DRAFT
PARTICIPATION AGREEMENT
Xxxxx Xxxxx Variable Trust and
Xxxxx Xxxxx Distributors, Inc.
and
Allmerica Financial Life Insurance and Annuity Company and
First Allmerica Financial Life Insurance Company
THIS AGREEMENT, made and entered into as of this 15 day of February, 2001 by and
among Allmerica Financial Life Insurance and Annuity Company and First Allmerica
Financial Life Insurance Company (hereinafter collectively referred to as, the
Company), a Delaware insurance company, on its own behalf and on behalf of each
segregated asset account of the Company (hereinafter referred to as the
Accounts), Xxxxx Xxxxx Variable Trust, a business trust organized under the laws
of Massachusetts (hereinafter referred to as the "Fund"), Xxxxx Xxxxx
Distributors, Inc., the underwriter of the Fund (hereinafter the "Distributor"),
a Massachusetts corporation.
WHEREAS, the Fund is engaged in business as an open-end management investment
company and wishes to act as the investment vehicle for separate accounts
established for variable life insurance policies and variable annuity contracts
(collectively referred to as "Variable Insurance Contracts" and the owners of
such products being referred to as "Contract Owners") to be offered by insurance
companies which have entered into participation agreements with the Fund
("Participating Insurance Companies"); and
WHEREAS, the shares of the Fund (the "Fund shares") consist of separate classes
or series of shares, each designated a "Portfolio" and each series of shares
("Portfolio shares") representing an interest in a particular managed portfolio
of securities and other assets; and
WHEREAS, the Fund has filed a registration statement (referred to herein as the
"Fund Registration Statement" and the prospectus contained therein, referred to
herein as the "Fund Prospectus") with the Securities and Exchange Commission
(the "SEC") on Form N-lA to register itself as an open-end management investment
company (File No. 811-10067) under the Investment Company Act of 1940, as
amended (the "1940 Act"), and the Fund shares (File No. 33344010) under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, each Account of the Company is a validly existing separate account duly
authorized and established by resolution of the Board of Directors of the
Company, and sets aside and invests assets attributable to the Contracts, and
the Company has registered or will have registered each Account, of which may be
divided into two or more SubAccounts ("SubAccounts"; reference herein to an
Account includes reference to each SubAccount thereof to the extent the context
requires). with the SEC as a unit investment trust under the 1940 Act before any
Contracts are issued by the Account unless such Accounts are exempt from
registration; and
WHEREAS, the Company has filed or will file registration statements with the SEC
to register under the 1933 Act certain variable annuity contracts and variable
life contracts (the "Contracts") unless
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such Contracts are exempt from registration, each such registration statement
for a class or classes of contracts being referred to as the "Contracts
Registration Statement," and the prospectus for each such class or classes
being referred to herein as the "Contracts Prospectus," and the owners of
such contracts; and,
WHEREAS, the Fund will seek an order from the Securities and Exchange Commission
("SEC") granting Participating Insurance Companies and variable annuity and
variable life insurance separate accounts exemptions from the provisions of
Sections 9(a),13(a),15(a), and 15(b) of the Investment Company Act of 1940, as
amended, (hereinafter the "1940 Act") and Rules 6e(b)(15) and 6e(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies (hereinafter the
"Shared Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. (the
"NASD"), and
WHEREAS, the Distributor and the Fund have entered into a Distribution Agreement
(the "Fund Distribution Agreement") dated August 14, 2000 pursuant to which the
Distributor will distribute Fund shares, and to the extent permitted by
applicable insurance laws and regulations, the Company intends to purchase
Portfolio shares on behalf of the Accounts to fund the Contracts and the
Distributor is authorized to sell such shares to unit investment trusts such as
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the Fund
and the Distributor agree as follows:
ARTICLE I. TRANSACTIONS IN FUND SHARES
1.1. The Fund agrees to sell to the Company those shares of the Fund which
the Company orders on behalf of the Accounts, executing such orders on a
daily basis in accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make the shares of its Portfolios available for
purchase by the Company on behalf of the Accounts at the then applicable net
asset value per share on Business Days as defined in Section 1.4 of this
Agreement, and each Portfolio shall use reasonable efforts to calculate its
net asset value on each such Business Day. Notwithstanding any other
provision in this Agreement to the contrary, the Board of Directors of the
Fund (the "Board") may suspend or terminate the offering of Fund shares of
any Portfolio, if such action is required by law or by regulatory authorities
having jurisdiction or if, in the sole discretion of the Board acting in good
faith and in light of its fiduciary duties under Federal and any applicable
state laws, suspension or termination is necessary and in the best interests
of the shareholders of any Portfolio.
1.3. The Fund agrees to redeem, upon request, any full or fractional shares
of the Fund held by the Accounts or the Company, executing such requests at
net asset value on a daily basis in accordance with Section 1.4 of this
Agreement and applicable provisions of the 1940 Act. Notwithstanding the
foregoing, the Fund may delay redemption of Fund shares to the extent
permitted by the 1940 Act, or any rules, regulations or orders thereunder.
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1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall be
the agent of the Fund for the limited purpose of receiving redemption and
purchase requests from the Account (but not from the general accounts of the
Company), and receipt on any Business Day by the Company as such limited
agent of the Fund by the time prescribed in the current Contracts Prospectus
(which as of the date of execution of this Agreement is expected to be 4
p.m.) shall constitute receipt by the Fund on that same Business Day,
provided that the Fund receives notice of such redemption or purchase request
by 11:00 a.m. Eastern Time on the next following Business Day. For purposes
of this Agreement, "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading or as otherwise provided in the Fund's
then currently effective Fund Prospectus.
(b) The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than the close of business on the
next business day after the Fund receives the purchase order. Payment shall
be made in federal funds transmitted by wire to the Fund or its designated
custodian. If Federal funds are not received on time, such funds will be
invested, and Portfolio shares purchased thereby will be issued, as soon as
practicable.
(c) Payment for Portfolio shares redeemed by the Accounts or the
Company will be made in Federal funds transmitted to the Company by wire on
the day the Fund is notified of the redemption order of Fund shares (unless
redemption proceeds are applied to the purchase of shares of other
Portfolios).
1.5. Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. Purchase and
redemption orders for Fund shares will be recorded in an appropriate ledger
for the Account or the appropriate SubAccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income dividends or capital gain distributions payable on Fund
shares. The Company hereby elects to receive all such dividends and
distributions as are payable on any Portfolio shares in the form of
additional shares of that Portfolio. The Company reserves the right to revoke
this election and to receive all such dividends in cash. The Fund shall
notify the Company of the number of Portfolio shares so issued as payment of
such dividends and distributions.
1.7. The Fund shall make the net asset value per share for each Portfolio
available to the Company by 6 p.m. Eastern Time each Business Day, and in any
event, as soon as reasonably practicable after the net asset value per share
for such series is calculated, and shall calculate such net asset value in
accordance with the then currently effective Fund Prospectus.
1.8. The Fund and the Distributor agree that Fund shares will be sold only
to Participating Insurance Companies, their separate accounts, and to certain
qualified pension plans, as may be permitted by Section 817 of the Internal
Revenue Code of 1986, as amended. The Fund and the Distributor will not sell
Fund shares to any insurance company, separate account, or qualified pension
plan unless an agreement containing provisions substantially the same as
Article VII of this Agreement, as it may be amended from time to time, is in
effect to govern such sales. No Fund shares of any Portfolio will be sold to
the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants:
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(a) that the Contracts are registered under the 1933 Act, will be so
registered before the issuance thereof, or are exempt from registration;
(b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws;
(c) that the Company will require of every person distributing the
Contracts (i) that the Contracts be offered and sold in compliance in all
material respects with all applicable Federal and state laws and (ii) that at
the time it is issued each Contract is a suitable purchase for the applicant
therefor under applicable state insurance laws;
(d) that it is an insurance company duly organized and in good
standing under applicable law and that it has legally and validly authorized
each of its Accounts as a separate account under the insurance law of its
state of domicile, and has registered or, prior to the issuance of any
Contracts, will register the Accounts as unit investment trusts in accordance
with the provisions of the 1940 Act to serve as separate accounts for the
Contracts, and that such registration will be maintained for as long as any
Contracts are outstanding, unless such Accounts are exempt from registration;
(e) that the Contracts are currently and at the time of issuance will
be treated as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code. The Company shall make
every effort to maintain such treatment and shall notify the Fund and the
Distributor immediately upon having a reasonable basis for believing that the
Contracts have ceased to be so treated or that they might not be so treated
in the future; and
(f) that until such time as the Fund agrees otherwise, the Contracts
investing in the Portfolios shall only consist of variable annuity contracts.
2.2. The Fund represents and warrants:
(a) that Fund shares sold pursuant to this Agreement shall be
registered under the 1933 Act and duly authorized for issuance in accordance
with applicable law and that the Fund is a business trust duly organized and
in good standing under the laws of Massachusetts;
(b) that each series currently qualifies and will make every effort to
continue to qualify as a Regulated Investment Company under Subchapter M of
the Internal Revenue Code of 1986, as amended (the "Code") and to maintain
such qualification (under Subchapter M or any successor or similar
provision), and that the Fund will notify the Company immediately upon having
a reasonable basis for believing that it has ceased to so qualify or that it
might not so qualify in the future;
(c) that each series currently complies with and will make every
effort to continue to comply with Section 817(h) (or any successor or similar
provision) of the Code, and all regulations issued thereunder, and that the
Fund will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future; and
(d) that the Fund's investment policies, fees and expenses and
operations are and shall at all times remain in material compliance with the
laws of Massachusetts, to the extent required to perform this Agreement. The
Fund, however, makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) otherwise complies with the insurance laws or regulations of any
states.
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2.3. The Distributor represents and warrants that the Distributor is duly
registered as a broker-dealer under the 1934 Act, is a member in good
standing with the NASD, and is duly registered as a broker-dealer under
applicable state securities laws; its operations are in compliance with
applicable law, and it will distribute the Fund shares according to
applicable law.
ARTICLE III. PROSPECTUSES, PROXY STATEMENTS AND SALES MATERIAL
3.1 At least annually, the Fund or its designee shall provide the Company,
free of charge, with "camera ready" copy of the new prospectus as set in
type, or, at the request of the Company, as a diskette in the form sent to a
financial printer, and other assistance as is reasonably necessary in order
for the parties hereto once each year (or more frequently if the prospectus
for the Fund is supplemented or amended) to have the prospectus for the
Contracts and the prospectus for the shares printed together in one document.
The Fund or its designee shall bear the cost of printing and mailing the
Fund's prospectus portion of such document for distribution to Contract
owners of existing Contracts, and the Company shall bear the expenses of
printing and mailing the portion of such document relating to the Accounts;
provided, however, that the Company shall bear all printing expenses of such
combined document where used for distribution to prospective purchasers.
3.2 The Fund's prospectus shall state that the current Statement of
Additional Information ("SAI") for the Fund is available from the Distributor
(or, in the Fund?s discretion, from the Fund), and the Distributor (or the
Fund) at its expense, shall print, or otherwise reproduce, and provide a copy
of such SAI free of charge to the Company for itself and for any Contract
owner who requests such SAI.
3.3 The Fund, at its expense, shall provide the Company with copies of its
proxy material, reports to shareholders, and other communications to
shareholders in such quantity as the Company shall reasonably require for
distributing to Contract owners. The Fund or its designee shall bear the cost
of printing, duplicating, and mailing of these documents to current Contract
owners, and the Company shall bear the cost for such documents used for
purposes other than distribution to current Contract owners.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investment Manager or the
Distributor is named to the Fund and the Distributor prior to its use. No
such material shall be used, except with the prior written permission of the
Fund and the Distributor. The Fund and the Distributor agree to respond to
any request for approval on a prompt and timely basis. Failure to respond
shall not relieve the Company of the obligation to obtain the prior written
permission of the Fund or the Distributor.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement
or Fund Prospectus, as such Registration Statement and Prospectus may be
amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved
by the Fund or by the Distributor, except with the prior written permission
of the Fund or the Distributor. The Fund and the Distributor agree to respond
to any request for permission on a prompt and timely basis. Failure to
respond shall not relieve the Company of the obligation to obtain the prior
written permission of the Fund or the Distributor.
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3.6. The Fund and the Distributor shall not give any information or make
any representations on behalf of the Company or concerning the Company, the
Accounts or the Contracts other than the information or representations
contained in the Contracts Registration Statement or Contracts Prospectus, as
such Registration Statement and Prospectus may be amended or supplemented
from time to time, or in published reports of the Account which are in the
public domain or approved in writing by the Company for distribution to
Contract Owners, or in sales literature or other promotional material
approved in writing by the Company, except with the prior written permission
of the Company. The Company agrees to respond to any request for permission
on a prompt and timely basis. Failure to respond shall not relieve the Fund
or the Distributor of the obligation to obtain the prior written permission
of the Company.
3.7. Each party will provide to the other party copies of draft versions of
any registration statements, prospectuses, statements of additional
information, reports, proxy statements, solicitations for voting
instructions, sales literature and other promotional materials, applications
for exemptions, requests for no-action letters, and all amendments or
supplements to any of the above, to the extent that the other party
reasonably needs such information for purposes of preparing a report or other
filing to be filed with or submitted to a regulatory agency. If a party
requests any such information before it has been filed, the other party will
provide the requested information if then available and in the version then
available at the time of such request.
3.8. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such
as material published, or designed for use, in a newspaper, magazine or other
periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures or other public media), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration
statements, prospectuses, Statements of Additional Information, shareholder
reports and proxy materials, and any other material constituting sales
literature or advertising under NASD rules, the 1940 Act or the 1933 Act.
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ARTICLE IV. VOTING
4.1. Subject to applicable law, the Company shall:
(a) solicit voting instructions from Contract Owners;
(b) vote Fund shares of each Portfolio attributable to Contract
Owners in accordance with instructions or proxies timely
received from such Contract Owners;
(c) vote Fund shares of each Portfolio attributable to Contract
Owners for which no instructions have been received in the same
proportion as Fund shares of such Portfolio for which
instructions have been timely received; and
(d) vote Fund shares of each Portfolio held by the Company on its
own behalf or on behalf of the Account that are not attributable
to Contract Owners in the same proportion as Fund shares of such
Portfolio for which instructions have been timely received.
The Company shall be responsible for assuring that voting privileges for the
Account are calculated in a manner consistent with the provisions set forth
above. The Company reserves the right to vote Fund shares held in any segregated
asset account in its own right, to the extent permitted by law.
4.2. Participating Insurance Companies shall be responsible for assuring
that each of their separate accounts participating in a Designated Portfolio
calculates voting privileges as required by any Shared Funding Exemptive
Order and consistent with any reasonable standards that the Fund may adopt.
4.3. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well
as with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors or trustees and
with whatever rules the SEC may promulgate with respect thereto.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Distributor shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any Portfolio adopts
and implements a service plan to compensate insurance companies for the
services described in Section 5.2 below, then the Distributor may make
payments to the Company in amounts agreed to by the Company and the
Distributor in writing. The Fund currently does not intend to make any
payments to finance distribution expenses pursuant to Rule 12b-l under the
1940 Act or in contravention of such rule, although it may make payments
pursuant to Rule 12b-l in the future. Nothing herein shall prevent the
parties from otherwise agreeing to perform, and arranging for appropriate
compensation for, other services relating to the Fund and/or the Accounts.
5.2. Unless otherwise agreed to in writing by the Company and the
Distributor, the services to be provided by the Company in exchange for
compensation under a Service Plan include:
(a) Maintaining regular contact with Contract owners and assisting
in answering inquiries
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concerning the Portfolios;
(b) Assisting in the process of printing and distributing
shareholder reports, prospectuses and other sale and service
literature provided by the Distributor;
(c) Assisting the Distributor and its affiliates in the
establishment and maintenance of Contract owner and shareholder
accounts and records;
(d) Assisting Contract owners in effecting administrative changes,
such as exchanging shares in or out of the Portfolios;
(e) Assisting in processing purchase and redemption transactions; and
(f) Providing any other information or services as the Contract
owners or the Distributor may reasonably request.
The Company will support the Distributor's marketing and servicing efforts by
granting reasonable requests for visits to the Company's offices by
representatives of the Distributor.
5.3. All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Sections 1.4 and 3.1 of this Agreement (or Article
VII, as it may be amended), the Company shall not bear any of the expenses
for the cost of registration and qualification of the Fund shares under
Federal and any state securities law, preparation and filing of the Fund
Prospectus and Fund Registration Statement, Fund proxy materials and reports,
setting the Fund Prospectus and proxy materials and reports to shareholders
in type, the printing and mailing of proxy materials, the preparation of all
statements and notices required by any Federal or state securities law, all
taxes on the issuance or transfer of Fund shares, and any expenses permitted
to be paid or assumed by the Fund pursuant to a plan, if any, under Rule
12b-l under the 1940 Act. The Company and the Fund shall share the cost of
printing and distributing the Fund's prospectus as set forth in Section 3.1,
above. The Company shall bear the expenses of distributing the Fund's reports
to Contract holders.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Sub-chapter M and Section 817(h) of
the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statement under the
1933 Act and the Account's Registration Statement under the 1940 Act from
time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company
shall register and qualify the Contracts for sale to the extent required by
applicable securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the 1933
Act and the 1940 Act from time to time as required in order to effect for so
long as Fund shares are sold the continuous offering of Fund shares as
described in the then currently effective Fund Prospectus. The Fund shall
register and qualify Fund shares for sale to the extent required by
applicable securities laws of the various states.
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6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
probable that such Contract would be a "modified endowment contract," as that
term is defined in Section 7702A of the Code, will identify such Contract as
a modified endowment contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-l, the Fund undertakes to have a Board of Trustees, a
majority of whom are not interested persons of the Fund, formulate and
approve any plan under Rule 12b-l to finance distribution expenses.
ARTICLE VII. POTENTIAL CONFLICTS
The following provisions apply effective upon (a) the issuance of the Shared
Funding Exemptive Order, and (b) investment in the Fund by a separate account of
a Participating Insurance Company supporting variable life insurance contracts.
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the
manner in which the investments of any Portfolio are being managed; (e) a
difference in voting instructions given by variable annuity contract and
variable life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Board shall
promptly inform the Company if it determines that an irreconcilable material
conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out
its responsibilities under any Shared Funding Exemptive Order and/or Rule
6e-3(T) of the 1940 Act, to the extent applicable, by providing the Board
with all information reasonably necessary for the Board to consider any
issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different
investment medium, including (but not limited to) another Portfolio of the
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected contract owners and, as appropriate,
segregating the assets of any appropriate group (I.E. annuity contract
owners, life insurance contract owners, or variable contract owners of one or
more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
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7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would prelude a majority vote, the Company
may be required, at the Fund?s election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such
Account provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the
Board. Any such withdrawal and termination must take place within six (6)
months after the Fund gives written notice that this provision is being
implemented, and until the end of that six month period the Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company
in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
members of the Board. Until the end of the foregoing six month period, the
Fund shall continue to accept and implement orders by the company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Section 7.3 through 7.6 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but
in no event will the Fund be required to establish a new funding medium for
the Contracts. The Company shall not be required by Section 7.3 to establish
a new funding medium for the Contract if fan offer to do so has been declined
by vote of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs
the Company in writing of the foregoing determination; provided, however,
that such withdrawal and termination shall be limited to the extent required
by any such material irreconcilable conflict as determination by a majority
of the disinterested members of the Board.
7.7. If and to the extent the Shared Funding Order contains terms and
conditions different from Sections, 3.4, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of
this Agreement, then the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with the
Shared Funding Exemptive Order, and Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4 and
7.5 of the Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in the
Shared Funding Exemptive Order or any amendment thereto. If and to the extent
that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule 6e-3 is adopted, to
provide exemptive relief from any provision of the 1940 Act or the rules
promulgated thereunder with respect to mixed or shared funding (as defined in
the Shared Funding Exemptive Order) on terms and conditions materially
different from those contained in the Shared Funding Exemptive Order, then
(a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such rules are
applicable; and (b) Sections 3.4, 3.5, 3.6, 7.1, 7.2, 7.3, 7.4 and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
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ARTICLE VIII. INDEMNIFICATION
8.1. Indemnification by the Company
The Company agrees to indemnify and hold harmless the Fund, the Distributor and
each person who controls or is associated with the Fund or the Distributor
within the meaning of such terms under the Federal securities laws and any
officer, trustee, director, employee or agent of the foregoing, against any and
all losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they or any of them may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Contracts Registration
Statement, Contracts Prospectus, sales literature for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made; provided that this obligation to
indemnify shall not apply if such statement or omission or such alleged
statement or alleged omission was made in reliance upon and in conformity
with information furnished in writing to the Company by the Fund or the
Distributor (or a person authorized in writing to do so on behalf of the Fund
or the Distributor) for use in the Contracts Registration Statement,
Contracts Prospectus or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by or on behalf of the Company (other
than statements or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature of the Fund not supplied by
the Company or persons under its control) or wrongful conduct of the Company
or persons under its control with respect to the sale or distribution of the
Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Fund Registration Statement, Fund Prospectus
or sales literature of the Fund or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made; or
(d) arise out of any material breach by the Company to provide the
services and furnish the materials required under the terms of this
Agreement, including but not limited to any failure to transmit a request for
redemption or purchase of Fund shares on a timely basis in accordance with
the procedures set forth in Article I.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
11
8.2. Indemnification by the Distributor
The Distributor agrees to indemnify and hold harmless the Company and each
person who controls or is associated with the Company within the meaning of such
terms under the Federal securities laws and any officer, director, employee or
agent of the foregoing, against any and all losses, claims, damages or
liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or sales
literature of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances in which they were made; provided that this obligation
to indemnify shall not apply if such statement or omission or alleged
statement or alleged omission was made in reliance upon and in conformity
with information furnished in writing by the Company to the Fund or the
Distributor for use in the Fund Registration Statement, Fund Prospectus (or
any amendment or supplement thereto) or sales literature for the Fund or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by the Distributor or the Fund (other
than statements or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature of the Fund not supplied by
the Distributor or the Fund or persons under their control) or wrongful
conduct of the Distributor or persons under its control with respect to the
sale or distribution of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Contracts Registration Statement, Contracts
Prospectus or sales literature for the Contracts (or any amendment or
supplement thereto), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which they
were made, if such statement or omission was made in reliance upon
information furnished in writing by the Distributor to the Company (or a
person authorized in writing to do so on behalf of the Distributor); or
(d) arise as a result of any material breach by the Distributor to
provide the services and furnish the materials required under the terms of
this Agreement.
This indemnification will be in addition to any liability which the Distributor
or the Fund may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is due to
the willful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
8.3. Indemnification by the Fund
The Fund agrees to indemnify and hold harmless the Company and each person who
controls or is associated with the Company within the meaning of such terms
under the Federal securities laws and any officer, director, employee or agent
of the foregoing, against any and all losses, claims, damages
12
or liabilities, joint or several (including any investigative, legal and
other expenses reasonably incurred in connection with, and any amounts paid
in settlement of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or sales
literature of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances in which they were made; provided that this obligation
to indemnify shall not apply if such statement or omission or alleged
statement or alleged omission was made in reliance upon and in conformity
with information furnished in writing by the Company to the Fund or the
Distributor for use in the Fund Registration Statement, Fund Prospectus (or
any amendment or supplement thereto) or sales literature for the Fund or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by the Distributor or the Fund (other
than statements or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature of the Fund not supplied by
the Distributor or the Fund or persons under their control); or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Contracts Registration Statement, Contracts
Prospectus or sales literature for the Contracts (or any amendment or
supplement thereto), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which they
were made, if such statement or omission was made in reliance upon
information furnished in writing by the Fund to the Company (or a person
authorized in writing to do so on behalf of the Fund); or
(d) arise as a result of any material breach by the Fund to provide
the services and furnish the materials required under the terms of this
Agreement (including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified in
Article VI of this Agreement).
This indemnification will be in addition to any liability which the Distributor
or the Fund may otherwise have; provided, however, that no party shall be
entitled to indemnification if such loss, claim, damage or liability is due to
the willful misfeasance, bad faith, gross negligence or reckless disregard of
duty by the party seeking indemnification.
8.4 Indemnification Procedures
After receipt by a party entitled to indemnification ("indemnified party") under
this Article VIII of notice of the commencement of any action, if a claim in
respect thereof is to be made against any person obligated to provide
indemnification under this Article VIII ("indemnifying party"), such indemnified
party will notify the indemnifying party in writing of the commencement thereof
as soon as practicable thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability under this Article
VIII, except to the extent that the omission results in a failure of actual
notice to the indemnifying party and such indemnifying party is damaged solely
as a result of the failure to give such notice. The indemnifying party, upon the
request of the indemnified party, shall retain
13
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related
to such proceeding. In any such proceeding, any indemnified party shall have
the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.5. Limitation of Liability
Notwithstanding anything to the contrary above, Company and its respective
officers, directors, employees and agents shall not be responsible for, and the
Fund and the Distributor shall indemnify and hold harmless the Company from and
against any and all losses, damages, charges, costs, reasonable attorney's fees,
payments, expenses and liabilities arising out of or attributable to the
reasonable reliance on information, records or documents furnished by or on
behalf of the Distributor or the Fund. Without limiting the generality of the
foregoing, the Company shall not be liable for any error, delay, or failures to
provide services under this Agreement attributable, in whole or in part, to the
error, delay, or failure of the Distributor, the Fund or their agents in making
the daily net asset value per share of the Portfolios available to the Company.
Notwithstanding anything to the contrary above, the Fund and the Distributor and
their respective officers, directors, employees and agents shall not be
responsible for, and the Company shall indemnify and hold harmless each of the
Fund and the Distributor from and against any and all losses, damages, charges,
costs, reasonable attorney's fees, payments, expenses and liabilities arising
out of or attributable to the reasonable reliance on information, records or
documents furnished by or on behalf of the Company.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the state of Massachusetts, without
giving effect to the principles of conflicts of laws.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant, and
the terms hereof shall be limited, interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
14
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months advance written notice
to the other parties, such termination to be effective no earlier than one
year following the date on which the first Contract is issued to the public;
or
(b) at the option of the Company if shares of any or all Portfolios
are not reasonably available to meet the requirements of the Contracts as
determined by the Company. Prompt notice of the election to terminate for
such cause shall be furnished by the Company, said termination to be
effective ten days after receipt of notice unless the Fund makes available a
sufficient number of Fund shares to meet the requirements of the Contracts
within said ten-day period; or
(c) at the option of the Fund upon institution of formal proceedings
against the Company by the NASD, the SEC, the insurance commission of any
state or any other regulatory body regarding the Company's duties under this
Agreement or related to the sale of the Contracts, the operation of the
Account, the administration of the Contracts or the purchase of Fund shares,
or an expected or anticipated ruling, judgment or outcome which would, in the
Fund's reasonable judgment, materially impair the Company's ability to meet
and perform the Company's obligations and duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund by the NASD, the SEC, or any state securities or
insurance commission or any other regulatory body; or
(e) upon requisite vote of the Contract Owners having an interest in
the affected Portfolio and the written approval of the Distributor (unless
otherwise required by applicable law), to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts; or
(f) at the option of the Fund in the event any of the Contracts are
not registered, issued or sold in accordance with applicable Federal and/or
state law; or
(g) by either the Company or the Fund upon a determination by a
majority of the Board, or a majority of disinterested Board members, that an
irreconcilable material conflict exists among the interests of (i) all
Product owners or (ii) the interests of the Participating Insurance Companies
investing in the Fund; or
(h) at the option of the Company if any series of the Fund or the Fund
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code, or under any successor or similar provision, or if the Company
reasonably believes based on an opinion of counsel satisfactory to the Fund
that the series or Fund may fail to so qualify and the Fund does not take
reasonable steps to ensure qualification; or
(i) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof; or
(j) at the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the Code,
or if the Fund reasonably believes that the Contracts may fail to so qualify;
or
15
(k) at the option of either the Fund or the Distributor if the Fund or
the Distributor, respectively, shall determine, in their sole judgment
exercised in good faith, that either (1) the Company shall have suffered a
material adverse change in its business or financial condition or (2) the
Company shall have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and operations of
either the Fund or the Distributor; or
(l) at the option of the Company, if (1) the Company shall determine,
in its sole judgment exercised in good faith, that the Fund or the
Distributor shall have been the subject of material adverse publicity which
is likely to have a material adverse impact upon the business and operations
of the Company; or (2) the Company shall have notified the Fund in writing of
such determination and the basis therefore, and (3) after sixty (60) days
after notice the Company again makes the same determination;
(m) upon the assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Account to another insurance
company pursuant to an assumption reinsurance agreement) unless the
non-assigning party consents thereto or unless this Agreement is assigned to
an affiliate of the Distributor; or
(n) at the option of Company, as one party, or the Fund and the
Distributor, as one party, upon the other party's material breach of any
provision of this Agreement.
10.2. Notice Requirement
Except as otherwise provided in Section 10.1, no termination of this Agreement
shall be effective unless and until the party terminating this Agreement gives
prior written notice to all other parties to this Agreement of its intent to
terminate which notice shall set forth the basis for such termination.
Furthermore:
(a) In the event that any termination is based upon the provisions
of Article VII or the provisions of Section 10.1(a) of this
Agreement, such prior written notice shall be given in advance
of the effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon the provisions
of Section 10.1(c) or 10.1(d) of this Agreement, such prior
written notice shall be given at least ninety (90) days before
the effective date of termination; and
(c) in the event that any termination is based upon the provisions
of Section 10.1(e) of this Agreement, such prior written notice
shall be given at least sixty (60) days before the date of any
proposed vote to replace the Fund's shares.
10.3. Except as necessary to implement Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in an
Account).
10.4. Effect of Termination
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund and the Distributor will, at the
option of the Company, continue to make available additional Fund shares for
so long after the termination of this Agreement as the Company
16
desires for all Contracts in effect on the effective date of termination of
this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, if the Company so elects to continue to
make additional Fund shares available, the owners of the Existing Contracts
or the Company, whichever shall have legal authority to do so, shall be
permitted to reallocate investments in the Fund, redeem investments in the
Fund and/or invest in the Fund upon the making of additional purchase
payments under the Existing Contracts.
(b) The parties agree that this Section 10.4 shall not apply to any
termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
If to the Fund:
Xxxxx Xxxxx Variable Trust
The Xxxxx Xxxxx Building
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
If to the Distributor:
Xxxxx Xxxxx Distributors, Inc.
The Xxxxx Xxxxx Building
000 Xxxxx Xxxxxx
Xxxxxx, XX 00000
Attention: General Counsel
If to Allmerica Financial Life Insurance and Annuity Company:
Xxxxxxx X. Xxxxxx
President
Allmerica Financial Life Insurance and Annuity Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
If to First Allmerica Financial Life Insurance Company:
Xxxxxxx X. Xxxxxx
Vice President
First Allmerica Financial Life Insurance Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
ARTICLE XII. MISCELLANEOUS
17
13.1. All persons dealing with the Fund must look solely to the property of
such Fund, and in the case of a series company, the respective Designated
Portfolio as though such Designated Portfolio had separately contracted with
the Company and the Distributor for the enforcement of any claims against the
Fund. The parties agree that neither the Board, officers, agents nor
shareholders of the Fund assume any personal liability or responsibility for
obligations entered into by or on behalf of the Fund.
13.2. Subject to the requirements of legal process and regulatory authority,
each party hereto shall treat as confidential the names and addresses of the
owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information without the express written
consent of the affected party until such time as such information may come
into the public domain.
13.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
13.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the foregoing, each
party hereto further agrees to furnish the Delaware Insurance Commissioner
with any information or reports in connection with services provided under
this Agreement which such Commissioner may request in order to ascertain
whether the variable annuity operations of the Company are being conducted in
a manner consistent with variable annuity laws and regulations and any other
applicable law or regulations.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies, and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
13.8. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto.
13.9. A copy of the Fund?s Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts. The Declaration of Trust has
been executed on behalf of the Fund by certain Trustees in their capacity as
Trustees of the Trust and not individually. All persons dealing with the Fund
must look solely to the property of the Fund for the enforcement of any
claims against the Fund as neither the Board, officers, agents, or
shareholders assume any personal liability for obligations entered into on
behalf of the Fund.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on behalf by its duly authorized representative and its
seal to be hereunder affixed hereto
18
as of the date specified below.
COMPANY: ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Xxxx X. Hug
----------------
Title: Vice President
-----------------
Date: February 15, 2001
--------------------
COMPANY: FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
By: /s/ Xxxx X. Hug
----------------
Title: VIce President
-----------------
Date: February 15, 2001
--------------------
FUND: XXXXX XXXXX VARIABLE TRUST
By: /s/ Xxxxx X. X'Xxxxxx
----------------------
Title: Treasurer
-----------
Date: February 15, 2001
-------------------
DISTRIBUTOR: XXXXX XXXXX DISTRIBUTORS, INC.
By: /s/ Xxxx X. Xxxxxxx
---------------------
Title: Vice President
----------------
Date: February 15, 2002
-------------------
19
