WHOLESALING AGREEMENT
AGREEMENT dated as of October 24, 1996 by and between Allmerica Financial
Life Insurance and Annuity Company, a Delaware insurance company
("Company"), ALLMERICA INVESTMENTS, INC., a Massachusetts corporation (the
"Underwriter"), Western Capital Financial Group, Inc., a California
corporation (the "Distributor"), and the insurance agency affiliates of the
Distributor listed on Schedule 1 to this Agreement (hereinafter referred to
as "Distributor Agency Affiliates).
WITNESSETH:
WHEREAS, the Company 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 to issue and sell
such contracts through Underwriter acting as the principal underwriter for
such contracts; and
WHEREAS, the Company, Underwriter and Distributor desire to establish an
arrangement whereby the Distributor will act as a 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,
Underwriter and Distributor 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 a Company or any other separate
account established by such Company.
B. CONTRACTS -- The variable annuity contracts or variable life
insurance contracts described more specifically on Schedule 3 to
this Agreement, as amended from time to time. The term "Contracts"
shall include 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).
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 l.C).
E. FUND -- The Palladian Trust
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.
J. 1940 ACT -- The Investment Company Act of 1940, as amended.
K. SEC -- The Securities and Exchange Commission.
L. NASD -- The National Association of Securities Dealers, Inc.
M. REGULATIONS -- The rules and regulations promulgated by the
SEC under the 1933 Act, the 1934 Act and the 1940 Act as in
effect at the time this Agreement is executed or thereafter
promulgated, and as they may be amended from time to time.
N. TERRITORY -- The fifty states of the United States, the
District of Columbia, and all other territories of the United States.
O. STATE -- any state or commonwealth of the United States,
the District of Columbia or any other territory of the United States.
P. BROKER-DEALER -- An entity registered as a broker-dealer and
licensed as a life insurance agent or affiliated with an entity so
licensed, and recruited by the Distributor and subsequently
authorized by the Company and Underwriter to distribute the
Contracts pursuant to a sales agreement with the Company and
Underwriter entered into in accordance with Section 3 of this
Agreement.
Q. ASSOCIATED PERSON -- This term as used in this Agreement shall
have the meaning assigned to it in the 1934 Act.
R. REPRESENTATIVE -- An Associated Person of the Distributor
or a Broker-Dealer registered with the NASD as a registered
representative or principal of the Distributor or Broker-Dealer, as
the case may be.
S. PURCHASE PAYMENT -- A payment made under a Contract by an
applicant or purchaser to purchase benefits under the Contract.
T. PROCEDURES -- The administrative procedures prepared and
distributed by the Company, as such may be amended or supplemented
from time to time, relating to the solicitation, sale and delivery
of the Contracts.
U. PARTICIPATION AGREEMENT -- The agreement dated as of _________
1996 among the Company, Distributor and the Fund relating to the
investment of assets of the separate accounts of the Company in the
Fund.
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2. APPOINTMENT AND WHOLESALING RIGHT
A. The Company hereby authorizes the Distributor to represent the
Company in the wholesaling activities contemplated by this
Agreement. Where required by relevant state insurance law, the
Company hereby appoints the Distributor 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 Distributor is not licensed as an insurance agent and the
relevant state insurance law requires that the Distributor be
licensed as an insurance agent, the Company hereby appoints the
appropriate entity or individual ("Distributor Agency Affiliate")
affiliated with the Distributor (as set forth on Schedule 1 to this
Agreement, as such Schedule may be amended from time to time by the
Distributor to reflect changes in the licensing status, if any, as
required by relevant state insurance law of the Distributor or
Distributor Agency Affiliates) as its agent under the insurance laws
to engage in such wholesaling activities. The Underwriter hereby
authorizes the Distributor 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.
B. The Distributor (both on its own behalf and on behalf of
Distributor 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 compliance with its
responsibilities under the federal securities laws and NASD rules
and regulations. The obligations of the Distributor and Distributor
Agency Affiliates hereunder are further subject to the accuracy of
the representations and warranties of the Company and Underwriter
contained in this Agreement and to the performance by the Company of
its obligations hereunder.
C. The appointment and authorization of the Distributor and
Distributor 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 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 Distributor pursuant
to Section 3 of this Agreement) without the Distributor's prior
written consent, nor shall the Company or Underwriter separately
engage in wholesaling or distribution activities relating to the
Contracts.
The Company shall design the Contracts, subject to consultation with
the Distributor and subject to the Distributors's right to refuse to
engage in wholesaling activities with respect to a class of
Contracts that the Distributor reasonably determines to be
unattractive from a marketing or business perspective. The
Contracts shall be issued by the Company and the variable portion
thereof shall be supported by the Accounts. The Company alone shall
be responsible for filing the initial Registration Statements and
any amendments thereto with the SEC in accordance with the 1933 Act,
1934 Act, 1940 Act and the Regulations to register interests in each
class of Contracts. The Company will not make any amendment or
rider to the Contracts or a class of Contracts, or file a
Registration Statement, or make an amendment to a Registration
Statement or supplement to a Prospectus, without the Distributor
having been given the opportunity to review any such filing,
amendment, rider or supplement. However, such opportunity to review
shall not make the Distributor responsible for the content of any
such filing, amendment, rider or supplement; the Company alone shall
be responsible for such content.
Each Company shall register its Accounts with the SEC. The
subaccounts of each Account available under the Contracts or a class
of Contracts are listed on Schedule 3 to this Agreement, as amended
from time to time. 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,
provided that such amounts may also be invested in an investment
company or investment vehicle other than the Fund
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if: (1) such other investment company is advised by the
Fund's investment adviser; (2) the Fund and/or Distributor,
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 listed on Schedule 3 to this
Agreement, as amended from time to time, as a management investment
company under the 1940 Act without the Fund's and Distributor's
prior written consent.
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 in each
State in the Territory (provided, however, that it shall be within
the Company's discretion whether to obtain such authorization in
Guam). From time to time, the Company shall notify the Distributor
in writing of all States in the Territory in which each class of
Contracts can then lawfully be offered. To the extent that the
Company is not authorized to issue the Contracts or any class of
Contracts in any State in the Territory, the Company shall employ
all reasonable efforts to obtain such authorization in such State
(provided, however, that it shall be within such Company's
discretion whether to obtain such authorization in Guam).
E. The Distributor 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 which the Distributor will act as wholesaler. 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.
3. RECRUITMENT OF BROKER-DEALERS AND RELATED RESPONSIBILITIES
A. The Company and Underwriter hereby authorize the Distributor and
any Distributor 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.
B. The Company and Underwriter shall have the responsibility for:
(i) executing appropriate sales agreements with the business firms
recommended by the Distributor or Distributor Agency Affiliates and
(ii) except as limited in Section 9.C of this Agreement, 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 Distributor, Distributor Agency Affiliates, the Company
or 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.
C. Any sales agreement entered into by the Company and/or
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 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;
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(ii) Purchase Payments 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 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, Underwriter
and Distributor and filed with the appropriate
governmental or regulatory agencies; and
(v) The Broker-Dealer shall not have authority, on
behalf of the Company, Underwriter, Distributor or
Distributor 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, Underwriter,
Distributor or Distributor Agency Affiliates.
D. The Distributor and Distributor Agency Affiliates shall provide
assistance to the Company in the appointment process applicable to
Broker-Dealers and their Representatives as may be reasonably
acceptable to the Company.
E. The Distributor shall train, supervise, and be solely responsible
for the conduct of all of its Associated Persons (including
Distributor Agency Affiliates, but not Broker-Dealers or their
Representatives unaffiliated with the Distributor or Distributor
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 Distributor and
Distributor 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 Distributor, Distributor Agency Affiliates, the
Company or 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 Distributor or
Distributor Agency Affiliates be responsible for Broker-Dealers' or
their Representatives' failure to comply with applicable law or the
Procedures.
G. The Distributor 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
Distributor shall not expend, nor contract for the expenditure of,
funds of the Company; nor shall the Distributor possess or exercise
any authority on behalf of the Company other than that expressly
conferred on the Distributor by this Agreement.
H. The Distributor and Distributor 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 Distributor or any Distributor Agency
Affiliate or their respective Associated Persons as employees of the
Company or Underwriter in connection with the wholesaling activities
contemplated by this Agreement or otherwise.
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4. MARKETING AND SALES
A. Prior to use with any member of the public, the Company shall
provide to the Distributor copies of any promotional, sales and
advertising material developed by the Company for the Distributor's
review and written approval. Upon receipt of such material from the
Company, the Distributor shall be given a reasonable amount of time
to complete its review. The Distributor will respond on a prompt
and timely 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 Distributor.
In the event that the Distributor shall design any promotional,
sales or advertising material relating to the Contracts, the
Distributor shall provide to the Company copies of such material for
the Company's review and written approval. Upon receipt of such
material from the Distributor, 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 Distributor of the
obligation to obtain the prior written approval of the Company.
The Underwriter shall be responsible for filing, as required, all
promotional, sales or advertising material, whether developed by the
Company, Underwriter or Distributor, 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, Underwriter or Distributor, with
any state insurance governmental or regulatory agencies. Neither
the Distributor nor Distributor 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 Distributor) 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 Underwriter of the
obligation to obtain the prior written approval of the Fund or the
Fund's distributor.
B. The Distributor acknowledges that the Company shall have the
unconditional right to reject, in whole or in part, any application
for a Contract. 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 Distributor
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 Distributor and
the Broker-Dealer who solicited the sale of the Contract of such
action.
C. The Distributor 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) expenses for design and development of (1)
marketing kits and prospectus covers in a design
which are agreed upon by the Company and the
Distributor, which meet regulatory requirements as
determined by the Company, and which are provided to the
Company in camera-ready format, and (2) of
promotional and advertising materials;
(iv) printing of promotional and advertising materials
(not including marketing kits and prospectuses);
(v) mailing of any promotional and advertisng material
and marketing kits in connection with the
6
distribution of the contracts
(vi) fulfillment of marketing materials and forms to
broker-dealers
(vii) the printing, mailing (such mailing to be
conducted by the Distributor), and all other
activities associated with proxy solicitations;
(viii) mailing of Fund prospectuses, supplements and
periodic reports relating to the Fund to contract owners;
(ix) any additions, inserts, or packaging enhancements
to the Company's basic "Welcome Package";
(x) expenses associated with telecommunications with
the Company at the sites of the Distributor or
its Associated Persons, including site
installations and purchases, leases or rentals of
modems, terminals and other hardware, and lease
line telephone charges; and
(xi) any other expenses incurred by the Distributor or
its Associated Persons for the purpose of
carrying out the obligations of the Distributor
hereunder.
Except for such expenses and the expenses described in this Section
4.C and in Section 4.G of this Agreement, the Distributor 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 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, or relating to any of the matters or acts contemplated
by this Agreement.
D. 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,
including the Company's basic "Welcome Package"
(any additions, inserts, or packaging
enhancements to the Company's basic "Welcome
Package" shall be at the expense of the
Distributor, as set forth in Section 4.C.(x), above).
(iii) any authorization, registration, qualification or
approval of the Contracts required under the
securities, blue-sky laws or insurance laws of
the States in the Territory;
(iv) registration fees for the Contracts payable to
the SEC, the NASD or any other governmental or
regulatory agency;
(v) printing of marketing kits materials, including
prospectus (other than those born by the Fund
pursuant to the Participation Agreement) used in
connection with the distribution of the Contracts
based on the schedule for each product as set
forth in Schedule 6.
(vi) the mailing of Contract Prospectuses and any
supplements thereto, as required by federal
securities laws, and periodic reports relating to
the Accounts to Contract owners;
(vii) the preparation and printing of administrative
forms utilized in connection with the
distribution of the Contracts, including but not
limited to the form of application;
(viii) the preparation of Contract Owner lists for the
purposes of proxy solicitations;
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(ix) compensation as provided in Section 9 hereof; and
(x) any other expenses related to the distribution of
the Contracts except those set forth in Section
4.C of this Agreement and except as provided in
Section 4.E of this Agreement.
E. 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
Distributor shall be responsible for answering inquiries from
Broker-Dealers or Representatives regarding the investment
performance of the Contracts as permitted by applicable law.
F. 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.
G. The Distriubtor agrees to reimburse the Company for development
and implementation costs for each new product based upon the
schedule set forth in Schedule 5.
5. REPRESENTATIONS AND WARRANTIES
A. The Company and Underwriter each represent and warrant to the
Distributor and each Distributor 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 (vii), (viii), (xi) and (xii) 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 Section
5.A.(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 Distributor
expressly for use in the Registration Statements.
(iii) Neither the Company nor 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.
(v) The financial statements included in the Registration
Statements present fairly the respective financial
positions of the Company and the Account supporting the
Contracts described in the Registration Statements as of
the dates indicated; and such financial statements have
been prepared in conformity with generally accepted
accounting principles in the United States applied on a
consistent basis.
(vi) Subsequent to the respective dates as of which information
is given in the Registration Statement
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or the Prospectus, there has not been any material adverse
change in the condition, financial or otherwise, of the
Company, Underwriter or the Account supporting the
Contracts described in the Registration Statements that
would cause such information to be materially misleading.
(vii) The Company has been duly organized and is validly existing
as a corporation in good standing under the laws of its
state of domicile 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 in the
Territory in which the Contracts are or will be offered.
(viii) The Underwriter has been duly organized and is
validly existing as a corporation in good standing under
the laws of the Commonwealth of Massachusetts with full
power and authority to own, lease and operate its
properties and conduct its business in the manner
described in the Prospectuses; is duly registered as a
broker-dealer with the SEC and with the securities
commission of every state in the Territory with which such
registration is required; and is a member in good standing
with the NASD.
(ix) Each Account supporting the Contracts described in the
Registration Statements has been duly authorized and
established and is validly existing as a separate account
under the insurance code of the respective Company's state
of domicile, and is duly registered with the SEC as a unit
investment trust under the 0000 Xxx.
(x) The form of the Contracts has been approved to the
extent required by the Insurance Commissioner of each
Company's respective state of domicile and by the
governmental agency responsible for regulating insurance
companies in each other State in the Territory in which
the contracts are offered.
(xi) 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 Underwriter and when
so executed and delivered this Agreement will be the valid
and binding obligation of the Company and Underwriter
enforceable in accordance with its terms.
(xii) 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 Underwriter, or any
indenture, agreement, mortgage, deed of trust, or other
instrument to which the Company or Underwriter is a party
or by which either is bound, or violate any law, or, to
the best of the Company's or Underwriter's knowledge, any
order, rule or regulation applicable to the Company or
Underwriter of any court or of any federal or state
regulatory body, administrative agency or any other
governmental instrumentality having jurisdiction over the
Company or Underwriter or any of their respective
properties.
(xiii) 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.
(xiv) The Company has filed with the SEC all statements and
other documents required for registration under the
provisions of the 1940 Act and the Regulations thereunder
of the Account supporting the Contracts described in the
Registration Statement, and such registration has been
effected; there are no agreements or documents required by
the 1933 Act, the 1940 Act, or the Regulations to be filed
with the SEC as exhibits to the Registration Statement,
that have not been so filed; and the Company has obtained
all exemptive or other orders of the SEC necessary to make
the public offering and consummate the sale of the
Contracts pursuant to this Agreement and to permit the
operation of the Accounts supporting the Contracts
described in the Registration Statements, as
9
contemplated in the Prospectuses.
(xv) 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. The Distributor represents and warrants to the Company on the date
hereof as follows:
(i) the Distributor has taken all action including, without
limitation, those necessary under its articles of
incorporation, by-laws and applicable state corporate law,
necessary to authorize the execution, delivery and
performance of this Agreement and all transactions
contemplated hereunder.
(ii) the Distributor is and during the term of this
Agreement shall remain duly registered as a broker-dealer
under the 1934 Act, a member in good standing with the
NASD, and duly registered as a broker-dealer under
applicable state securities laws.
6. ADDITIONAL RESPONSIBILITIES OF THE COMPANY
A. The Company shall use its best efforts:
(i) to maintain the registration of the Contracts with the
SEC and any state securities commissions of any State in
the Territory where the securities or blue-sky laws of
such State require registration of the Contracts,
including without limitation using its best efforts to
prevent a stop order from being issued or if a stop order
has been issued to cause such stop order to be withdrawn;
(ii) to gain approval or other authorization of the
Contract forms where required under the insurance laws and
regulations of each State in the Territory (provided,
however, that it shall be within the Company's discretion
whether to obtain such approval or authorization in Guam);
and
(iii) to keep such registration, approval and authorization in
effect thereafter so long as the Contracts are outstanding.
B. During the term of this Agreement the Company shall take all
reasonable action required to cause each class of Contracts to
comply, and to continue to comply, as annuity contracts or life
insurance contracts, as the case may be, and to cause the
Registration Statements and the Prospectus for each class of
Contracts to comply, and to continue to comply, with: all applicable
federal laws and regulations and all applicable laws and regulations
of each State in the Territory.
C. The Company, during the term of this Agreement, shall notify the
Distributor immediately:
(i) when each Registration Statement has become effective or any
post-effective amendment with respect to the Registration
Statement thereafter becomes effective;
(ii) of any request by the SEC for any amendment to a
Registration Statement or supplement to a Prospectus or
for additional information;
(iii) of any event that makes any material statement made in a
Registration Statement or a Prospectus untrue in any
material respect or results in a material omission in a
Registration Statement or a Prospectus;
(iv) of the issuance by the SEC of any stop order with respect
to a Registration Statement or any amendment thereto, or
the initiation of any proceedings for that purpose, or for
any other purpose relating to the registration and/or
offering of the Contracts (or class of Contracts);
10
(v) in which States in the Territory registration of the
Contracts (or 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 Distributor 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 Distributor, 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
Distributor's request.
G. The Company and Underwriter will provide the Distributor access
to such records, officers and employees of the Company, Underwriter
and each Account at reasonable times as is necessary to enable the
Distributor to fulfill its obligations under the federal securities
laws and NASD rules. The Distributor will provide the Company and
Underwriter access to such of its records, officers and employees at
reasonable times as is necessary to enable the Company and
Underwriter to fulfill their obligations under the federal
securities laws and NASD rules.
7. CONFIDENTIALITY
A. The Company and 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 Distributor, of its
parent company and of any affiliated person of the Distributor,
Distributor Agency Affiliates or of any Broker-Dealer that may come
to the attention of the Company, Underwriter or any person
affiliated with the Company or Underwriter as a result of their
relationship with the Distributor, its parent company or any
affiliated person of the Distributor, Distributor Agency Affiliates
or any Broker-Dealer and not from any independent source, are
confidential and shall not be used by the Company or Underwriter or
any person affiliated with the Company or 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 or efforts to prevent the replacement of
such Contracts or to encourage the exercise of options 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 Underwriter outside the operation of
this Agreement. In no event shall the names and addresses of such
customers and prospective customers be furnished by the Company,
Underwriter or any of their affiliated persons to any other person.
The intent of this paragraph is that neither the Company nor
Underwriter, nor persons affiliated with the Company or Underwriter,
shall utilize, or permit to be utilized, their knowledge of the
Distributor, of its parent company or of any affiliated person of
the Distributor, Distributor Agency Affiliates or any Broker-Dealer,
derived as a result of the relationship created through the funding
and sale of the Contracts or the solicitation of sales of any
product or service. This paragraph shall remain operative and in
full force and effect regardless of the termination of this
Agreement, and shall survive any such termination.
8. RECORDS
The Company, Underwriter, Distributor and Distributor 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,
Underwriter, the Account, the Distributor and Distributor Agency
Affiliates as to all transactions hereunder shall be maintained so
as to clearly and accurately disclose the nature and details of the
transactions, including such accounting
11
information as 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 DISTRIBUTOR PROMOTIONAL ALLOWANCES
A. The Company shall compensate Broker-Dealers for sales of the
Contracts by the Broker-Dealers 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. 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 in accordance with the procedures set forth on
Schedule 4. The compensation provided for in this Section 9 shall be
payable to the Broker-Dealer 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
Broker-Dealers, the Company shall pay Distributor 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 Distributor in such
amount and in accordance with the procedures as set forth on
Schedule 4, as such Schedule may be amended from time to time upon
mutual agreement of the parties to this Agreement. Promotional
Allowances shall be payable to Distributor for so long as the
Contracts are outstanding and this Agreement remains in effect.
If any State in the Territory by insurance rule, regulation or
statute, prohibits payment of Promotional Allowances to the
Distributor, the Distributor shall designate in writing a business
entity or natural person, including Distributor Agency Affiliates,
meeting the requirements of such State to receive any amounts that
may otherwise be payable to the Distributor hereunder. The
Distributor 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 Distributor shall
discharge the Company's liability to the Distributor hereunder.
If a purchaser rescinds a Contract or exercises a right to surrender
a contract for return of all Purchase Payments, the Distributor will
pay on demand the amount of any Promotional Allowances it received
on the Purchase Payments returned.
B. INDEBTEDNESS. Nothing in this Agreement shall be construed as
giving the Distributor 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 appointment by the Company of duly licensed
Distributor Agency Affiliates and Broker-Dealers and their
respective Associated Persons, as follows:
(i) that if total annual sales of the Contracts exceed
$60,000,000 during any calendar year beginning January 1,
1997, the Company will pay up to $600,000 of appointment
fees; provided, however, if sales do not meet this goal,
the Distributor will reimburse the Company for all
appointment fees paid during the calendar year.
(ii) if total sales of contracts exceed $100,000,000 during any
calendar year, the Company will pay up to $1,300,000 of
appointment fees. If sales do not meet this goal but do
exceed $60,000,000, the Distributor will reimburse the
Company for all appointment fees paid during the calendar
year over $600,000.
(iii) The Distributor will reimburse the Company for all
appointment fees over $1,3000,000 during any
12
calendar year, unless prior agreement is made with the
Company.
The Company reserves the right to refuse to pay renewal fees for
individuals not meeting such minimal sales as may be agreed upon
from time to time.
D. REPORTING. The Distributor shall be responsible for all tax
reporting information, if any, that the Distributor 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 Distributor to provide any tax reporting information
directly or indirectly to any Broker-Dealer or its Representatives.
E. SURVIVAL. 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, Underwriter and Distributor will cooperate fully in
any securities or insurance governmental or regulatory investigation
or proceeding or judicial proceeding arising in connection with the
offering, sale or distribution of the Contracts for which the
Distributor acts as wholesaler pursuant to this Agreement. Without
limiting the foregoing, the Company, Underwriter and Distributor
agree to notify one another promptly of any customer complaint or
notice of any governmental or regulatory investigation or proceeding
or judicial proceeding received by any of them with respect to the
Company, Underwriter, Distributor or any of their respective
Associated Persons or that may affect the issuance of any Contract
for which the Distributor acts as wholesaler pursuant to this
Agreement.
B. In the case of a substantive customer complaint, the Company,
Underwriter, Distributor and Distributor Agency Affiliates will
cooperate in investigating such complaint and any response by the
Company or Underwriter, as one party, or the Distributor or
Distributor 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 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.
11. INDEMNIFICATION
A. The Company and Underwriter, jointly and severally, shall
indemnify and hold harmless the Distributor and Distributor Agency
Affiliates and each person who controls or is associated with the
Distributor or Distributor 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 Distributor,
Distributor Agency Affiliates and/or such person may become subject,
under any statute or regulation, at common law or otherwise, insofar
as such losses, claims, damages or liabilities:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in
any Registration Statement, Prospectus, blue sky
application or other document executed by the Company
specifically for the purpose of qualifying any or all of the
Contracts for sale under the securities laws of any State,
promotional, sales or advertising material for the
Contracts, 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
13
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 Underwriters by the Distributor
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 law of
any State, or in any promotional, sales or advertising
material or written information relating to the shares of
the Fund authorized by the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances in which they were made, in
each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in
conformity with information furnished in writing to the
Distributor or the Fund by the Company specifically for
use in the preparation of any such Fund Registration
Statement, Fund Prospectus, blue-sky application or other
document (or any such amendment or supplement thereto); or
(iii) arise out of or are based upon any untrue statement
or alleged untrue statement or omission or alleged
omission of a material fact by or on behalf of the Company
or 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,
Underwriter or persons under their control) or wrongful
conduct of the Company or 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
Underwriter of any terms of this Agreement or of any
Contract or that proximately result from any activities of
the Company' or Underwriter' 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 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 ll.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 Distributor shall indemnify and hold harmless the Company and
Underwriter and each person who controls or is associated with the
Company or 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 and/or any such person may
become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities
arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a
material fact contained in any Registration Statement,
Prospectus or blue-sky application or other document
executed by the Company specifically for the purposes of
qualifying any or all of the Contracts for sale under the
securities law of any State (or any amendment or
supplement to the foregoing), or omission or alleged
omission to state therein a material fact required to be
stated therein or necessary in order to make the
statements therein not misleading, in light of the
circumstances in which they were made, in each case to the
extent, but only to the extent, that such untrue statement
or alleged untrue statement or
14
omission or alleged omission was made in reliance upon and
in conformity with information furnished in writing to the
Company or Underwriter by the Distributor 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); or
(ii) any use of promotional, sales or advertising material
for the Contracts not authorized by the Company or any
verbal or written misrepresentations or any unlawful sales
practices concerning the Contracts by the Distributor or
Distributor 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 Underwriter under this Agreement or
otherwise); or
(iii) claims by agents, representatives or employees of the
Distributor for compensation or other remuneration of any
type; or
(iv) any material breach by the Distributor or Distributor
Agency Affiliates of any provision of this Agreement.
This indemnification obligation will be in addition to any liability
that the Distributor may otherwise have; provided, however, that no
person shall be entitled to indemnification pursuant to this Section
ll.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. 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 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 indemnified party shall indemnify the indemnified
party from and against any loss or liability by reason of such
settlement or judgment.
D. 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 Distributor 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
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.
15
B. This Agreement shall terminate automatically if it is assigned.
This Agreement may be terminated at the option of the Company and
Underwriter, as one party, or the Distributor and Distributor Agency
Affiliates, as one party, upon the other party's material breach of
any provision of this Agreement.
C. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except:
(i) the obligation to settle accounts hereunder, as set forth in
Schedule 4;
(ii) the provisions contained in Sections 7, 9 and 11 of this
Agreement; and
(iii) the indemnification provisions set forth in Section 11 of
this Agreement, or as otherwise specifically noted in this
Agreement.
13. RIGHTS, REMEDIES, ETC, ARE CUMULATIVE.
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties to this
Agreement are entitled to under state and federal laws. Failure of
the Distributor or Distributor Agency Affiliates, as one party, or
the Company or 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:
Xxxxxxx X. Xxxxxx
President
Allmerica Financial Life Insurance and Annuity Company
00 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
if to the Underwriter:
Xxxxxxx X. Xxxxxx
President and CEO
Allmerica Investments Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
if to the Distributor or Distributor Agency Affiliates, to:
Western Capital Financial Group, Inc.
At.: President
0000 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
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.
16
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 Distributor and the Fund have
entered into the Participation Agreement in contemplation of
entering into this Agreement. This Agreement shall be construed and
the provisions of this Agreement interpreted under and in accordance
with the internal laws of the Commonwealth of Massachusetts without
giving effect to principles of conflict of laws.
16. ARBITRATION
Any controversy or claim arising out of or relating to this
Agreement, or the breach of this Agreement, shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of
the American Arbitration Association, and judgment upon the award
rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof.
17. HEADINGS
The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the
provisions of this Agreement or otherwise affect their construction
or effect.
18. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
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. Without limiting the generality of the foregoing, the
term "assigned" shall not include any transaction exempted from
Section 15(b)(2) of the 1940 Act.
21. MISCELLANEOUS
For the purposes of Section 4(G), "Aggregate Sales" shall refer to
the aggregate sales through Distributor pursuant both to this
Agreement and to the Wholesaling Agreement ("First Allmerica
Agreement") with First Allmerica Financial Life Insurance Company
("First Allmerica"). Based on such Aggregate Sales, Distributor
shall be responsible for only a single Reimbursement amount, and
such Reimbursement shall be divided between the Company and First
Allmerica as they may mutually agree. For the purposes of Section
9(C), "total annual sales" shall refer to the total annual sales
through Distributor pursuant both to this Agreement and to the
First Allmerica Agreement, and "total amount of initial or renewal
fees" shall refer to the aggregate amount of such fees incurred by
the Company and First Allmerica. For the purposes of Schedule 6,
"total quantity" shall refer to the total number of marketing kits
and prospectuses provided
17
pursuant both to this Agreement and to the First Allmerica Agreement.
IN WITNESS WHEREOF, each party hereto represents that the officer
signing this Agreement on the party's behalf is duly authorized to
execute this Agreement; and each party has caused this Agreement to
be duly executed by such authorized officer on the date specified
below.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
Date: By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief Executive Officer
ALLMERICA INVESTMENTS, INC.
Date: By: /s/ Xxxxxxx X. Xxxxxx
---------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Director
WESTERN CAPITAL FINANCIAL GROUP, INC.
(on its own behalf and on behalf of
the Distributor Agency Affiliates)
Date: By: /s/ M. Xxxxxxx Xxxxxxxx
---------------------------
Name: M. Xxxxxxx Xxxxxxxx
Title: President
18
SCHEDULE I
DISTRIBUTOR AGENCY AFFILIATES
Effective______ , 1996
STATE(S) IN
DISTRIBUTOR AGENCY AFFILIATE WHICH LICENSED
---------------------------- --------------
Palladian Marketing Group, Inc. Connecticut, New York
19
SCHEDULE 2
FUND PORTFOLIOS
AVAILABLE UNDER THE CONTRACTS
Effective _________, 1996
NAME OF SEPARATE ACCOUNT UNDERLYING FUNDS
------------------------ ----------------
Fulcrum Fund Separate Account of Value Portfolio of The Palladian Trust
Allmerica Financial Life Insurance
and Annuity Company
Growth Portfolio of The Palladian Trust
International Growth Portfolio of
The Palladian Trust
Global Strategic Income Portfolio of
The Palladian Trust
Global Interactive/Telecomm Portfolio
of The Palladian Trust
Money Market Fund of
Allmerica Investment Trust
NAME OF SEPARATE ACCOUNT UNDERLYING FUNDS
------------------------ ----------------
Fulcrum Fund Variable Life Value Portfolio of The Palladian Trust
Separate Account of
Allmerica Financial Life Insurance
and Annuity Company
Growth Portfolio of The Palladian Trust
International Growth Portfolio of
The Palladian Trust
Global Strategic Income Portfolio of
The Palladian Trust
Global Interactive/Telecomm Portfolio
of The Palladian Trust
Money Market Fund of
Allmerica Investment Trust
20
SCHEDULE 3
CONTRACTS SUBJECT TO PROMOTIONAL AGENT AGREEMENT
Effective , 1996
SEC
MARKETING POLICY REGISTRATION NAME OF
NAME FORM NO. NO. SEPARATE ACCOUNT
--------- -------- ------------ -----------------
Fulcrum Fund A3025-96 333-11377 Fulcrum Separate Account of
Variable Annuity 811-7799 Allmerica Financial Life Insurance
and Annuity Company
Fulcrum Fund Single 1030-96 Fulcrum Variable Life Separate
Premium Variable Account of Allmerica Financial Life
Life Policy Insurance and Annuity Company
21
SCHEDULE 4
BROKER-DEALER COMPENSATION AND
DISTRIBUTOR PROMOTIONAL ALLOWANCE SCHEDULE
VARIABLE ANNUITY CONTRACTS
(A). The maximum Broker-Dealer Commission and Distributor Service Fees
Compensation payable by the Company with respect to the sale and distribution
of the Contracts shall be 7.1% of initial and subsequent Purchase Payments
received and accepted by the Company.
(B). Of the amount specified in item (A), above, 6.00% shall be payable by
the Company as Broker-Dealer sales commissions, or in lieu thereof the
Broker-Dealer may select an alternative trail commission option, if
available. In the event that an annuitant is over 85.5 years old, the only
commission option available to the Broker-Dealer will be a 1% trail option.
Commission to the Broker-Dealer will be reduced by 0.50% for contracts sold
is states that require the Company to pay premium tax at time of issue.
(C). Of the amount specified in item (A), above, 1.10% shall be payable to
the Distributor for administrative and support services ("Variable Annuity
Promotional Allowance") with respect to the distribution of the contracts.
(D). Actual compensation paid to the Distributor will be net of an offset of
$30 for each policy anniversary and surrender of any contract issued to a
401(k) plan with Accumulated Value of less than $100,000. This offset will
apply only to the extent that the Company waives its policy fee in connection
with contracts issued in connection with such 401(k) plans.
(E). Variable Annuity Promotional Allowances will be paid to the Distributor
no less frequently than twice a month.
(F). To the extent that the commissions paid to the Broker-Dealer as outlined
in item (B), above, increases or decreases, than the Variable Annuity
Promotional Allowance, outlined in item (C), above, shall decrease or
increase accordingly, such that the total compensation paid by the Company
shall be equal to a maximum of 7.10%.
(G). Notwithstanding item (F), above, the Company reserves the right to
reduce the commission payable to a Broker-Dealer on any contract sold in
connection with a 401(k) plan, without increasing the compensation payable to
the Distributor under item (C), above.
SINGLE PREMIUM VARIABLE LIFE CONTRACTS
(A). Maximum Initial Compensation payable by the Company with respect to the
sale and distribution of Variable Life Contracts shall be 8.0% of initial and
subsequent payments. The Maximum Initial Compensation is reduced for issue
ages 65 and older, and is payable as follows:
ISSUE MAXIMUM INITIAL
AGE COMPENSATION
------------------------------------
65 and Under 8.00%
66 - 75 7.70%
76 - 85 6.75%
86 + 4.95%
Of the Maximum Initial Compensation above, between 6.50% and 7.00% shall be
payable by the Company as Broker-Dealer sales commissions. The remainder
shall be payable to the Distributor for administrative and support services
with respect to the distribution of the Contracts ("Variable Life Promotional
Allowance").
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(B). In addition to the amount specified in (A) above as Maximum Initial
Compensation, 0.50% shall be payable to the Distributor as fees with respect
to product development/consultation ("Product Development Fees").
(C). In addition to the Commissions payable in (A), Broker-Dealers shall be
paid deferred compensation beginning in contract year 11 as follows:
Deferred Compensation-COI based: 50% of standard (even if the Contract charges
substandard rates)
COI charges in year 1-10, paid quarterly
beginning in contract year 11
Trail: 0.25% of account value (unloaned assets) each
quarter, beginning in contract year 11
(D). If the Distributor should determine that the level of Commissions
payable to the Broker-Dealer as set forth in (A) shall increase or decrease,
than the Variable Life Promotional Allowance shall decrease or increase
accordingly, such that the total compensation payable by the Company shall be
equal to the Maximum Initial Compensation set forth in (A).
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SCHEDULE 5
DEVELOPMENT AND ADMINISTRATIVE COST REIMBURSEMENT
(A) FULCRUM FUND VARIABLE ANNUITY
(1) With respect to the Fulcrum Fund Variable Annuity product, the
Distributor agrees to reimburse the Company for development and
implementation costs at the end of a period (the "initial Variable
Annuity measurement period") of 15 months from the later of the
following dates:
(a) the date on which the Company has obtained approval of the product in
35 states (which will include California, Florida, Arizona, Michigan,
Massachusetts, Texas, and Pennsylvania, unless (1) the Company
determines, in good faith and upon notice to the Distributor, that
approval of the product in any such state is not reasonably possible
without material modifications to the contract, or (2) in California,
if approval is not obtained because of any failure of the funds of
The Palladian Trust to satisfy the requirements of California
insurance statutes and regulations, or interpretive positions of the
California Insurance Department).
(b) the date on which the registration statement for the product under
the 1933 Act is effective; or
(c) the date on which the product is available for sale to the public, as
determined by the Company.
based on the following schedule unless the combined product sales require
Variable Annuity reimbursement of a lower amount (as described in
Section (A)(2) and Section (B)(2)):
AGGREGATE SALES REIMBURSEMENT
--------------- -------------
$0 up to $75,000,000 $600,000
$75,000,001 to $95,000,000 $480,000
$95,000,001 to $115,000,000 $360,000
$115,000,001 to $135,000,000 $240,000
$135,000,001 to $155,000,000 $120,000
$155,000,001 to $175,000,000 $50,000
$175,000,001 and over $0
(2) For sales over $175 million during the initial Variable Annuity
measurement period, the Distributor will receive a credit of $100,000 for
each $20 million (pro rata for a portion thereof), of annuity sales to
offset any SPVUL reimbursement which may be required for the Fulcrum Fund
SPVUL, as set forth in Section (B), below. Under no circumstances will
the Company make any payments to the Distributor for the credit.
(3) If Variable Annuity reimbursement is required, it will be payable in
equal monthly installments over a 24 month period from the date the
Company provides notice to the Distributor that Variable Annuity
reimbursement is due the Company.
(4) If Variable Annuity reimbursement is required and during the next 15
month period from date of expiration of the initial Variable Annuity
measurement period (the "subsequent Variable Annuity measurement period")
cumulative sales for any consecutive 15 month period reach $175 million,
then the Distributor will no longer be required to make Variable Annuity
reimbursement payments and the Company will refund all Variable Annuity
reimbursement payments made to date. If during the subsequent Variable
Annuity measurement period, cumulative sales for any three month period
(which may include the last 3 months of the initial Variable Annuity
measurement period), exceeds $44 million, then the Distributor may
suspend Variable Annuity reimbursement payments until the end of the
subsequent Variable Annuity measurement period, at which time the Company
will make a determination as to whether Variable Annuity reimbursement
payments are due. If cumulative sales reach $175 million for any period
of 15 consecutive
24
months by the end of the subsequent Variable Annuity measurement period,
then the Distributor will no longer be required to make Variable Annuity
reimbursement payments and the Company will refund all Variable Annuity
reimbursement payments which have been made.
(5) If during the initial Variable Annuity measurement period or the
subsequent Variable Annuity measurement period there should be material
changes to federal tax laws ("Material Tax Law Change"), which have a
significant negative impact on the sales of variable annuities, then each
Variable Annuity reimbursement amount set forth above in Section (A)(1)
will be reduced by 50%. For the purposes of this section, "significant
negative impact" shall mean a reduction of 35 % or more in the average
monthly industry sales of individual variable annuity contracts from the
average monthly industry sales of individual variable annuity contracts
for the consecutive three month period prior to the Material Tax Law
Change, as reported by VARDS, and the Company agrees that the reduction is
reasonably attributable to the Material Tax Law Change.
(B) FULCRUM FUND SPVUL
(1) With respect to the Fulcrum Fund SPVUL product, the Distributor agrees to
reimburse the Company for development and implementation costs at the end
of a period (the "initial SPVUL measurement period") of 18 months from
the later of the following dates:
a) the date on which the Company has obtained approval of the product in
35 states (which will include California, Florida, Arizona, Michigan,
Massachusetts, Texas, and Pennsylvania, unless (1) the Company
determines, in good faith and upon notice to the Distributor, that
approval of the product in any such state is not reasonably possible
without material modifications to the contract, or (2) in California,
if approval is not obtained because of any failure of the funds of The
Palladian Trust to satisfy the requirements of California insurance
statutes and regulations, or interpretive positions of the California
Insurance Department).
b) the date on which the registration statement for the Fulcrum Fund
SPVUL under the 1933 Act is effective; or
c) the date on which the product is available for sale to the public, as
determined by the Company,
based on the following schedule unless the combined product sales require
SPVUL reimbursement of a lower amount (as described in Section (A)(2)
and Section (B)(2)):
AGGREGATE SALES REIMBURSEMENT
--------------- -------------
$0 up to $80,000,000 $700,000
$80,000,001 to $100,000,000 $580,000
$100,000,001 to $120,000,000 $460,000
$120,000,001 to $140,000,000 $340,000
$140,000,001 to $160,000,000 $220,000
$160,000,001 to $175,000,000 $100,000
$175,000,001 and over $0
(2) For sales over $175 million during the initial SPVUL measurement period,
the Distributor will receive a credit of $100,000 for each $20 million
(pro rata for a portion thereof) of SPVUL sales to offset any
reimbursement which may be required for the Fulcrum Fund Variable Annuity.
Under no circumstances will the Company make any payments to the
Distributor for the credit.
(3) If SPVUL reimbursement is required it will be payable in equal monthly
installments over the 24 month period from the date the Company provides
notice to the Distributor that SPVUL reimbursement is due the Company.
25
(4) If SPVUL reimbursement is required, and during the next 24 month period
from date of expiration of the initial SPVUL measurement period ( "the
subsequent SPVUL measurement period") cumulative sales for any
consecutive 15 month period reach $175 million, then the Distributor will
no longer be required to pay SPVUL reimbursement expenses and the Company
will refund all SPVUL reimbursement payments made to date. If during the
subsequent SPVUL measurement period, cumulative sales for any three month
period (which may include up to 3 months of the initial SPVUL measurement
period), exceeds $43.75 million, then the Distributor can suspend SPVUL
reimbursement payments until the end of the subsequent SPVUL measurement
period, at which time the Company will make a determination as to whether
SPVUL reimbursement is due. If cumulative SPVUL sales reach $175 million
for any period of 15 consecutive months by the end of the subsequent
SPVUL measurement period, then the Distributor will no longer be required
to pay SPVUL reimbursement to the Company and the Company will refund all
SPVUL reimbursement payments which have been made.
(5) If during the initial or the subsequent SPVUL measurement period there
should be material changes to federal tax laws ("Material Tax Law
Change"), which have a significant negative impact on the sales of single
premium variable life contracts, then each SPVUL reimbursement amount set
forth above in Section (B)(1) will be reduced by 50%. For the purposes of
this section, "significant negative impact" shall mean a reduction of 35%
or more in the average monthly industry sales of single premium variable
life insurance from the average monthly industry sales of single premium
variable life insurance over the three month period prior to the Material
Tax Law Change, as reported by VARDS, and the Company agrees that the
reduction is reasonably attributable to the Material Tax Law Change.
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SCHEDULE 6
MARKETING KIT AND PROSPECTUS SALES MATERIALS
FULCRUM FUND VARIABLE ANNUITIES
The Company will print an initial total quantity of 25,000 marketing kits and
prospectuses to be available at the time of the product launch or on a
schedule agreed upon between the Company and the Distributor. Additional
quantities may be provided at the discretion of the Company.
The Company will provide a minimum total quantity of 65,000 marketing kits
and prospectuses each year up to a rate of 25,000 kits per $100,000,000 of
sales. Additional quantities may be provided at the discretion of the
Company.
FULCRUM FUND SPVUL
The Company will print an initial total quantity of 10,000 marketing kits and
prospectuses to be available at the time of the product launch or on a
schedule agreed upon between the Company and the Distributor. Additional
quantities may be provided at the discretion of the Company.
The Company will provide a minimum total quantity of 20,000 marketing kits
and prospectuses per year up to a total quantity of 20,000 marketing kits
and prospectus per $100,000,000 of sales. Additional quantities may be
provided at the discretion of the Company.
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