DISTRIBUTION AGREEMENT
By and Between
Allmerica Financial Life Insurance and Annuity Company
First Allmerica Financial Life Insurance Company
Allmerica Investments, Inc.
and
First Union Securities, Inc.
TABLE OF CONTENTS
SECTION PAGE NO.
Additional Definitions ...............................................2
Distribution Activities - Authority ..................................3
Distribution Activities - Appointment ................................4
Distribution Activities - Duties .....................................4
Limitations on Authority .............................................5
Selling Group Agreements .............................................6
Payment of Expenses .................................................6
Forms, Applications, and Licensing....................................7
Marketing Materials ..................................................8
The Distributor's Compensation .......................................9
Representations and Warranties ......................................10
Indemnification .....................................................11
Records .............................................................16
Investigations and Proceedings ......................................16
Term and Termination ................................................17
Rights Upon Termination .............................................18
Independent Contractor ..............................................19
Notices .............................................................19
Arbitration .........................................................20
Confidentiality .....................................................20
Severability ........................................................21
Choice of Law .......................................................22
No Waiver ...........................................................22
Agreement Non-Assignable ............................................22
Schedules ...........................................................22
Headings ............................................................22
Entire Agreement ....................................................22
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____________ day of _________________ 2000, by and
between Allmerica Financial Life Insurance and Annuity Company, a Delaware
insurance company ("AFLIAC"), First Allmerica Financial Life Insurance Company,
a Massachusetts insurance company ("FAFLIC" and, together with AFLIAC,
collectively, the "Insurance Companies"), Allmerica Investments, Inc., a
Massachusetts corporation (the "Underwriter") and First Union Securities, Inc.,
a Delaware corporation (the "Distributor"), on its own behalf and on behalf of
the individuals and entities listed on Schedule 1 to this Agreement (the
"Distributor Agency Affiliates"), as such Schedule may be amended from time to
time in accordance with this Agreement.
RECITALS:
WHEREAS, the Insurance Companies propose to issue certain variable annuity
contracts and variable life insurance policies; and
WHEREAS, certain of the variable annuity contracts and variable life insurance
policies to be issued by the Insurance Companies (the "Private Placements") may
be offered and sold in reliance upon exemptions from the registration
requirements of the Securities Act of 1933 (the "1933 Act") and the Investment
Company Act of 1940 (the "1940 Act"), while certain other variable annuity
contracts and variable life insurance policies to be issued by the Insurance
Companies may be offered and sold pursuant to Registration Statements (the
"Registered Products") and their related Prospectuses filed with and declared
effective by the Securities and Exchange Commission (the "Commission") under the
provisions of the 1933 Act and the 1940 Act (collectively, the "Private
Placements" and the "Registered Products" are referred to as the "Variable
Products") (Variable Products are identified in Schedule 2 to this Agreement, as
such Schedule may be amended from time to time); and
WHEREAS, the Distributor is registered as a broker-dealer with the Commission
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD") that engages in the distribution of variable annuity contracts and
variable life insurance products; and
WHEREAS, the Insurance Companies and the Underwriter desire to retain the
Distributor to distribute the Variable Products through registered
broker-dealers ("Broker-Dealers") and their registered representatives
("Representatives"); and
WHEREAS, the Distributor desires to be retained by the Insurance Companies and
the Underwriter to distribute the Variable Products on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
parties hereto agree as follows:
1. ADDITIONAL DEFINITIONS
(a) AFFILIATE -- With respect to a person, any other person
controlling, controlled by, or under common control with, such
person.
(b) APPLICATIONS -- The forms used by a prospective purchaser to
apply for a variable life insurance policy or a variable
annuity contract.
(c) CONTRACTS -- The variable annuity contracts set forth in
Schedule 2 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(d) FUNDS -- The funds set forth in Schedule 4 to this Agreement,
as such Schedule may be amended from time to time in
accordance with this Agreement, through which benefits
provided by the Variable Products are to be funded.
(e) FUND PROSPECTUS -- At any time while this Agreement is in
effect, the prospectus and statement of additional information
for each Fund most recently filed with the Commission pursuant
to Rule 497 under the 1933 Act.
(f) FUND REGISTRATION STATEMENT -- At any time while this
Agreement is in effect, the currently effective registration
statement filed with the Commission under the 1933 Act, or
currently effective post-effective amendment thereto, for
shares of each Fund.
(g) POLICIES -- The variable life insurance policies set forth in
Schedule 2 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(h) PORTFOLIOS -- The underlying Fund portfolios, set forth in
Schedule 4 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(i) PREMIUM -- A payment made under a Policy by an applicant or
purchaser.
(j) PRIVATE PLACEMENT GUIDELINES -- The guidelines set forth in
Schedule 3 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(k) PRIVATE PLACEMENT MEMORANDUM -- The document through which the
Insurance Companies offer Private Placements. (For purposes of
Section 12 of this Agreement, however, the term "any Private
Placement Memorandum" means any document which is or at any
time was a Private Placement Memorandum within the meaning of
this Section 1(k)).
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(l) PRIVATE PLACEMENTS -- Contracts and Policies being offered and
sold in reliance upon exemptions from the registration
requirements of the 1933 Act and the 1940 Act for non-public
offerings.
(m) PROSPECTUS -- The prospectus, if any, included within a
Registration Statement or, if more recent, the prospectus
filed pursuant to Rule 497 under the 1933 Act. (For purposes
of Section 12 of this Agreement, however, the term "any
Prospectus" means any document which is or at any time was a
Prospectus within the meaning of this Section 1(m)).
(n) PURCHASE PAYMENT -- A payment made under a Contract by an
applicant or purchaser.
(o) REGISTRATION STATEMENT -- At any time while this Agreement is
in effect, each currently effective registration statement, or
currently effective post-effective amendment thereto, relating
to the Contracts or Policies, including financial statements
included in, and all exhibits to, that registration statement
or post-effective amendment. (For purposes of Section 12 of
this Agreement, however, the term "Registration Statement"
means any document which is or at any time was a Registration
Statement within the meaning of this Section 1(o)).
(p) REGULATIONS -- The rules and regulations promulgated by the
Commission under the 1933 Act, the 1934 Act and the 1940 Act
as in effect at the time this Agreement is executed or
thereafter promulgated.
(q) VARIABLE ACCOUNTS -- Separate accounts established pursuant to
Delaware state insurance law (in the case of AFLIAC) or
Massachusetts state insurance law (in the case of FAFLIC)
supporting the Variable Products specified in Schedule 2 as in
effect at the time this Agreement is executed, or as such
Schedule may be amended from time to time in accordance with
this Agreement.
2. DISTRIBUTION ACTIVITIES -- AUTHORITY
(a) The Insurance Companies and the Underwriter authorize the
Distributor, and the Distributor accepts the authority, to act
as a distributor of the Variable Products, subject to any
applicable requirements of the 1933 Act and the 1940 Act.
The Insurance Companies hereby authorize the Distributor to
recommend to the Insurance Companies persons that may be
authorized to engage in solicitation activities with respect
to the Variable Products, including the recruitment and
appointment of Broker-Dealers and Representatives who, in
turn, may be authorized to engage in solicitation activities
involving the solicitation of Applications, Premiums and
Purchase Payments directly from prospective purchasers.
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The Insurance Companies shall have the right to reject any
such recommendation, but shall not do so unreasonably, and
shall notify the Distributor of any such rejection.
(b) The Distributor shall enter into separate written "Selling
Group Agreements" with Broker-Dealers for distribution of the
Variable Products. These Selling Group Agreements will be in a
form mutually agreeable to the parties to this Agreement. The
standard form of Selling Group Agreement to be used on the
effective date of this Agreement is set forth in Schedule 5 to
this Agreement.
(c) Nothing in this Agreement precludes additional mutually
agreeable distribution and compensation arrangements among the
parties to this Agreement, including ones that may have
compensation arrangements that reward the Insurance Companies
for identifying and recruiting new Broker-Dealers to sell the
Variable Products, for identifying potential purchasers of the
Variable Products, or for providing superior support under
this Agreement.
3. DISTRIBUTION ACTIVITIES -- APPOINTMENT
(a) Where required by applicable state insurance law, the
Insurance Companies hereby appoint the Distributor as their
agent under that state insurance law to represent the
Insurance Companies in the distribution activities
contemplated by this Agreement. The Insurance Companies and
the Underwriter hereby authorize the Distributor under
applicable securities laws to engage in the activities
contemplated by this Agreement relating to the distribution of
the Variable Products.
(b) In states where the Distributor is not licensed as an
insurance agent and applicable state insurance law requires
that the Distributor be so licensed, the Insurance Companies
hereby appoint each Distributor Agency Affiliate listed on
Schedule 1 to this Agreement (as that Schedule may be amended
from time to time by the Distributor when required by
applicable state insurance law to reflect changes in the
licensing status of the Distributor or the Distributor Agency
Affiliates) as their agent under applicable state insurance
laws to represent the Insurance Companies in the distribution
activities contemplated by this Agreement.
4. DISTRIBUTION ACTIVITIES -- DUTIES
(a) The Distributor shall use its best efforts to market the
Variable Products through Broker-Dealers and Representatives
in accordance with the terms and conditions of this
Agreement, subject to applicable material market and
regulatory conditions.
In addition, the Distributor (both on its own behalf and on
behalf of the Distributor Agency Affiliates) undertakes to use
its best efforts to recruit Broker-
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Dealers in accordance with Section 3 of this Agreement,
consistent with market conditions and in compliance with
its responsibilities under the federal securities laws
and NASD rules and regulations.
(b) The Distributor shall assist and provide information to
Broker-Dealers and their Representatives in connection with
the sale and servicing of Variable Products.
(c) Under no circumstances shall the Insurance Companies or the
Underwriter be responsible under this Agreement for any
failure by Broker-Dealers or their Representatives to comply
with applicable law.
(d) Under no circumstances shall the Distributor be responsible
under this Agreement for any failure by Broker-Dealers or
their Representatives to comply with applicable law.
Notwithstanding the foregoing, the Distributor agrees to
indemnify the Insurance Companies and the Underwriter for any
such failure to comply with applicable law, as provided in
Section 12(a)(1)(viii) of this Agreement.
(e) Under no circumstances shall the Distributor be responsible
under this Agreement for any failure by the Insurance
Companies or the Underwriter to comply with applicable law.
(f) Under no circumstances shall the Insurance Companies or the
Underwriter be responsible under this Agreement for any
failure by the Distributor to comply with applicable law.
5. LIMITATIONS ON AUTHORITY
(a) The Distributor shall not have the authority, and shall not
grant authority to Broker-Dealers or their Representatives, on
behalf of the Insurance Companies:
(1) to make, alter or discharge any Variable Product or
other contract entered into pursuant to a Variable
Product;
(2) to waive any Variable Product forfeiture provision;
(3) to extend the time of paying any Purchase Payments,
or Premiums due under the Variable Products; and
(4) to receive any monies, Purchase Payments or
Premiums (except for the sole purpose of forwarding
monies, Purchase Payments or Premiums to the
appropriate Insurance Company).
(b) The Distributor shall not expend, nor contract for the
expenditure of, funds of the Insurance Companies.
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(c) The Distributor shall not possess or exercise any authority on
behalf of the Insurance Companies other than that expressly
conferred on the Distributor by this Agreement.
6. SELLING GROUP AGREEMENTS
(a) The Distributor shall not enter into any Selling Group
Agreement with a Broker-Dealer relating to the distribution of
any Variable Product, unless that Selling Group Agreement (i)
is substantially identical to the form of Selling Group
Agreement mutually agreed to by the parties to this Agreement
(the standard form of Selling Group Agreement in use on the
effective date of this Agreement is set forth in Schedule 5
hereto) or (ii) is approved by the appropriate Insurance
Company, provided that the approval of the Insurance Company
shall be deemed to have been given if no written objection to
the Selling Group Agreement has been delivered by the
Insurance Company to the Distributor within five (5) business
days after being provided by facsimile or express courier with
a copy of the proposed Selling Group Agreement.
(b) The Distributor shall provide to the appropriate Insurance
Company a copy of each Selling Group Agreement entered into by
the Distributor and a Broker-Dealer within five (5) business
days following execution thereof.
(c) The Insurance Companies agree to appoint Representatives of
Broker-Dealers as life insurance agents of the Insurance
Companies to the extent that such Representatives satisfy the
licensing and qualification requirements of applicable state
insurance laws, as well as the Insurance Companies' own
standards applicable to life insurance agents. The Insurance
Companies reserve the right, which right shall not be
exercised unreasonably, to refuse to appoint any
Representative as their life insurance agent. The Insurance
Companies reserve the right to terminate immediately the
appointment of any Representative as their life insurance
agent if such Representative fails to maintain his or her
registration, license or qualifications under federal and
state securities laws, as well as applicable state insurance
laws, is subject to disciplinary action by any governmental
authority or self-regulatory organization, fails to meet
minimum sales requirements established from time to time by
the Insurance Companies, or fails, in the reasonable view of
the Insurance Companies, to satisfy appropriate industry
standards. The Insurance Companies shall promptly notify the
Distributor and the Broker-Dealer with which the
Representative is affiliated of their intent to terminate a
Representative and the reasons for such termination.
(d) As outlined in the Selling Group Agreement, the Broker-Dealer
will pay the initial and renewal fees for agent appointments
by the respective company of the Broker-Dealers and
Broker-Dealer Representatives.
7. PAYMENT OF EXPENSES
Expenses will be paid in accordance with Schedule 7 to this Agreement.
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8. FORMS, APPLICATIONS, AND LICENSING
(a) The Insurance Companies, or their agent, shall forward to the
Distributor, Applications, other administrative forms, and any
amendments or supplements to the foregoing, necessary to carry
out the Distributor's distribution authority and
responsibilities with respect to the Variable Products.
(b) The Insurance Companies shall obtain all requisite regulatory
approvals of the Variable Products and shall comply with all
applicable laws, rules, regulations and orders of any
governmental authority relating to the issuance or sale of the
Variable Products.
(c) Subject to any Addendum to the Selling Group Agreement for
netting commissions, all Premiums and Purchase Payments paid
by check or money order that are collected by the Distributor
or any Broker-Dealer or Representative shall be remitted
promptly, and in any event not later than two business days,
in full, together with Applications, forms, and any other
required documentation, to the appropriate Insurance Company.
Checks or money orders in payment of Premiums and Purchase
Payments shall be drawn to the order of AFLIAC or FAFLIC, as
appropriate. If any Premium or Purchase Payment is held at any
time by the Distributor, Broker-Dealers, Representatives,
agents, or any affiliates, the Distributor, the
Broker-Dealers, the Representatives, the agents or the
affiliates shall hold that Premium or Purchase Payment in a
fiduciary capacity. All Premiums and Purchase Payments whether
by check, money order or wire, shall be the property of the
appropriate Insurance Company.
(d) The Distributor acknowledges that the Insurance Companies
shall have the unconditional right to reject, in whole or in
part, any Application. The Insurance Companies shall return
any monies received by them or from an applicant or purchaser
whose Application has been rejected. The Insurance Companies
shall notify the Distributor in writing one business day prior
to taking any action to return any such monies, which notice
shall identify, if applicable, the Representative who
submitted the rejected Application.
(e) If a purchaser rescinds a Variable Product or exercises its
"free look right" under a Variable Product, any refund of
Premiums or Purchase Payments due as provided in that Variable
Product, shall be made by the issuing Insurance Company to the
purchaser. The Insurance Companies shall notify the
Distributor in writing one business day prior to taking any
action to refund any such Premiums or Purchase Payments, which
notice shall identify, if applicable the Broker-Dealer or the
Representative through which the Variable Product had been
purchased.
If a purchaser rescinds a Variable Product or exercises its
"free look right" under a
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Variable Product, the Distributor will pay to AFLIAC or
FAFLIC, whichever is the issuing Insurance Company, within
five (5) business days of a written request for repayment, the
amount of any commission or other compensation the Distributor
or a Distributor Agency affiliate received on the Premiums or
Purchase Payments returned.
(f) The Distributor agrees to maintain all registrations,
licenses, and qualifications under federal and state
securities laws that are applicable to its activities and
those of its registered representatives in connection with the
performance of this Agreement. The Distributor also agrees to
maintain all registrations, licenses, and qualifications under
state insurance laws that are applicable to the activities of
the Distributor, the Distributor Agency Affiliates and their
agents and registered representatives in performing this
Agreement.
(g) The Distributor agrees to notify the Insurance Companies
within three (3) business days of obtaining actual knowledge
of any changes in the registrations, licenses, or
qualifications of the Distributor, the Distributor Agency
Affiliates, or the agents or registered representatives of the
Distributor or Distributor Agency Affiliates that would
adversely affect its performance of this Agreement.
(h) The Insurance Companies agree to obtain and maintain all
registrations, licenses, qualifications and approvals under
federal securities laws and state blue sky and insurance laws
in connection with qualifying the Variable Products for sale.
(i) The Insurance Companies agree to notify the Distributor within
three (3) business days of obtaining actual knowledge of any
changes in the registrations, licenses, qualifications, or
approvals of the Variable Products that would adversely affect
the offering of the Variable Products.
9. MARKETING MATERIALS
Prior to use with any member of the public, the Distributor shall
provide to the Insurance Companies copies of all promotional, sales and
advertising material developed by the Distributor for the Insurance
Companies' review and written approval. Upon receipt of such material
from the Distributor, the Insurance Companies shall be given a
reasonable amount of time to complete their review. The Insurance
Companies 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 Insurance
Companies.
The Insurance Companies shall be responsible for filing, as required,
all promotional, sales or advertising material related to the Variable
Products with the NASD and any federal and state securities,
governmental or regulatory agencies. The Insurance Companies shall also
be responsible for filing, as required, such material with any state
insurance department.
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10. THE DISTRIBUTOR'S COMPENSATION
(a) In consideration for the services rendered by the Distributor
pursuant to this Agreement, the Insurance Companies, as agent
for the Underwriter, shall pay the Distributor the
compensation set forth in Schedule 6 to this Agreement.
Schedule 6 and/or Schedule 2 may be modified at any time, and
from time to time, by adding or deleting Policies or Contracts
and changing the compensation payable for those Policies and
Contracts, provided that any such modifications are mutually
agreed upon by both the Insurance Companies and the
Distributor, in writing, and signed by both parties. Any such
modification shall apply only to Policies and Contracts
applied for after the effective date of each such
modification.
(b) In the event a Variable Product terminates within twelve (12)
months of the date of issue, the Insurance Companies reserve
the right to recover: (1) one hundred percent (100%) of the
compensation paid to the Distributor respecting the sale of
the Variable Product if that Variable Product terminates for
reasons other than death during the first twelve (12) months
following issue; (2) seventy five percent (75%) of the
compensation paid to the Distributor if a Variable 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 Distributor if a Variable 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 Distributor if a
Variable Product terminates for reasons other than death
during the fourth twelve (12) months following issue; and (5)
nothing from the Distributor (i.e., no charge back) if the
Variable Product terminates thereafter. However,
notwithstanding any other provision of this Agreement, if
termination of a Variable Product at any time is due to the
willful or negligent wrongful actions or representations of
the Distributor, a Broker-Dealer or any Representative, the
Insurance Companies reserve the right to recover one hundred
percent (100%) of the compensation paid to the Distributor
respecting the sale of the Variable Product.
In the event a Variable Product owner makes a withdrawal from
or partially surrenders a Variable Product within forty-eight
(48) months following its date of issue, the charge back rules
described in the first paragraph of this Section 10(b) 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
-----------------
Variable Product
Cash Value**
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*100% year one; 75% year two; 50% year three; 25% year four
**determined as of the date of the withdrawal
With respect to any other Variable Product terminations or
withdrawals, the Insurance Companies shall have no right to
recover any portion of the compensation paid to the
Distributor. In no event shall the Insurance Companies have
the right to recover any portion of any compensation received
by the Distributor as a basis point charge against investment
values under the Policies and Contracts. The Insurance
Companies shall have the right to set off any amounts owed by
the Distributor under this Section 10(b) against any amounts
owed by the Insurance Companies to the Distributor.
11. REPRESENTATIONS AND WARRANTIES
(a) BY THE DISTRIBUTOR
The Distributor represents and warrants to, and covenants
with, the Insurance Companies as follows:
(1) The Distributor has taken all actions necessary,
including without limitation, those necessary under
its articles of incorporation, by-laws and applicable
state corporate law, to authorize the execution,
delivery and performance of this Agreement and all
transactions contemplated hereunder.
(2) Prior to the sale of any Variable Product hereunder,
the Distributor will be, and shall thereafter remain
during the term of this Agreement, registered as a
broker-dealer under the 1934 Act, a member in good
standing of the NASD, and duly registered under
applicable state securities laws.
(3) Prior to the sale of any Variable Product hereunder,
the Distributor will be, and shall thereafter remain
during the term of this Agreement, in compliance with
the eligibility requirements for certain affiliated
persons and underwriters found in Section 9(a) of the
0000 Xxx.
(4) Prior to the sale of any Variable Product hereunder,
the Distributor and each Distributor Agency Affiliate
and their employees, agents and registered
representatives will have all necessary state
insurance licenses and other regulatory approvals to
perform the services required by this Agreement and
the Distributor will notify the Insurance Companies
and the Underwriter within three business days of
obtaining actual knowledge of any change in the
status of such licenses or regulatory approvals.
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(5) While this Agreement remains in force and at any time
following termination of this Agreement for any
reason, the Distributor and the Distributor Agency
Affiliates agree that they will not take any action
designed or calculated to result in the transfer,
exchange or replacement of any Policy or Contract.
(b) BY THE INSURANCE COMPANIES AND THE UNDERWRITER
The Insurance Companies and the Underwriter represent and
warrant to, and covenant with, the Distributor, as follows:
(1) All necessary regulatory approvals and licenses from
any state or federal governmental body having
jurisdiction over the Insurance Companies, the
Underwriter or the Variable Products have been
obtained, and the Insurance Companies will notify the
Distributor within one business day of obtaining
actual knowledge of any change in the status of any
approvals or licenses related to the marketing, sale
or distribution of the Variable Products.
(2) The Insurance Companies and the Underwriter have
taken all actions necessary including, without
limitation, those necessary under their articles of
incorporation, bylaws and applicable state corporate
law, to authorize the execution, delivery and
performance of this Agreement and all transactions
contemplated hereunder.
(3) The Insurance Companies and the Underwriter are and
shall remain during the term of this Agreement in
compliance with the eligibility requirements for
certain affiliated persons and underwriters found in
Section 9(a) of the 1940 Act.
12. INDEMNIFICATION
(a) BY THE DISTRIBUTOR
(1) The Distributor agrees to indemnify and hold harmless
the Insurance Companies, each Affiliate of the
Insurance Companies and the Underwriter and each of
their directors, officers, employees or agents and
each person, if any, who controls the Insurance
Companies or the Underwriter within the meaning of
the federal securities laws (collectively, the
"Indemnified Parties" for purposes of this Section 12
(a)) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement
with the written consent of the Distributor) or
litigation (including legal and other expenses) to
which the Indemnified Parties may become subject
under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect
thereof) or settlements are related to the
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offer or sale of the Variable Products or the
operation of the Variable Accounts and:
(i) arise out of, or are based upon,
violation(s) by the Distributor of federal
or state securities law(s) or regulation(s),
applicable banking law(s) or regulation(s),
insurance law(s) or regulation(s) or any
rule or requirement of the NASD; or
(ii) arise out of, or are based upon, any
tortious conduct (including oral or written
misrepresentation), or any unlawful sales
practices concerning the Variable Products
by the Distributor; or
(iii) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a
material fact or omission or alleged
omission 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, contained in any advertising,
sales literature, or other promotional
material designed, developed, and produced
by the Distributor and used by it in the
distribution of the Variable Products;
PROVIDED THAT the Distributor shall not be
liable in any such case to the extent that
such losses, claims, damages, liabilities or
expenses arises out of, or are based upon,
an untrue statement or alleged untrue
statement or omission or alleged omission
made in reliance upon information furnished
in writing to the Distributor by the
Insurance Companies or the Underwriter
specifically for use in the preparation of
any such promotional material; or
(iv) arise out of, or are based upon, claims by
Broker-Dealers, Representatives or
employees, agents or registered
representatives of the Distributor for
commissions or other compensation or
remuneration of any type; or
(v) arise as a result of any failure on the part
of the Distributor, a Broker-Dealer or a
Representative to submit Premiums, Purchase
Payments, or Applications to the Insurance
Companies, or to submit the correct amount
of a Premium or Purchase Payment, on a
timely basis and in accordance with this
Agreement, subject to applicable law; or
(vi) arise as a result of any failure on the part
of the Distributor, a Broker-Dealer or a
Representative to deliver the Variable
Products to purchasers thereof on a timely
basis; PROVIDED THAT the Distributor shall
not be liable in any such case to the extent
that
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such losses, claims, damages, liabilities or
expenses arise as a result of any failure on
the part of the issuing Insurance Company to
perform its obligations under this Agreement
on a timely basis; or
(vii) arise as a result of a material breach by
the Distributor of any provisions of this
Agreement; or
(viii) arise as a result of actions of a
Broker-Dealer or its Representatives;
as limited by and in accordance with the provisions
of Sections 12(a)(2) and 12 (a)(3) hereof.
(2) The Distributor shall not be liable under this
indemnification provision with respect to any losses,
claims, damages, liabilities or litigation ("Losses"
for purposes of this Section 12 (a)(2)) incurred or
assessed against an Indemnified Party that may arise
from any Indemnified Party's willful misfeasance or
bad faith. The Distributor's liability for Losses in
the event of its breach of this Agreement shall be
limited to that portion of Losses caused by its
breach, and the Distributor shall not be liable for
that portion of Losses caused by breach of this
Agreement by an Indemnified Party or from any act or
omission by an Indemnified Party.
(3) The Distributor shall not be liable under this
indemnification provision with respect to any claim
made against an Indemnified Party unless that
Indemnified Party shall have notified the Distributor
in writing within a reasonable time after the summons
or other first legal process giving information of
the nature of the claim shall have been served upon
that Indemnified Party (or after the Indemnified
Party shall have received notice of such service on
any designated agent). Notwithstanding the foregoing,
the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Distributor
of its obligations hereunder except to the extent
that the Distributor has been prejudiced by such
failure to give notice. In addition, any failure by
the Indemnified Party to notify the Distributor of
any such claim shall not relieve the Distributor from
any liability which it may have to the Indemnified
Party against whom the action is brought otherwise
than on account of this indemnification provision. In
case any such action is brought against the
Indemnified Parties, the Distributor shall be
entitled to participate, at its own expense, in the
defense of the action. The Distributor also shall be
entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action;
PROVIDED, HOWEVER, that if the Indemnified Party
shall have reasonably concluded that there may be
defenses available to it which are different from or
additional to those available to the Distributor, the
13
Distributor shall not have the right to assume said
defense, but shall pay the costs and expenses thereof
(except that in no event shall the Distributor be
liable for the fees and expenses of more than one
counsel for Indemnified Parties in connection with
any one action or separate but similar or related
actions in the same jurisdiction arising out of the
same general allegations or circumstances). After
notice from the Distributor to the Indemnified Party
of the Distributor's election to assume the defense
thereof, and in the absence of such a reasonable
conclusion that there may be different or additional
defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the
Distributor will not be liable to that party under
this Agreement for any legal or other expenses
subsequently incurred by the party independently in
connection with the defense thereof other than
reasonable costs of investigation.
(4) The Indemnified Parties will notify the Distributor
within a reasonable time, not to exceed five (5)
business days, of the receipt of service of process
in any litigation or proceedings against them in
connection with the offer or sale of the Variable
Products or the operation of the Variable Accounts.
(b) BY THE INSURANCE COMPANIES AND THE UNDERWRITER
(1) The Insurance Companies and the Underwriter agree,
jointly and severally, to indemnify and hold harmless
the Distributor and each director, officer, employee
or agent of the Distributor, and each person, if any,
who controls the Distributor within the meaning of
the federal securities laws (collectively, the
"Indemnified Parties" for purposes of this Section
12(b)) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement
with the written consent of the Insurance Companies
and the Underwriter) or litigation (including legal
and other expenses) to which the Indemnified Parties
may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the
offer or sale of the Variable Products or the
operation of the Variable Accounts and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of a
material fact or omission or alleged
omission 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, contained in any: (A)
Registration Statement or Prospectus; (B)
blue-sky application or other document
executed by the Insurance Companies
specifically for the purpose of exempting
the Private Placements from, or qualifying
any or all of the Registered
14
Products for sale under, the securities laws
of any jurisdiction; or (C) information
furnished in writing to the Distributor
specifically for the purpose of being
included in any advertising, sales
literature, or other promotional material to
be used in connection with the distribution
of the Variable Products; PROVIDED THAT
neither the Insurance Companies nor the
Underwriter shall be liable in any such case
to the extent that such losses, claims,
damages, liabilities or expenses arise out
of, or are based upon, an untrue statement
or alleged untrue statement or omission or
alleged omission made in reliance upon
information furnished in writing to the
Insurance Companies by the Distributor
specifically for use in the preparation of
any such document, application, or
promotional material; or
(ii) result because of the provisions of any
Variable Product or because of any material
breach by the Insurance Companies or the
Underwriter of any provision of this
Agreement or of any Variable Product or
which result from any wrongful activities of
the Insurance Companies' or the
Underwriter's officers, directors, employees
or agents or their wrongful failure to take
any action in connection with the sale,
processing or administration of the Variable
Products including, without limitation,
obtaining auditors' reports, computing
accurate separate account and/or underlying
fund performance data, preparation and
timely filing and delivery, as required, of
annual and semiannual reports and reports on
Form NSAR and the timely payment of all
state and federal registration fees; as
limited by and in accordance with the
provisions of Sections 12 (b)(1) and 12
(b)(2) hereof.
(2) Neither the Insurance Companies nor the Underwriter
shall be liable under this indemnification provision
with respect to any losses, claims, damages,
liabilities or litigation ("Losses" for purposes of
this Section 12 (b)(2)) incurred or assessed against
an Indemnified Party that may arise from any
Indemnified Party's willful misfeasance or bad faith.
The Insurance Companies' and the Underwriter's
liability for Losses in the event of its (or their)
breach of this Agreement shall be limited to that
portion of Losses caused by its (or their) breach,
and that party shall not be liable for that portion
of Losses caused by breach of this Agreement by an
Indemnified Party or from any act or omission by an
Indemnified Party.
(3) The Insurance Companies and the Underwriter shall not
be liable under this indemnification provision with
respect to any claim made against an Indemnified
Party unless the Indemnified Party shall have
notified the Insurance Companies and the Underwriter
in writing within a reasonable time after receiving
the summons or other first legal process giving
15
information of the nature of the claim against the
Indemnified Party (a "Claim"). Notwithstanding the
foregoing, the failure of any Indemnified Party to
give notice as provided herein shall not relieve the
Insurance Companies or the Underwriter of their
obligations hereunder except to the extent that they
have been prejudiced by the failure of the
Indemnified Party to give notice. In addition, any
failure by the Indemnified Party to notify the
Insurance Companies or the Underwriter of any Claim
shall not relieve the Insurance Companies or the
Underwriter from any liability which they may have to
the Indemnified Party against whom the action is
brought otherwise than on account of this
indemnification provision. In case any Claim is
brought against the Indemnified Parties, the
Insurance Companies and the Underwriter shall be
entitled to participate, at their own expense, in the
defense of the Claim. The Insurance Companies and the
Underwriter also shall be entitled to assume the
defense thereof, with counsel satisfactory to the
party named in the Claim. After notice to the
Indemnified Party of the Insurance Companies' and the
Underwriter's election to assume a defense to a
Claim, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it,
and neither the Insurance Companies nor the
Underwriter will be liable to the Indemnified Party
under this Agreement for any legal or other expenses
subsequently incurred by the Indemnified Party
independently in connection with the defense of a
Claim other than the reasonable costs of
investigation.
13. RECORDS
The parties to this Agreement shall maintain such accounts, books and
records and other documents as are required to be maintained under
applicable laws and regulations and shall preserve such accounts, books
and records, and other documents for the periods prescribed by such
laws and regulations. Each party shall have the right to inspect and
audit the accounts, books and records and other documents of the other
party that pertain to the Variable Products during normal business
hours upon reasonable written notice to the other party. Any party
requesting such an audit shall bear the expense of the audit, including
the reasonable costs (other than overhead costs or costs for time spent
on audit-related matters by officers, directors, or employees of the
other party) borne by the other party in connection with the audit.
14. INVESTIGATIONS AND PROCEEDINGS
The parties to this Agreement shall notify each other promptly of any
insurance or securities regulatory investigation, administrative or
judicial proceeding, or material complaint arising in connection with
the offer or the sale of the Variable Products. The parties shall
cooperate fully in the resolution of any insurance or securities
investigation, administrative or judicial proceeding, or material
complaint.
16
15. TERM AND TERMINATION
(a) TERM -- This Agreement shall be effective from the date hereof
through December 31, 2002, which term shall automatically be
extended for a period of three (3) years unless this Agreement
is sooner terminated in accordance with the termination
provisions in Section 15(b) of this Agreement.
(b) TERMINATION -- No party hereto may terminate this Agreement
except as expressly provided in this Section 15(b).
(1) The Insurance Companies and the Underwriter (as one
party) or the Distributor may terminate this
Agreement effective at the close of business on
December 31, 2002 upon written notice delivered to
the other party not less than 30 nor more than 60
days prior to such date, which notice shall specify
that it is being given pursuant to this Section
15(b)(1).
(2) A party (the "Terminating Party") may terminate this
Agreement for cause if:
(i) another party (the "Breaching Party")
materially breaches this Agreement,
(ii) the Terminating Party has delivered to the
Breaching Party a notice specifying the
nature of the breach and that this notice is
being given pursuant to this Section
15(b)(2), and
(iii) the Breaching Party has not cured the breach
within 30 days after the delivery of the
notice.
(3) A Terminating Party may terminate this Agreement
immediately for cause:
(i) in the event of the voluntary institution by
the Distributor of bankruptcy proceedings or
the voluntary institution by an Insurance
Company of insolvency or rehabilitation
proceedings under any state insurance laws
or regulations (each an "Insolvent Party"),
or
(ii) in the event of a formal order or written
finding by a court of competent jurisdiction
that the Insolvent Party is bankrupt or
insolvent, there is a degradation of the
Insolvent Party's reputation that would
materially impair the ability of the
Insolvent Party to carry out its obligations
under this Agreement, or
17
(iii) if the Commission institutes a formal cease
and desist order or proceeding prohibiting
the offer of the sale of the Variable
Products or the operation of a Variable
Account, or a governmental or regulatory
authority of a state or other jurisdiction
institutes a formal order or proceeding
prohibiting the offer or the sale of the
Variable Products or the operation of a
Variable Account; PROVIDED, that this
Agreement will be terminated only with
respect to the particular state or
jurisdiction issuing such order or
proceeding, or
(iv) if the Commission, the NASD, or any other
government authority or self-regulatory
organization revokes or suspends the
registration or license of the Distributor,
or the Distributor's ability to do business
is so materially impaired, in the reasonable
view of the Insurance Companies or the
Underwriter, that it could not perform its
obligations under this Agreement, or
(v) if a state insurance commissioner suspends
or revokes an Insurance Company's ability to
do business or the Insurance Company's
ability to do business is so materially
impaired, in the reasonable view of the
Distributor, that it could not perform its
obligations under this Agreement.
(c) SOLICITATION AFTER TERMINATION -- After termination of this
Agreement for any reason, the Distributor and the Distributor
Agency Affiliates agree that they will not take any action
designed or calculated to result in the transfer, exchange or
replacement of any Policy or Contract.
(d) SURVIVAL -- The provisions of Sections 11, 12, 16, 19 and 20
(Representations and Warranties, Indemnification, Rights Upon
Termination, Arbitration, and Confidentiality, respectively)
shall survive the termination of this Agreement.
16. RIGHTS UPON TERMINATION
(a) In no event will any further compensation be paid to the
Distributor should the Insurance Companies or the Underwriter
terminate this Agreement for cause pursuant to Section
15(b)(2) or Section 15(b)(3).
(b) As of the date of termination, the Insurance Companies shall
have the right to set off against any monies they owe the
Distributor any amounts owed by the Distributor to an
Insurance Company. In the event that the amounts owed by the
Distributor exceed the amounts owed by the Insurance
Companies, the difference shall become immediately due and
payable by the Distributor.
18
(c) In the event that either party does not pay within 45 days
after resolution of the net amount payable, then the net
amount owed will accrue interest, compounded daily, at the
fluctuating prime interest rate charged by The Chase Manhattan
Bank, N.A., plus two percent (2%).
(d) If the Insurance Companies and the Underwriter terminate this
Agreement pursuant to Section 15(b)(1), the Insurance
Companies shall continue to:
(1) pay the Distributor the compensation set forth in
Schedule 6 to this Agreement; and
(2) offer all of the Variable Products then identified on
Schedule 2 to this Agreement for a period of one (1)
year from the date of termination of this Agreement,
during which period of time (i) the Insurance
Companies shall employ at least the same level of
effort in offering and supporting the Variable
Products as they did before the termination of this
Agreement and (ii) the terms of this Agreement shall
remain in full force and effect as though the
Agreement had not been terminated. The parties
further agree that such compensation shall only be
based on the Variable Products that have not lapsed
or been surrendered, due to 1035 exchanges or other
means, whether such lapse or surrender occurred
before or after the termination date.
(e) If the Distributor terminates this Agreement pursuant to
Section 15(b)(1), the Insurance Companies shall continue to
pay the Distributor the compensation set forth in Schedule 6
to this Agreement. The parties further agree that such
compensation shall only be based on the Variable Products that
have not lapsed or been surrendered, due to 1035 exchanges or
other means, whether such lapse or surrender occurred before
or after the termination date.
17. INDEPENDENT CONTRACTOR
The Distributor shall act as an independent contractor in the
performance of its duties and obligations under this Agreement and
nothing herein contained shall constitute the Distributor,
Broker-Dealers, Representatives or employees or officers of the
Distributor or Broker-Dealers as employees of AFLIAC, FAFLIC or the
Underwriter in connection with the distribution of the Variable
Products.
18. NOTICES
Any notice required or permitted under this Agreement shall be
delivered personally or sent by facsimile or by registered or certified
mail, return receipt requested, with all postage prepaid:
(a) TO THE DISTRIBUTOR:
19
First Union Securities, Inc.
Attention: Xxxxx Xxxxxx
Fax: (000)000-0000
(b) TO THE INSURANCE COMPANIES:
First Allmerica Financial Life Insurance Company
Attention: Xxx Xxxxxxxx
Fax: (000) 000-0000
(C) TO ALLMERICA INVESTMENTS, INC.:
Attention: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
A party may change its address or fax number for the delivery of
notices by delivering a written notice to the other party at its last
specified address. All notices shall be effective upon delivery;
PROVIDED that any notice sent by facsimile shall be deemed ineffective
unless a copy of the notice is also delivered personally or sent by
express courier or mail for delivery on the same or next business day.
19. ARBITRATION
Any dispute between the Distributor and an Insurance Company or between
the Distributor and the Underwriter arising under or relating to this
Agreement shall be settled by compulsory arbitration before a single
arbitrator experienced in the insurance industry in accordance with the
Commercial Arbitration Rules then in force of the American Arbitration
Association. The arbitration shall take place in Charlotte, North
Carolina unless some other location is mutually agreed upon by the
parties in dispute. Each party shall bear its own costs and expenses in
any such arbitration, except that the expenses of the arbitrators'
services shall be divided equally between the Distributor and the other
party to the dispute (either one or both of the Insurance Companies
and/or the Underwriter).
20. CONFIDENTIALITY
(a) GENERALLY. Each party will hold the other party's Confidential
Information (as defined below) in confidence and will
safeguard it as provided herein. The party receiving
Confidential Information will not, directly or indirectly,
report, publish, distribute, disclose, or otherwise
disseminate the Confidential Information, or any portion
thereof, to any third party including its Affiliates, and will
not use the Confidential Information, or any portion thereof,
for the benefit of itself or any third party including its
Affiliates or for any purpose, except only as necessary to
perform its duties and exercise its rights hereunder,
20
or as expressly authorized in writing by the party who owns
such Confidential Information. Disclosure of Confidential
Information internally by a recipient will be limited to those
of its and its Affiliates' officers, directors, employees, and
agents on a "need to know" basis who must have access to the
Confidential Information to enable such party to perform its
duties and exercise its rights hereunder. In order to
safeguard the Confidential Information, each party shall (i)
inform each recipient of the Confidential Information of the
confidential nature thereof and of the requirements of this
Agreement, (ii) direct such recipients to comply with the
terms of this Agreement, and (iii) exercise any other
precautions necessary to prevent any improper use or
disclosure of Confidential Information.
(b) DEFINITION. "Confidential Information" shall mean: (i)
information regarding a party's or such party's Affiliates',
financial condition, information systems, business operations,
plans and strategies, products or services, customers and
prospective customers, and marketing and distribution plans,
methods and techniques; (ii) information that is marked
"confidential", "proprietary" or in like words, or that is
summarized in writing as being confidential prior to or
promptly after disclosure to the other party; (iii) any and
all related research; and (iv) any and all designs, ideas,
concepts, and technology embodied therein. Confidential
Information of the Distributor or its Affiliates that is to be
kept confidential by the Insurance Companies shall also
include: (v) any information regarding the pricing strategies
of each Broker-Dealer; (vi) specific marketing and training
materials of each Broker-Dealer; and (vii) any information of
the Distributor or its Affiliates in any form whatsoever that
is covered by a patent issued by the United States Patent and
Trademark Office.
Information is not considered confidential or proprietary if
such information: (1) is or becomes generally available to the
public other than as a result of disclosure by the recipient;
(2) was available to or already known by the recipient on a
non-confidential basis prior to its receipt from the party
claiming confidentiality; (3) is developed by the recipient
independently of any information or data acquired from the
party claiming confidentiality; or (4) is, or is required to
be, disclosed pursuant to a court order or the requirement of
any federal or state regulatory, judicial, or government
authority.
(c) 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 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 for any breach or
anticipated breach of this Section.
(d) SURVIVAL. The provisions of this Section shall survive the
expiration or other termination of this Agreement.
21. SEVERABILITY
21
If any provision of this Agreement is held to be unenforceable or
invalid, that provision shall be severed from this Agreement and the
remainder of this Agreement shall remain in full force and effect.
22. CHOICE OF LAW
This Agreement and any disputes, actions or other proceedings arising
under or relating to it shall be governed by law of the State of North
Carolina without regard to its principles of conflicts of law.
23. NO WAIVER
No failure or delay on the part of any party hereto in exercising any
power or right under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of such power or right
preclude any other or further exercise thereof or the exercise of any
other power or right. No waiver by any party of any provision of this
Agreement, nor of any breach or default, shall be effective unless in
writing and signed by the party against whom such waiver is to be
enforced.
24. AGREEMENT NON-ASSIGNABLE
Any assignment of this Agreement in whole or in part by a party without
the prior written consent of the other parties thereto shall be void
and shall vest no rights in the assignee.
25. SCHEDULES
The Schedules to this Agreement are a part of this Agreement as if set
forth in full herein. With the exception of Schedule 6, all other
schedules attached to this agreement may be revised by the Insurance
Companies and the Underwriter, subject to review by the Distributor.
26. HEADINGS
The headings herein are for the purpose of convenience only and have no
legal force, meaning or effect.
27. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements (other than on matters related to
confidentiality), understandings, negotiations and discussions, whether
oral or written, of the parties and there are no warranties,
representations and/or
22
agreements between the parties in conjunction with the subject matter
hereof except as set forth in this Agreement. This Agreement, including
any Schedule hereto, may be amended or modified only by written
instrument, executed by duly authorized officers of the parties.
23
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be executed
as of the date first above written.
FIRST UNION SECURITIES, INC.
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
FIRST ALLMERICA FINANCIAL LIFE INSURANCE
COMPANY
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
ALLMERICA INVESTMENTS, INC.
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
24
SCHEDULE 1
DISTRIBUTOR AGENCY AFFILIATES
[TO BE ADDED]
SCHEDULE 2
VARIABLE PRODUCTS
------------------------------- ---------------------------- ---------------------------- ----------------------------
PRODUCT POLICY/CERTIFICATE NUMBER DESCRIPTION EXPENSE ALLOWANCE
------------------------------- ---------------------------- ---------------------------- ----------------------------
ValuPlus Assurance 1036-99 Registered Retail VUL .50%*
------------------------------- ---------------------------- ---------------------------- ----------------------------
*Once the total Premiums and Purchase Payments received since the effective date
of this Agreement exceed $100 million, the .5% is replaced with .35%. Such
decreased percentage shall be pro-rated for the year the $100 million threshold
is first achieved.
SCHEDULE 3
PRIVATE PLACEMENT GUIDELINES
The Insurance Companies rely on exemptions under the 1933 Act and the 1940 Act
in the issuance of certain of their variable annuity contracts and variable life
insurance policies. Reliance on these exemptions generally depends upon the
number and identity of the purchasers, the number of securities offered, the
size of the offering, the manner of the offering, and whether the securities are
being purchased only for investment purposes (and not for the purpose of
distributing or reselling them).
SECTION 3(c)(7)
Section 3(c)(7) exempts from the registration requirements of the 1940 Act
certain companies owned exclusively by an unlimited number of "qualified
purchasers", as defined in amended Section 2(a)(51) of the 1940 Act. Section
2(a)(51) establishes asset tests for four categories of "qualified purchasers":
(1) a natural person who owns at least $5 million in investments; (2) a family
investment vehicle that owns at least $5 million in investments; (3) a trust
whose trustees and settlers are qualified persons, provided that the trust was
not formed for the purpose of investing in the Section 3(c)(7) company; and (4)
any other person who owns and invests on a discretionary basis, for itself or
other qualified purchasers, at least $25 million in "investments."
In order to preserve their right to rely on Section 3(c)(7) of the 1940 Act, the
Insurance Companies require, and the Distributor shall require, through any
Sales Agreements entered into pursuant to Section 2(b) of this Agreement that
each Broker-Dealer require each prospective purchaser to represent and warrant
(in response to a questionnaire) that it owns sufficient "investment securities"
(as defined in Rule 2a 51-1 under the 0000 Xxx) to meet the financial
requirements and otherwise meet the requirements of the appropriate definition
of "qualified purchaser" in Section 2(a)(51) of the 1940 Act.
In addition, if the Private Placement will be used by a corporation to assist it
in funding its obligation to employees under a non-funded deferred compensation
plan, the Insurance Companies therefore, will impose certain additional
conditions on the purchase and will request additional information from the
purchaser in order to insure compliance with Section 3(c)(7). These additional
requirements also are designed to insure that the employer is and remains the
sole beneficial owner of the Private Placement for purposes of the 1940 Act.
SECTION 3(c)(1)
Certain of the Variable Accounts for the Private Placements are not registered
under the 1940 Act in reliance on Section 3(c)(1) of the 1940 Act. Section
3(c)(1) exempts from the registration requirements of the 1940 Act certain
companies who are issuers whose outstanding securities (other than short-term
paper) are beneficially owned by not more than one hundred persons and which are
not making and do not presently propose to make a public offering of their
securities.
In order to preserve their right to rely on Section 3(c)(1) of the 1940 Act, the
Insurance Companies require, and the Distributor shall require, through any
Sales Agreements entered into pursuant to Section 2(b) of this Agreement that
each Broker-Dealer require its Representatives to comply with the requirements
of a non-public offering and monitor the number of prospective purchasers to
whom offers of sales have been made.
REGULATION D - RULE 501
With respect to the Private Placements, each prospective purchaser must also be
qualified as an "accredited investor" or otherwise be a "suitable investor,"
prior to offering the Private Placements to that prospective purchaser. An
"accredited investor" is: (a) a natural person, (i) whose individual net worth,
or joint net worth with the person's spouse, at the time of purchase exceeds
$1,000,000; or (ii) who has had individual income in excess of $200,000 in each
of the two (2) most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and who reasonably expects an income
in excess of such amounts in the current year; (b) a bank or savings and loan
association, whether acting in an individual or fiduciary capacity; (c) a
registered broker or dealer; (d) an insurance company; (e) a registered
investment company; (f) a Small Business Investment Company; (g) any plan
established by a state or municipal agency or government for the benefit of its
employees, with total assets in excess of $5,000,000; (h) certain employee
benefit plans (within the meaning of ERISA) with total assets in excess of
$5,000,000; (i) a private business development company; (j) a charitable
organization, corporation, business trust, any trust whose purchase is directed
by a person with knowledge and experience in financial and business matters, or
partnerships, not formed to acquire the securities offered, with total assets in
excess of $5,000,000; or (k) an entity in which all of the equity owners are
accredited investors.
Because resales of securities acquired in a private offering generally are
prohibited (with the exception of offerings pursuant to Rule 144A of the 1933
Act, which expressly permits resales to certain institutional investors),
Representatives must ensure that each prospective purchaser understands the
long-term nature of the Private Placement investment, does not intend to resell
the investment and is financially able to retain the securities purchased.
SCHEDULE 4
AVAILABLE FUNDS AND FUND
PORTFOLIOS
[TO BE ADDED]
SCHEDULE 5
STANDARD FORM OF SALES AGREEMENT
[The draft "Selling Group Agreement" funished by First Union Securities, Inc.
is currently being reviewed by Allmerica Financial's Legal Department.
Once the form has been agreed to, it will be set forth on this Schedule 5]
March 16, 2000
SCHEDULE 6
COMPENSATION SCHEDULE
ValuPlus Assurance (Retail VUL Product)
Single Life - Simplified Issue and Fully Underwritten
Premium received in years 1-4: 8.50%
Premium received in years 5-10: 4.00%
Premium received in years 11+: 2.00%
ADJUSTMENT OF COMPENSATION:
The compensation may be adjusted, either up or down, as a result of the annual
review of the actual mix of business by the Insurance Companies.
The actual results will be compared to a target return.
If results are better than the target, to the extent allowed by law:
First year commissions will be increased retroactively to share in 50% of
the Excess. Commissions will be capped at 15%.
If results are worse than the target, to the extent allowed by law:
The difference will be neutralized by:
First, reduce any of the revenue sharing in excess of 15 bps
Second, reduce, retroactively, first year compensation.
For any variable product, the Insurance Company may elect, from time to time, to
make advances of compensation to the Distributor. Any such advance shall be
deemed a loan, payable upon demand, and secured by a first lien (security
interest) upon compensation payable by the Insurance Company to the Distributor,
without he necessity of execution of any further document, and Insurance Company
shall be entitled to set off amounts owed to it by Distributor against any
amounts owed to Distributor by the Insurance Company.
SCHEDULE 7
PAYMENT OF EXPENSES
(a) The Distributor will pay the following costs and expenses
related to its distribution and other services contemplated by
this Agreement:
(i) all commissions and other compensation payable to
Broker-Dealers and their Representatives, related to
the sale and servicing of the Variable Products, as
provided in the Selling Group Agreement between the
Distributor and the Broker-Dealer;
(ii) the compensation, if any, of the Distributor's
employees, agents and registered representatives;
(iii) expenses associated with the licensing and
appointment, if any, and training of the
Distributor's employees, agents and representatives
involved in the distribution activities contemplated
by this Agreement;
(iv) the cost and expense of the mailing of any
promotional and advertising material and marketing
kits in connection with the distribution of the
Policies and Contracts;
(v) fulfillment of marketing materials and forms (not
including Applications and other insurance forms) to
Broker-Dealers;
(vi) any additions, inserts, or packaging enhancements to
the Insurance Companies' basic "Welcome Package";
(vii) expenses associated with telecommunications with the
Insurance Companies at the sites of the Distributor
or the Distributor Agency Affiliates, including site
installations and purchases, leases or rentals of
modems, terminals and other hardware, and lease line
telephone charges; and
(viii) any other expenses incurred by the Distributor or the
Distributor Agency Affiliates, except those set forth
in Section (b) of this Schedule and except as
provided in Section (c) of this Schedule, for the
purpose of carrying out the obligations of the
Distributor hereunder.
(b) The Insurance Companies will pay all costs and 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 Policies and
Contracts, including the Companies' basic "Welcome
Package" (any additions, inserts, or packaging
enhancements to the Companies' "Welcome Package"
shall be at the expense of the Distributor, as set
forth in Section (a)(vi) above);
(iii) any authorization, registration, qualification or
approval of the Policies and Contracts required under
the securities, blue-sky laws or insurance laws of
any state;
(iv) registration fees for the Policies and Contracts
payable to the Commission, the NASD or any other
governmental or regulatory agency;
(v) the mailing of Prospectuses and any supplements
thereto, as required by federal securities laws, and
periodic reports relating to the Variable Accounts to
Policy and Contract owners;
(vi) the preparation and printing of administrative forms
utilized in connection with the distribution of the
Policies and Contracts, including but not limited to
the form of Application;
(vii) the preparation of Policies and Contract owner lists
for the purposes of proxy solicitations;
(viii) compensation payable to the Distributor, as provided
in Section 10 of this Agreement, and
(ix) any other expenses related to the distribution of
Policies and contracts except those set forth in
Section (a) of this Schedule and except as provided
in Sections (c) and (d) of this Schedule.
(c) Subject to an Annual Accounting (described below), the
Insurance Companies will pay for reasonable expenses as
determined by the Insurance Companies for the following:
(i) the costs and expenses for design, development and
printing of (1) marketing kits and Variable Product
Prospectus covers in a design which is agreed upon by
the Insurance Companies and the Distributor, which
meet regulatory requirements as determined by the
Insurance Companies,
and which are provided to the Insurance Companies in
a camera-ready format, and (2) promotional and
advertising materials;
(ii) to the extent not paid by a Fund, the cost and
expense for design, development and printing of the
Fund Prospectuses and semi-annual and annual reports;
(iii) the cost and expense of printing Variable Product
Prospectuses, which Prospectuses will each contain a
copy of each Fund Prospectus;
(iv) the cost and expense for design, development and
printing of Policy and Contract semi-annual and
annual reports; and
(v) any other marketing expenses incurred by the
Distributor or the Distributor Agency Affiliates,
except as provided in Section (a) of this Schedule
and except those set forth in Section (b) of this
Schedule, including, but not limited to, the costs
and expenses associated with conferences relating to
the Variable Contracts and Policies.
On each anniversary of the effective date of this Agreement,
the Insurance Companies will perform an Annual Accounting and
determine "X" and "Y", described below:
X is an amount equal to the expenses for items c(i) through
(v) above paid or incurred by the Insurance Companies during
last 12 months, and
Y is an amount equal to the product of the applicable Expense
Allowance (identified in Schedule 2 to this Agreement) and the
total Premiums and Purchase Payments received and accepted for
each Variable Contract or Policy in the last 12 months.
To the extent X exceeds Y, the Distributor shall reimburse the
Insurance Companies for such excess. To the extent Y exceeds
X, the Insurance Companies shall reimburse the Distributor for
such excess. All reimbursements must be paid within one (1)
month of the date the reimbursement amount is determined.
(d) The Insurance Companies alone shall be responsible for and
bear the cost of administration of the Contracts following
their issuance, including all Policy and 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 Policies and Contracts, as permitted by
applicable law.
(e) The Insurance Companies, as agent for the Underwriter, will be
responsible for and bear the cost of confirming to each
applicant for and owner of a Policy or Contract in accordance
with Rule 10b-10 under the 1934 Act their acceptance of
Premiums and Purchase Payments and such other transactions as
are required by Rule 10b-10 or administrative interpretations
thereunder and in accordance with Release 8389 under the 1934
Act.
AMENDMENT #1 TO THE
DISTRIBUTION AGREEMENT
--------------------------------------------------------------------------------
Notwithstanding any provision of the Distribution Agreement effective, February
1, 2000, by and between Allmerica Financial Life Insurance and Annuity Company,
a Delaware insurance company ("AFLIAC"), First Allmerica Financial Life
Insurance Company, a Massachusetts insurance company ("FAFLIC" and, together
with AFLIAC, collectively, the "Insurance Companies"), Allmerica Investments,
Inc., a Massachusetts corporation (the "Underwriter") and First Union
Securities, Inc., a Delaware corporation (the "Distributor"), on its own behalf
and on behalf of the individuals and entities listed on Schedule 1 to this
Agreement (the "Distributor Agency Affiliates"), as such Schedule may be amended
from time to time, such Distribution Agreement is amended as set forth below:
1. DEFINITIONS
The following definitions are added to Section 1 of the Distribution Agreement
entitled "Additional 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 Section 3(a)(4) and Section 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 Contracts and Policies until May 12, 2001 will be
treated and defined as a Broker-Dealer for the purpose of this Agreement
until May 12, 2001.
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 Contracts and Policies 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 Contracts
and Policies 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.
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2. EXCLUSIVITY
The following provision is added to the Distribution Agreement:
EXCLUSIVITY IN DISTRIBUTION OF VARIABLE PRODUCTS
The Insurance Companies grant the exclusive right to distribute the
Contracts and Policies to the Distributor, the rights and obligations of
which are set forth in this Agreement. The Insurance Companies further
agree that the Distributor shall have the exclusive authority to enter into
Selling Group Agreements with appropriately licensed, qualified or approved
Broker-Dealers.
Notwithstanding the foregoing, the Distributor understands and agrees that
the exclusive distribution rights granted hereunder shall apply only to
Contracts and Policies that are funded in whole or in part with Funds
sponsored by the Distributor or by any of its affiliates. As a result, the
Distributor understands and agrees that AFLIAC Policy form 1036-99 or any
other Contract or Policy form that may be added to Schedule 2 is not
subject to the exclusive distribution rights granted to the Distributor
hereunder in situations where AFLIAC or FAFLIC utilizes any such Contract
or Policy form with funds other than funds sponsored by the Distributor or
any of its affiliates.
3. NETTING COMMISSION
The following provision is added to the Distribution Agreement:
NETTING COMMISSIONS
The Distributor shall be entitled to deduct from payments it receives for
certain Contracts and Policies such commissions to which it may be entitled
under the terms of the Distribution Agreement and Schedule(s) attached
thereto, subject to the following terms and conditions.
SECTION 1 - POLICIES TO WHICH NETTING COMMISSIONS PROVISION APPLIES
Unless the Insurance Companies otherwise agree in writing, the Contracts
and Policies to which this provision applies include the following:
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- Form 1036-99, but only in situations where the simplified underwriting
process is utilized.
SECTION 2 - AMOUNTS DEDUCTIBLE
Amounts which the Distributor shall be entitled to deduct pursuant to this
provision shall include only the up-front portion of any compensation due,
and shall not include trail amounts earned or to be earned, if any.
SECTION 3 - PROCEDURES
The Distributor agrees to adhere to and continue to follow procedures for
administration of Netting Commissions, as established and updated by the
Insurance Companies from time to time.
SECTION 4 - EFFECT ON PRICING
The Distributor shall accept from the client as the full initial purchase
payment for the Contracts and Policies to which this provision applies,
neither more nor less than the exact amount of the initial purchase payment
stated in the application or enrollment form signed by the Contract or
Policy owner/applicant.
SECTION 5 - CHANGES TO COMMISSION NETTING SCHEDULE
Any change to this provision will become effective as to any applications
or enrollment forms received by the Insurance Companies on or after the
later of (a) the date specified in a new or revised Addendum, or (b) the
tenth (10) day after the date of mailing of the new or revised Addendum to
the Distributor.
SECTION 6 - CONSIDERATION
The Distributor's continued deduction and retention of compensation under
this provision shall signify acceptance of and shall be the consideration
for changes to the section of this Addendum which addresses netting.
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SECTION 7 - COMMISSION REFUNDS
Any commission refunds specified in the Distribution Agreement shall be
paid to the appropriate Insurance Company within 10 days of receipt of a
request for repayment.
SECTION 8 - OFFSET
The Insurance Companies shall be entitled to offset any indebtedness of the
Distributor under this provision against any other moneys owed to the
Distributor by the Insurance Companies.
SECTION 9 - COSTS OF COLLECTION
The Distributor shall pay any costs of collection, including attorneys=
fees, court costs and costs of investigation, associated with the
collection of any overdue receivables under this provision. Prior to
incurring any such additional costs of collection, the Insurance Companies
shall terminate this provision and make written demand for such overdue
amounts. Such written demand shall be mailed to the Distributor at its last
known address as shown on the records of the Insurance Companies.
4. TERMINATION
The Insurance Companies reserve the right to terminate this Addendum at any
time, with or without cause. Termination of this Addendum does not necessarily
terminate the Distribution Agreement.
(a) If the Insurance Companies terminate this Addendum without cause, the
Distributor shall be entitled to ten (10) days= written notice of such
termination during the first year the Distribution Agreement is in
force
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and to thirty (30) days= written notice of any such termination to
occur thereafter.
(b) If the Insurance Companies terminate this Addendum for cause, such
termination shall be effective immediately without prior notice, and
all amounts owed by the Distributor to the Insurance Companies shall
become immediately due and payable.
(c) Cause for immediate termination of this Addendum shall include, but
not be limited to:
(i) breach of any provision of this Addendum or the Distribution
Agreement by the Distributor; or
(ii) the Distributor's insolvency, bankruptcy, or evidence of
insolvency.
5. CAPTIONS
Captions are used for informational purposes only and no caption shall be
construed to affect the substance of any provision of this Addendum.
6. ENTIRE CONTRACT
The Distribution Agreement, as modified by this Addendum, contains the entire
Contract between the parties. The Distribution Agreement, as modified by this
Addendum, replaces all previous agreements between the parties relating to the
solicitation of Contracts. It is hereby understood and agreed that any other
agreement or representation, commitment, promise or statement of any nature,
whether oral or
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written, relating to or purporting to relate to the relationship of the parties
is hereby rendered null and void.
7. WAIVER
Waiver by the Insurance Companies of any conditions or terms of this Addendum
shall not be considered to be a subsequent waiver of such conditions or terms.
8. EFFECTIVE DATE
This Addendum shall be effective ___________________, upon execution of all
parties hereto.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be executed
as of the date first above written.
FIRST UNION SECURITIES, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
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FIRST ALLMERICA FINANCIAL LIFE INSURANCE
COMPANY
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
ALLMERICA INVESTMENTS, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
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