ALLMERICA DRAFT
MARCH 16, 2000
SELLING GROUP AGREEMENT
THIS AGREEMENT ("Agreement") is made as of ___________, 2000 by and
between First Union Securities Inc., a Delaware corporation ("FUSI"), and the
undersigned broker-dealer ("Broker-Dealer").
DEFINITIONS:
BROKER-DEALERS - broker-dealers registered with the Securities and Exchange
Commission ("SEC") under the 1934 Act that are members of the National
Association of Securities Dealers, Inc. ("NASD") or entities that are excluded
from the definitions of "broker" or "dealer" pursuant to the "bank" exclusion
under Sections 3(a)(4) and Sections 3(a)(5) of the 1934 Act. Notwithstanding the
fact that a bank is not a Broker-Dealer, a bank that is exempt from registration
with the SEC under the 1934 Act but is otherwise permitted to sell the Products
until May 12, 2001 will be treated and defined as a Broker-Dealer for the
purposes of this Agreement until May 12, 2001.
INSURANCE COMPANY(IES) - All Products will be issued by Allmerica Financial Life
Insurance and Annuity Company for non-New York sales and First Allmerica
Financial Life Insurance Company - for NewYork sales (herein collectively
referred to as the "Insurance Companies"). The Principal Office of the Insurance
Companies is located at 000 Xxxxxxx Xxxxxx, Xxxxxxxxx, Xxxxxxxxxxxxx 00000.
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PRODUCTS - The variable annuity contracts and variable life insurance policies
of the Insurance Companies identified on the Schedule of Products, attached
hereto, or on a supplement to such Schedule of Products. Certain products are
anticipated to be registered under the 1933 Act and other products will not be
registered in reliance on exemptions under the 1933 Act and the 1940 Act.
REPRESENTATIVES - Individuals affiliated with a Broker-Dealer who are licensed
as life insurance agents in those jurisdictions in which applications for the
sale of the Products are to be solicited and who are also duly registered with
the NASD in compliance with the 1934 Act. Notwithstanding the fact that Bank
employees may not be Representatives, Bank employees who are licensed as life
insurance agents in those jurisdictions in which applications for the sale of
the Products are to be solicited and who are authorized to sell until May 12,
2001, will be treated and defined as Representatives for the purpose of this
Agreement until May 12, 2001.
PROSPECTUS - The prospectuses for the Products which are registered under the
1933 Act. Notwithstanding the fact that a private placement memorandum is not a
Prospectus, the private placement memorandums for the Products, which are not
registered in reliance on exemptions under the 1933 Act and the 1940 Act, will
be treated and defined as a Prospectus.
1933 ACT - The Securities Act of 1933, as amended.
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1934 ACT - The Securities Exchange Act of 1934, as amended.
RECITALS:
X. XXXX, pursuant to the provisions of a distribution agreement (the
"Distribution Agreement") between FUSI and the Insurance Companies, acts as a
distributor of the Products.
X. XXXX desires that the Broker-Dealer distribute the Products in those
jurisdictions in which the Broker-Dealer, FUSI, the Insurance Company and the
Products are appropriately licensed, qualified or approved, as the case may be,
and the Broker-Dealer desires to sell the Products, through its agents in such
jurisdictions, on the terms and conditions set forth hereinafter.
C. The Insurance Company, pursuant to the Distribution Agreement, has
authorized FUSI to recommend broker-dealers, including the Broker-Dealer, for
appointment by the Insurance Company to engage in the distribution activities
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants hereinafter set forth, the parties agree as follows:
1. AUTHORITY TO SELL PRODUCTS.
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1.1 GENERAL. FUSI, subject to the terms and conditions contained
herein, hereby authorizes the Broker-Dealer, as an independent contractor, on a
non-exclusive basis, to offer and sell the Products. The Broker-Dealer hereby
agrees to use its best efforts to sell the Products.
1.2 COMPENSATION/EXPENSES. Except as otherwise provided herein, the
Broker-Dealer shall be entitled to commissions with respect to sales of the
Products made by the Broker-Dealer and its Representatives, in accordance with
the Schedule of Commissions attached to this Agreement, as such Schedule may be
amended from time to time. FUSI reserves the right to amend the Schedule of
Commissions at any time and from time to time. PROVIDED, HOWEVER, that any such
amendment shall apply only to Products applied for after the effective date of
each such amendment. All commissions shall be payable by FUSI. As a result, the
Broker-Dealer understands and agrees that the Insurance Company shall not be
responsible for payment of any compensation due and payable to the Broker-Dealer
hereunder, and that FUSI is solely responsible for the payment of all such
compensation. The Broker-Dealer shall be responsible for the payment of all
expenses incurred by the Broker-Dealer in connection with this Agreement and the
performance of its obligations, and the exercise of its rights hereunder.
2. REPRESENTATIONS AND WARRANTIES.
The Broker-Dealer represents and warrants to, and covenants with, FUSI
that:
(a) the Broker-Dealer (i) is a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"), (ii) is duly
registered as a broker-dealer with
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the Securities and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and registered in each state or other
jurisdiction in which the Broker-Dealer is required to be registered in order to
sell the Products, (iii) is licensed and appointed to sell the Products under
the insurance laws of each state or other jurisdiction in which the
Broker-Dealer is required to be licensed and appointed in order to sell the
Products, and (iv) otherwise maintains in effect all governmental and other
registrations, licenses and permits necessary for it to carry out its
obligations, and the transactions contemplated hereunder (the "Required
Registrations");
(b) the Broker-Dealer is in compliance, in all material respects,
with all applicable federal and state securities laws and regulations, the
requirements of the NASD and any applicable securities exchanges of which it is
a member and all codes of conduct and codes of ethics applicable to its
activities (collectively, the "Regulations");
(c) the Broker-Dealer is a corporation duly organized and in good
standing under the law of its jurisdiction of organization and is qualified to
do business as a corporation in those states or jurisdictions where it is, or
will be, doing business pursuant to this Agreement; and
(d) this Agreement and the transactions contemplated hereby
(i) have been duly approved by all required corporate action on the part of the
Broker-Dealer and (ii) do not
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conflict with any law, regulation, court order or agreement to which the
Broker-Dealer is subject or the Broker-Dealer's properties are bound.
3. COVENANTS OF THE BROKER-DEALER.
3.1 SALE OF PRODUCTS. The Broker-Dealer agrees that (a) offers and
sales of the Products will be made only through the use of a then current
prospectus which is a part of a registration statement which is then effective
under the 1933 Act (each a "Prospectus"), (b) a Prospectus relating to the
Product in question will be delivered prior to, or concurrently with any sales
presentation or other offer of such Product, (c) no oral or written statements
will be made by or on behalf of the Broker-Dealer to a prospective purchaser of
a Product other than statements identical to, or based solely on information set
forth in the Prospectus, and (d) in connection with offers and sales of the
Products, the Broker-Dealer will at all times comply with the Regulations and
offer and sell the Products only in those jurisdictions, and in the manner in
which the Products may be lawfully sold.
3.2 REPRESENTATIONS AND WARRANTIES TRUE, ETC. At all times during the
term hereof the representations and warranties of the Broker-Dealer contained in
Section 2, above, shall be true.
3.3 REPRESENTATIVES. The Broker-Dealer may recommend persons
associated with it who are duly licensed and qualified under applicable law and
regulations to act in the offer or sale of the Products (the "Representatives")
for appointment as insurance agents of the Insurance Company, PROVIDED that such
person: (a) has not been subject to any civil, administrative or criminal
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actions or sanctions by, or entered into any settlement agreements with, any
governmental or quasi-governmental regulatory authority or self regulatory
organization, (b) has not been precluded or restricted for any period of time by
any entity from selling any securities, insurance products or other products of
such entity, (c) otherwise is qualified to offer and sell the Products, (d)
agrees in writing (i) to comply with all of the obligations of the Broker-Dealer
and the Representatives hereunder, (ii) not to make any recommendation to an
applicant or prospective purchaser to purchase a Product without having
reasonable grounds to believe that the purchase of the Product is suitable for
the prospective purchaser, (iii) to report promptly in writing to the Insurance
Company and FUSI all customer or regulatory complaints or inquiries with respect
to such Representative, whether written or oral, and to assist the Insurance
Company and FUSI in resolving any complaint to the satisfaction of all parties
involved, (e) possesses all Required Registrations and agrees to maintain in
force during the term hereof all Required Registrations, and (f) agrees that
prior to soliciting Products on behalf of the Insurance Company that he/she must
be appointed as an insurance agent of the Insurance Company. The Broker-Dealer
is authorized, except as hereinafter specifically provided, to cause the
Representatives to offer and sell the Products in the states and jurisdictions
in which the Products, the Broker-Dealer and such Representatives are
registered, licensed and appointed or otherwise appropriately qualified. The
Broker-Dealer shall be solely responsible for the supervision of the
Representatives and shall enforce written supervisory procedures to assure
strict compliance with NASD rules and applicable rules and regulations under the
1934 Act, and other applicable
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federal and state statutes and regulations. The Broker-Dealer agrees to provide
to the Representatives instructions sufficient to provide them with information
needed to offer and sell the Products in compliance with this Agreement and the
Regulations. The Broker-Dealer shall direct the sales activities of the
Representatives and shall be solely responsible for the conduct of the
Representatives in the offer and sale of the Products.
3.4 NO AUTHORITY TO MODIFY, ETC. The Broker-Dealer acknowledges and
agrees that neither the Broker-Dealer nor any of the Representatives shall have
the authority, on behalf of FUSI or the Insurance Company or otherwise, to (a)
modify any of the terms of the Products, including, but not limited to, any
forfeiture provisions thereof, or (b) extend the time of payment of any premiums
with respect to a Product. The Broker-Dealer acknowledges that neither the
Broker-Dealer nor any Representative may receive any premiums or other funds
from applicants for, or purchasers of the Products (except for the sole purpose
of forwarding such funds to the Insurance Company). If the Broker-Dealer or a
Representative inadvertently receives any funds from applicants for, or
purchasers of, the Products they shall hold such funds in a fiduciary capacity
on behalf of the Insurance Company and promptly submit them to the Insurance
Company.
3.5 REJECTION OF PRODUCT APPLICATIONS, ETC. The Broker-Dealer
acknowledges and agrees that (a) the Insurance Company, in its sole discretion,
may reject any application for a Product submitted to it by the Broker-Dealer or
any of the Representatives, (b) nothing herein contained shall constitute the
Broker-Dealer or any of its Representatives as employees of FUSI or the
Insurance
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Company, and (c) the Schedule of Products may be amended by FUSI at its sole
discretion from time to time to add other Products distributed by FUSI pursuant
to the Distribution Agreement or other distribution agreements with the
Insurance Company, or to delete Products therefrom.
3.6 ACCESS TO INFORMATION. The Broker-Dealer shall give FUSI and the
Insurance Company full access upon reasonable advance notice during the
Broker-Dealer's normal business hours to all information in the possession or
control of the Broker-Dealer or any Representative relating to, arising out of
or in connection with the offer and sale of Products pursuant to this Agreement,
and shall be required to provide to FUSI and the Insurance Company copies of any
documents relating thereto within ten (10) days after a written request
therefor. The Broker-Dealer shall be entitled to reimbursement of the expenses
it incurs in connection with providing documents to FUSI or the Insurance
Company, as required by the preceding sentence.
3.7 BASIS FOR RECOMMENDATIONS. The Broker-Dealer shall be solely
responsible for the approval of suitability determinations for the purchase of
any Product or the selection of any investment option thereunder, in compliance
with the Regulations and shall appropriately supervise the Representatives in
determining client suitability. The Broker-Dealer, through the Representatives
or otherwise, shall not make any recommendations to a prospective purchaser to
purchase a Product without having reasonable grounds to believe that the
purchase of that Product is suitable for such prospective purchaser. Among other
things, a determination of suitability shall
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be based on information supplied to a Representative after a reasonable inquiry
concerning the prospective purchaser's insurance and investment objectives,
financial situation and needs.
3.8 NO MISREPRESENTATIONS; DISCLOSURE. The Broker-Dealer, through the
Representatives or otherwise, shall not (a) make any misrepresentation of a
material fact with respect to the Products or omit to state a material fact
necessary to make statements made with respect to a Product in light of the
circumstances in which they were made, not misleading or (b) otherwise engage in
any deceptive or misleading practice or activity in connection with the offer
and the sale of the Products. The Broker-Dealer, through the Representatives or
otherwise, shall not: (a) give any oral information or make any representations
or statements in connection with the offer or sale of a Product that is not the
same as, or based solely on the then current version provided by FUSI or the
Insurance Company of the registration statement, Prospectus or statement of
additional information, as the case may be, relating to the such Product, or (b)
provide prospective purchasers of the Products or otherwise utilize in
connection with the offer of sale of the Products any advertising materials,
sales literature, signage or other promotional material, written, electronic,
graphic or audio visual materials other than materials supplied by, or approved
in writing in advance, by FUSI or the Insurance Company (the "Disclosure
Material"). The Broker-Dealer shall not modify in any way any Disclosure
Material which has been approved for use by the Broker-Dealer by FUSI or the
Insurance Company. The Broker-Dealer shall immediately cease using, and shall
cause the Representatives to immediately cease using, any Disclosure Material
previously approved
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by FUSI or the Insurance Company upon receipt of an oral or written instruction
to do so by FUSI or the Insurance Company. FUSI agrees to follow-up in writing
within three business days any such oral instruction from FUSI or the Insurance
Company to discontinue such use. The Broker-Dealer will maintain complete
records indicating the manner and extent of distribution of any such Disclosure
Material, and will make such records available to the Insurance Company, FUSI,
state insurance departments, the NASD, the SEC and any other regulatory agency
which has regulatory authority over the Insurance Company or FUSI.
3.9 EXCHANGE OF PRODUCTS. The Broker-Dealer or the Representatives may
solicit exchanges of contracts issued by insurance carriers other than the
Insurance Company or any of its affiliates for Products only when the
Broker-Dealer can demonstrate that the exchange would be beneficial to the
prospective purchaser or class of purchasers, as the case may be, and provided
that the exchange offer is approved in advance by an NASD-licensed principal of
the Broker-Dealer. The Broker-Dealer shall maintain records of the basis for any
determination that an exchange would be beneficial to a prospective purchaser,
including the name of such principal approving the exchange offer. Without the
express written permission of the Insurance Company, neither the Broker-Dealer
nor the Representatives may solicit exchanges of contracts issued by the
Insurance Company or any of its affiliates for Products.
3.10 COMPLAINTS AND INVESTIGATION. The Broker-Dealer shall
report in writing within three (3) business days after the occurrence thereof to
the Insurance Company and FUSI all
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customer complaints or inquiries relating to the offer, sale or ownership of the
Products or made by or on behalf of any prospective purchaser or owner of a
Product, whether written or oral, and shall assist the Insurance Company and
FUSI in resolving those complaints to the satisfaction of such prospective
purchaser, owner, FUSI and the Insurance Company. The Broker-Dealer shall
cooperate fully with FUSI and the Insurance Company in connection with any
governmental or other investigation or proceeding relating to any complaint
related to the Products by any prospective purchaser or owner of the Products.
3.11 NOTICE OF CLAIMS. If any action or proceeding shall be brought
against the Broker-Dealer or any of its Representatives or affiliates relating
to the Products, the Broker-Dealer shall give written notice to FUSI and the
Insurance Company within (3) business days after it receives notice of any such
action or proceeding.
3.12 FIDELITY BOND. The Broker-Dealer represents and warrants that all
directors, officers and employees of the Broker-Dealer (including the
Representative) who have access to funds of the Insurance Company are, and will
continue to be, covered by a blanket fidelity bond including coverage for
larceny, embezzlement and other defalcation, issued by a reputable bonding
company acceptable to the Insurance Company in an amount at least equivalent to
the minimal coverage required under the NASD Rules of Fair Practice, and
endorsed to extend coverage to variable life insurance and variable annuity
transactions. The Broker-Dealer acknowledges that the Insurance Company may
require evidence that such coverage is in force and the Broker-Dealer shall
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promptly give notice to the Insurance Company of any notice of cancellation or
change of coverage. The Broker-Dealer hereby assigns any proceeds received from
the fidelity bond company to the Insurance Company to the extent of the
Insurance Company's loss due to activities covered by such bond. If the payment
to the Insurance Company under the fidelity bond is insufficient to cover the
Insurance Company's loss, the Broker-Dealer will promptly pay the Insurance
Company an amount equal to the balance of such loss on demand. The Broker-Dealer
indemnifies and holds harmless the Insurance Company from any deficiency and
from the cost of collection thereof. The Broker-Dealer agrees to maintain the
fidelity bond coverage described in this Section 3.12 at all times while the
Agreement remains in force.
3.12 Other Broker-Dealers. Subject to the consent of the Insurance
Company, Broker-Dealer may recruit other broker-dealers that are registered
under the 1934 Act to offer and sell the Products provided that: (a) such
broker-dealer enters into an agreement in the form of this Agreement which
agreement is delivered to FUSI for its review, and (b) FUSI has the right, in
its sole discretion, to accept or reject such broker-dealer as authorized to
sell the Products. Any such other broker-dealer which is approved by FUSI to
sell the Products is referred to herein as a "Downstream Broker-Dealer."
Broker-Dealer shall be entitled to receive commissions from a Downstream
Broker-Dealer based on the sales of the Products made by such Downstream
Broker-Dealer upon such arrangements as may be agreed to by Broker-Dealer and
such Downstream Broker-Dealer (the "Downstream Agreement"); provided, however,
that such arrangements are subject to
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review and approval by FUSI in its sole discretion. Broker-Dealer acknowledges
that Broker-Dealer shall not be entitled to any commissions or other
compensation from FUSI or the Insurance Company in connection with the
recruiting, or any activities of a Downstream Broker-Dealer and shall only be
entitled to receive payments in connection with the activities of a Downstream
Broker-Dealer from such Downstream Broker-Dealer pursuant to any arrangement
that may be agreed to between Broker-Dealer and such downstream Broker-Dealer.
Broker-Dealer shall take all reasonable actions to insure that each Downstream
Broker-Dealer complies with the terms of its Downstream Agreement and all laws,
rules and regulations applicable to the Downstream Broker-Dealer in connection
with such Downstream Broker-Dealer's offers and sales of the Products. Any
breach by a Downstream Broker-Dealer of its Downstream Agreement shall be deemed
for all purposes, including, but not limited to, indemnification provided in
Section 9, below, to be a breach by Broker-Dealer of this Agreement. The
Insurance Company reserves the right, in its sole discretion, to terminate a
Downstream Broker-Dealer's authority to sell the Products.
4. REPRESENTATIONS AND WARRANTIES OF FUSI.
(a) FUSI is (i) a member in good standing of the NASD, (ii) duly
registered as a broker-dealer with the SEC under the 1934 Act, and registered in
each state or other jurisdiction in which FUSI is required to be registered in
order to sell the Products and otherwise maintains in effect all Required
Registrations;
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(b) FUSI conducts its operations is in compliance, in all
material respects, with all applicable federal and state securities laws and
regulations, with all applicable state insurance laws, and the requirements of
the NASD and any applicable securities exchanges of which it is a member;
(c) FUSI is a corporation duly organized and in good standing
under the law of its jurisdiction of organization and is qualified to do
business as a corporation in those states or jurisdictions where it is, or will
be, doing business pursuant to this Agreement; and
(d) this Agreement and the transactions contemplated hereby (i)
have been duly approved by all required corporate action on the part of FUSI and
(ii) do not conflict with any law, regulation, court order or agreement to which
FUSI is subject or FUSI's properties are bound.
5. COVENANTS OF FUSI. FUSI covenants with the Broker-Dealer that:
5.1 PRODUCTS. The SEC registered Products, when they are made
available to the Broker-Dealer for offer and sale, will be duly registered under
applicable federal and state securities laws.
5.2 INSURANCE COMPLIANCE. The Products, when they are made
available to the Broker-Dealer for offer and sale, will be in compliance with
applicable state insurance laws.
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5.3 DISCLOSURE. With respect to the Product it purports to
describe, each Prospectus, provided to the Broker-Dealer by FUSI or the
Insurance Company:
(a) will be true, accurate and complete in all material respects;
(b) will not contain any false or misleading statements of
material fact or omit any material fact necessary to make statements contained
therein not misleading in light of the circumstances under which they are made;
and
(c) will fully and adequately disclose all material terms,
conditions, limitations and restrictions with respect to the Products.
5.4 REPRESENTATIONS AND WARRANTIES TRUE, ETC. At all times during the
term hereof, the representations and warranties of FUSI contained in Section 4,
above, shall be true.
5.5 DOCUMENTS. FUSI shall provide the Broker-Dealer with
quantities of Prospectuses reasonably sufficient for the Broker-Dealer to
effectively market the Products.
6. TERM AND TERMINATION OF AGREEMENT
6.1 TERM. Unless sooner terminated pursuant to this Section 6, this
Agreement shall terminate on the earlier to occur of the date of termination of
the Distribution Agreement and the _____ anniversary of the date hereof.
6.2 TERMINATION. This Agreement shall be subject to termination at any
time by the Broker-Dealer or by FUSI, with or without cause, upon the giving of
at least thirty (30) days' written notice to such effect to the other party.
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6.3 EFFECT OF TERMINATION.
(a) In the event this Agreement is terminated, (i) the
Broker-Dealer and the Representatives shall immediately cease to have the right
to offer or sell any of the Products; (ii) the Broker-Dealer shall return
forthwith, upon the request of FUSI or the Insurance Company, all written
materials related to the Products delivered to the Broker-Dealer or the
Representatives by or on behalf of FUSI or the Insurance Company on or before
the date of such termination; (ii) all compensation required to be paid to
Broker-Dealer shall be paid in accordance with the Schedule of Commissions
attached hereto; (iii) all amounts due from the Broker-Dealer to FUSI shall be
immediately due and payable to FUSI, notwithstanding any other terms of such
payments that may have been in effect during the term of this Agreement; and
(iv) the Broker-Dealer shall carry out all residual obligations, if any, which
arose while this Agreement was in effect.
(b) In the event that this Agreement is terminated by FUSI after
a breach by the Broker-Dealer of any of its representations and warranties or
covenants hereunder, then FUSI may offset against any amounts owed to the
Broker-Dealer hereunder an amount equal to (i) the damages, losses and expenses
(including reasonable attorneys' fees) incurred by FUSI as a result of such
breach and (ii) any amount that may be owed by the Broker-Dealer to FUSI under
Section 9, below.
7. CONFIDENTIALITY
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7.1 GENERALLY. Each party will hold the other party's Confidential
Information (as defined below) in confidence and will safeguard such
Confidential Information as provided herein. The party receiving Confidential
Information (a "Recipient") will not, directly or indirectly, report, publish,
distribute, disclose, or otherwise disseminate the Confidential Information, or
any portion thereof, to any individual or entity for any purpose, except as
necessary to perform such Party's duties hereunder, or as expressly authorized
in writing by the party providing the Confidential Information (the "Provider").
Disclosure of Confidential Information internally by the recipient thereof will
be limited to those of its officers, directors, employees and agents who are
required to have access to the Confidential Information to enable the party to
perform its duties hereunder. In order to safeguard Confidential Information,
the Recipient shall (a) inform each party to whom it discloses Confidential
Information of the confidential nature thereof and of the requirements of this
Agreement, (b) direct such recipients to comply with the terms of this
Agreement, and (c) exercise any other precautions reasonably necessary to
prevent any improper disclosure of such Confidential Information.
7.2 DEFINITION. For purposes of the Agreement, "Confidential
Information" shall mean information: (a) regarding the Provider's or any
affiliate of the Provider's financial condition, information systems, business
operations, plans and strategies, products or services, customers or prospective
customers, and marketing and distribution plans, methods and techniques; (b)
that is marked confidential, "proprietary" or in like words, or that is
indicated in writing as being
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confidential prior to or promptly after disclosure to the Recipient; and (c) any
and all research and designs, ideas, concepts, and technology embodied in the
items described in clauses 7.2(a) or (b). Information shall not be deemed to be
Confidential Information hereunder if that information (a) is or becomes
generally available to the public other than as a result of disclosure by the
Recipient; (b) was available to, or already known by the Recipient on a
non-confidential basis prior to its receipt from the Provider; (c) is developed
by the Recipient independently of any information or data acquired from the
Provider; or (d) is disclosed pursuant to a court order or the requirement of
any federal or state regulatory, judicial, or government authority.
7.3 REMEDIES. Each party acknowledges and agrees that monetary damages
would not be a sufficient or adequate remedy for a breach or anticipated breach
of this Section 7 and that, in addition to any other legal or equitable remedies
which may be available, each party shall be entitled to specific performance and
injunctive relief, without the posting of a bond, for any breach or anticipated
breach of this Section.
7.4 SURVIVAL. The provisions of this Section 7 shall survive the
expiration or other termination of this Agreement.
8. MODIFICATION OF AGREEMENT
This Agreement may not be modified in any way unless by written
agreement signed by both of the parties, except for any amendment of the
Schedule of Products pursuant to the terms of Section 3.5 hereof or of the
Schedule of Commissions pursuant to the terms of Section 1.2 hereof,
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which Schedules shall be deemed to be modified upon the giving by FUSI to the
Broker-Dealer of revised versions thereof.
9. INDEMNIFICATION
9.1 GENERAL. The Broker-Dealer will indemnify FUSI, each affiliate of
FUSI (as defined in Rule 405 under the 1933 Act), the Insurance Company, each
affiliate of the Insurance Company (as defined in Rule 405 under the 1933 Act),
and each of their shareholders, officers, directors, employees, agents and
attorneys (each an "Indemnified Party") against, and hold each Indemnified Party
harmless from and in respect of, all losses, damages, costs, (expenses including
reasonable attorneys' fees) judgments, fines, penalties, settlements resulting
from claims, demands, actions, cases, proceedings, suits or investigations
conducted by, or pending before any governmental agency or authority or any
arbitration proceeding based on, arising from, related to or otherwise
attributable to (a) any breach of the representations and warranties of the
Broker-Dealer set forth in this Agreement or (b) any nonfulfillment of any
covenant or agreement on the part of the Broker-Dealer under this Agreement.
9.2 CONDITIONS OF INDEMNIFICATION.
(a) All claims for indemnification under this Agreement shall be
asserted and resolved as provided in this Section 9.2. An Indemnified Party
claiming indemnification under this Agreement shall promptly (i) notify the
Broker-Dealer (in this Section 9, the "INDEMNIFYING
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PARTY") of any third-party claim or claims asserted against the Indemnified
Party (a "THIRD PARTY CLAIM") that could give rise to a right of indemnification
under this Agreement and (ii) transmit to the Indemnifying Party a written
notice ("Claim Notice") describing in reasonable detail the nature of the Third
Party Claim, a copy of all papers served with respect to that claim (if any),
and the basis for the Indemnified Party's request for indemnification under this
Agreement. The failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with respect to
the related Third Party Claim, except to the extent that the resulting delay is
materially prejudicial to the defense of that claim. Within fifteen (15) days
after receipt of any Claim Notice (the "Election Period"), the Indemnifying
Party shall notify the Indemnified Party (i) whether the Indemnifying Party
disputes its potential liability to the Indemnified Party under this Section 9
with respect to that Third Party Claim and (ii) if the Indemnifying Party does
not dispute its potential liability to the Indemnified Party with respect to
that Third Party Claim, whether the Indemnifying Party desires, at the sole cost
and expense of the Indemnifying Party, to defend the Indemnified Party against
that Third Party Claim.
(b) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party
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to a final conclusion or settled at the discretion of the Indemnifying Party in
accordance with this Section 9, and the Indemnified Party will furnish the
Indemnifying Party with all information in its possession with respect to that
Third Party Claim and otherwise cooperate with the Indemnifying Party in the
defense of that Third Party Claim; PROVIDED, HOWEVER, that the Indemnifying
Party shall not enter into any settlement with respect to any Third Party Claim
that purports to limit the activities of, or otherwise restrict in any way, any
Indemnified Party or any affiliate of any Indemnified Party without the prior
consent of that Indemnified Party (which consent may be withheld in the sole
discretion of that Indemnified Party). The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 9 and will bear its own costs
and expenses with respect to that participation; PROVIDED, HOWEVER, that if the
named parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party, and the Indemnified Party has
been advised by counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
Indemnifying Party, then the Indemnified Party may employ separate counsel at
the expense of the Indemnifying Party, and, on its written notification of that
employment, the Indemnifying Party shall not have the right to assume or
continue the defense of such action on behalf of the Indemnified Party.
(c) If the Indemnifying Party (i) within the Election Period (A)
disputes its potential liability to the Indemnified Party under this Section 9,
(B) elects not to defend the
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ALLMERICA DRAFT
MARCH 16, 2000
Indemnified Party as described, above, or (C) fails to notify the Indemnified
Party that the Indemnifying Party elects to defend the Indemnified Party as
provided above, or (ii) elects to defend the Indemnified Party as provided,
above, but fails diligently and promptly to prosecute or settle the Third Party
Claim, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party (if the Indemnified Party is entitled
to indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Section 9 and if that
dispute is resolved in favor of the Indemnifying Party, the Indemnifying Party
shall not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section 9, or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all reasonable costs and expenses
of such participation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this Section 9, and the Indemnifying Party shall bear its own costs and
expenses with respect to that participation.
(d) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall
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MARCH 16, 2000
transmit to the Indemnifying Party a written notice (the "Indemnity Notice")
describing in reasonable detail the nature of the claim, an estimate of the
amount of damages attributable to that claim to the extent feasible (which
estimate shall not be conclusive of the final amount of that claim) and the
basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within fifteen (15) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes the claim specified by the Indemnified Party in the
Indemnity Notice, that claim shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed that claim, as
provided above, that dispute shall be resolved by proceedings in an appropriate
court of competent jurisdiction if the parties do not reach a settlement of that
dispute within thirty (30) days after notice of that dispute is given (the
"INDEMNITY NOTICE PERIOD").
(e) Payments of all amounts owing by an Indemnifying Party
pursuant to this Section 9 relating to a Third Party Claim shall be made
within thirty (30) days after the latest of (i) the settlement of that Third
Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of that Third Party Claim and (iii) the expiration of the period
for appeal of a final adjudication of the Indemnifying Party's liability to
the Indemnified Party under this Agreement in respect of that Third Party
Claim. Payments of all amounts owing by an Indemnifying Party with respect to
claims other than Third Party Claims shall be made within thirty (30) days
after the later of the expiration of (i) the Indemnity Notice Period and (ii)
the expiration of the period for appeal
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MARCH 16, 2000
of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement.
9.3 SURVIVAL. The provisions of this Section 9 shall survive the
expiration or other termination of this Agreement.
10. REMEDIES CUMULATIVE; NON-WAIVER. The rights and remedies of the parties
contained in this Agreement are cumulative and are in addition to any and all
rights and remedies at law or in equity, which the parties hereto are entitled
to under applicable law. Failure of either party to insist upon strict
compliance 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.
11. MITIGATION OF LOSSES. In the event of any dispute between an owner
of a Product (a "Disputing Owner") and FUSI, the Insurance Company, the
Broker-Dealer, a Representative or any other party with respect to such
Product, FUSI shall have the right, with prior written notice and
consultation with the Broker-Dealer and the Insurance Company, to take such
action as FUSI may deem necessary to promptly effect a mitigation of damages
or limitation of losses, and without waiving or electing to relinquish any
rights or remedies FUSI may have against the Broker-Dealer, FUSI shall have
the right to settle any such dispute without the prior consent of the
Broker-Dealer
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and without waiving or electing to relinquish any rights or remedies FUSI may
have against the Broker-Dealer.
12. GOVERNING LAW, ETC. This Agreement shall be governed by and construed
in accordance with the laws of North Carolina, without regard to choice of law
provisions, and the venue for all actions or proceedings brought by either party
to this Agreement arising out of or relating to this Agreement shall be in the
state or federal courts, as the case may be, located in Mecklenburg County,
North Carolina (collectively, the "Courts"). The Broker-Dealer hereby
irrevocably waives any objection which the Broker-Dealer now or hereafter may
have to the laying of venue of any action or proceeding arising out of or
relating to this Agreement brought in any of the Courts, and any objection on
the ground that any such action or proceeding in any of the Courts has been
brought in an inconvenient forum. In the event of any litigation between the
parties hereto with respect to this Agreement, the prevailing party therein
shall be entitled to receive from the other party all of such prevailing party's
expenses in connection with such litigation, including, but not limited, to
reasonable attorneys' fees.
13. NOTICES. Any notices or demands given in connection herewith shall be
in writing and deemed given when (i) personally delivered, (ii) sent by
facsimile transmission to a number provided in writing by the addressee and a
confirmation of the transmission is received by the sender or (iii) three (3)
days after being deposited for delivery with a recognized overnight courier,
such as
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MARCH 16, 2000
FedEx, and addressed or sent, as the case may be, to the address or facsimile
number set forth below or to such other address or facsimile number as such
party may in writing designate:
(a) TO FUSI:
Attention:
(b) TO THE BROKER-DEALER:
Attention:
14. ARBITRATION
14.1 Any disagreement, dispute, claim or controversy arising out of or
relating to this Agreement, performance hereunder or the breach hereof, or
otherwise arising between the Broker-Dealer and FUSI, shall be subject to
mandatory arbitration under the auspices, rules and bylaws of the NASD, to the
full extent applicable and as may be amended from time to time.
14.2 Where the NASD Code of Arbitration Procedure is not applicable,
any dispute between the Broker-Dealer and FUSI arising under or relating to this
Agreement shall be settled by compulsory arbitration before one arbitrator in
accordance with the Commercial Arbitration Rules then in force of the American
Arbitration Association. The arbitration shall take place in North Carolina,
unless the parties agree on another location. The arbitrator shall have no
authority to issue any decision or award for punitive damages or for treble or
any other type of multiple damages, consequential damages, or any compensatory
damages based on a claim of lost profits or similar claim. Each party shall bear
its own costs and expenses incurred by it in any such
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MARCH 16, 2000
arbitration, except that the parties shall bear the expenses of the arbitrator's
services equally. The provisions of this Section shall survive the expiration or
other termination of this Agreement.
15. ENTIRE AGREEMENT; CERTAIN TERMS. This Agreement, together with the
Schedules hereto, constitutes and contains the entire agreement of the parties
with respect to the matters addressed herein and supersedes any and all prior
negotiations, correspondence, understandings and agreements between the parties
respecting the subject matter hereof. No waiver of any rights under this
Agreement, nor any modification or amendment of this Agreement shall be
effective or enforceable unless in writing and signed by the party to be charged
therewith. When used in this Agreement, the terms "hereof," "herein" and
"hereunder" refer to this Agreement in its entirety, including the Schedules
attached to this Agreement, and not to any particular provisions of this
Agreement, unless otherwise indicated.
16. HEADINGS
The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
17. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which
together shall be deemed an original, but both of which together shall
constitute one and the same instrument.
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MARCH 16, 2000
18. SEVERABILITY. It is the intention of the parties hereto that any
provision of this Agreement found to be invalid or unenforceable be reformed
rather than eliminated. If any of the provisions of this Agreement, or any part
thereof, is hereinafter construed to be invalid or unenforceable, the same shall
not affect the remainder of such provision or the other provisions of this
Agreement, which shall be given full effect, without regard to the invalid
portions. In the event that the courts of any one or more jurisdictions shall
hold such provisions wholly or partially unenforceable by reason of the scope
thereof or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the parties' rights provided for
herein in the courts of any other jurisdictions as to breaches or threatened
breaches of such provisions in such other jurisdictions, the above provisions as
they relate to each jurisdiction being, for this purpose, severable into diverse
and independent covenants.
19. ASSIGNMENT Except as specifically set forth herein, the Broker-Dealer
may not assign any of its rights or obligations hereunder without the prior
written approval of FUSI.
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MARCH 16, 2000
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first indicated above.
FUSI
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
BROKER-DEALER
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Accepted and Agreed to
[Name of Insurance Company]
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ALLMERICA DRAFT
MARCH 16, 2000
SCHEDULE OF PRODUCTS
to
First Union Securities, Inc.
SELLING GROUP AGREEMENT
--------------------------------------------------------------------------------
Policy/Certificate
Product Description Form
--------------------------------------------------------------------------------
ValuPlus Assurance Registered Retail 1036-99
Variable Universal Life
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ALLMERICA DRAFT
MARCH 16, 2000
SCHEDULE OF COMMISSIONS
to
First Union Securities, Inc.
SELLING GROUP AGREEMENT
I. PURPOSE
This Schedule of Commissions ("Schedule") is adopted pursuant to
Section 1.2 of the Selling Group Agreement (the "Agreement") and
governs the determination and payment by FUSI of commissions
("Compensation") to the Broker-Dealer in connection with premium
payments received under the products specified herein.
II. COVERED PRODUCTS
The only products covered by this Schedule ("Covered Products") are the
following:
COVERED PRODUCT POLICY FORM
ValuPlus Assurance 1036-99
III. COMPENSATION
The Compensation to the Broker-Dealer under this Selling Group
Agreement shall be as outlined below:
VABL
Year 1: 6.0%
Years 2-4: 6.0%
Years 5-10: 3.0%
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ALLMERICA DRAFT
MARCH 16, 2000
Years 11+: 1.50%
The foregoing amounts shall be payable by FUSI within five (5) business
days after FUSI receives such amounts from the Insurance Company.
IV. CHARGEBACK OF COMPENSATION
A. The termination of a Covered Product (1) within twelve (12) months
of its date of issue will result in a charge-back of one hundred
percent (100%) of the Compensation paid to the Broker-Dealer respecting
the sale of the Covered Product if the Covered Product terminates for
reasons other than death; (2) seventy-five percent (75%) of the
compensation paid to the Broker-Dealer if a Covered Product terminates
for reasons other than death during the second twelve (12) months
following issue; (3) fifty percent (50%) of the Compensation paid to
the Broker-Dealer if a Covered Product terminates for reasons other
than death during the third twelve (12) months following issue; (4)
twenty five percent (25%) of the Compensation paid to the Broker-Dealer
if a Covered Product terminates for reasons other than death during the
fourth twelve (12) months following issue; and (5) nothing from the
Broker-Dealer (i.e., no charge back) if the Covered Product terminates
thereafter. However, notwithstanding any other provision of the
Agreement, if termination of a Covered Product at any time is due to
the willful or negligent wrongful actions or representations of the
Broker-Dealer or any Representative, FUSI reserves the right to recover
one hundred (100%) of the Compensation paid to the Broker-Dealer
respecting the sale of the Covered Product.
In the event a Covered Product owner makes a withdrawal from or
partially surrenders a Covered Product within forty-eight (48) months
following its date of issue, the charge back rules described in the
preceding paragraph shall apply, except that the amount of the charge
back shall be pro-rated. Any such pro-rated charge back shall be
determined in accordance with the following formula:
Charge Back = Charge Back Percentage* x Withdrawal Amount
-----------------
Covered Product
Cash Value**
*100% year one; 75% year two; 50% year three; 25% year four
**determined as of the date of the withdrawal
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ALLMERICA DRAFT
MARCH 16, 2000
B. Compensation charge-backs will be due within 60 days of notification
by FUS. Compensation will be charged back by credit against
Compensation to be paid in the future and/or by requiring cash
repayment to be made by the Broker-Dealer.
V. MODIFICATIONS AND TERMINATION
A. No Compensation shall be paid on Covered Products that are changed
from their original version, either under a policy provision or
otherwise, or on Covered Products that are issued using cash values of
Insurance Company policies, either under a policy provision or
otherwise.
B. Except as otherwise provided in the Agreement, termination of the
Agreement for any reason shall not impair the right of the
Broker-Dealer to receive Compensation accrued and payable on account of
premium received under Covered Products issued on applications procured
by the Broker-Dealer, or by Representatives operating under supervision
of the Broker-Dealer, prior to the termination of the Selling Group
Agreement.
VI. APPLICABILITY
This Schedule supersedes and replaces any and all previous Schedules of
Commissions and Allowances.
34
