Exhibit 3a
WHOLESALING AGREEMENT
AGREEMENT dated as of November 5, 1996 by and between FIRST ALLMERICA FINANCIAL
LIFE INSURANCE COMPANY, a Massachusetts insurance company (the "Company"),
ALLMERICA INVESTMENTS, INC., a Massachusetts corporation (the "Underwriter"),
Xxxxxx Distributors, Inc., a Delaware corporation ("KDI"), ZKI Agency, Inc., a
Delaware corporation ("ZKIA" and, together with KDI, collectively, the
"Wholesaler"), and the insurance agency affiliates of the Wholesaler listed on
Schedule 1 to this Agreement (hereinafter referred to as the "Wholesaler Agency
Affiliates").
WITNESSETH:
WHEREAS, the Company has registered or proposes to register with the Securities
and Exchange Commission interests in certain variable annuity contracts and
variable life insurance contracts under the Securities Act of 1933 and proposes
to issue and sell such contracts through the Underwriter acting as the principal
underwriter for such contracts; and
WHEREAS, the Company, the Underwriter and the Wholesaler desire to establish an
arrangement whereby the Wholesaler will act as the wholesaler for such variable
annuity contracts and variable life insurance contracts and, as such, will
recruit business firms to distribute such contracts;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Underwriter and the Wholesaler hereby agree as follows:
1. DEFINITIONS
a. ACCOUNT -- Each and any separate account established by the Company
and listed on Schedule 2 to this Agreement, as amended from time to
time. The phrase "Account supporting the Contracts" or "Account
supporting a class of Contracts" shall mean the separate account
identified in such Contracts as the separate account to which the
Purchase Payments made under such Contracts are allocated and as to
which income, gains and losses, whether or not realized, from assets
allocated to such separate account, are, in accordance with such
Contracts, credited to or charged against such separate account without
regard to other income, gains, or losses of the Company or any other
separate account established by the Company.
b. CONTRACTS -- The variable annuity contracts and variable life insurance
contracts described more specifically on Schedule 3 to this Agreement, as
amended from time to time. The term "Contracts" shall include various
Account sub-account investment options, investment options in the Company's
general account and Guarantee Period Accounts, if available, any riders to
such contracts and any other contracts offered in connection therewith or
any contracts for which such Contracts may be exchanged or converted. The
phrase "a class of Contracts" shall mean those variable annuity contracts or
variable life insurance contracts, as the case may be, issued on the same
policy form or forms and covered by the same Registration Statement, as
shown on Schedule 3 to this Agreement.
c. REGISTRATION STATEMENT -- At any time while this Agreement is in effect,
the currently effective registration statement filed with the SEC under the
1933 Act, or currently effective post-effective amendment thereto, relating
to a class of Contracts, including financial statements included in, and all
exhibits to, such registration statement or post-effective amendment. (For
purposes of Sections 5.a. and 11 of this Agreement, however, the term
"Registration Statement" means any document that is or at any time was a
Registration Statement within the meaning of this Section 1.c.).
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d. PROSPECTUS -- The prospectus and any statement of additional information
included within a Registration Statement, except that, if the prospectus and
statement of additional information most recently filed with the SEC
pursuant to Rule 497 under the 1933 Act after the date on which the
Registration Statement became effective differs from the prospectus and
statement of additional information included within the Registration
Statement at the time it became effective, the term "Prospectus" shall refer
to the most recently filed prospectus and statement of additional
information filed under Rule 497 under the 1933 Act from and after the date
on which they each shall have been filed. (For purposes of Sections 5.a.
and 11 of this Agreement, however, the term "any Prospectus" means any
document that is or at any time was a Prospectus within the meaning of this
Section x.x.).
e. FUND --Xxxxxx Investors Fund.
f. FUND REGISTRATION STATEMENT -- At any time while this Agreement is in
effect, the currently effective registration statement filed with the SEC
under the 1933 Act, or currently effective post-effective amendment thereto,
for shares of the Fund. (For purposes of Section 11 of this Agreement,
however, the term "Fund Registration Statement" means any document that is
or at any time was a Fund Registration Statement within the meaning of this
Section l.f.).
g. FUND PROSPECTUS -- At any time while this Agreement is in effect, the
prospectus and statement of additional information for the Fund most
recently filed with the SEC pursuant to Rule 497 under the 1933 Act. (For
purposes of Section 11 of this Agreement, however, the term "Fund
Prospectus" means any document that is or at any time was a Fund Prospectus
within the meaning of this Section l.g.).
h. 1933 ACT -- The Securities Act of 1933, as amended.
i. 1934 ACT -- The Securities Exchange Act of 1934, as amended.
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j. 1940 ACT -- The Investment Company Act of 1940, as amended.
k. SEC -- The Securities and Exchange Commission.
l. NASD -- The National Association of Securities Dealers, Inc.
m. REGULATIONS -- The rules and regulations promulgated by the SEC under
the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time
this Agreement is executed or thereafter promulgated, and as they may be
amended from time to time.
n. STATE - The state of New York and/or the state of Hawaii.
o. BROKER-DEALER -- An entity registered as a broker-dealer and licensed as
a life insurance agent or affiliated with an entity so licensed, and
recruited by the Wholesaler and subsequently authorized by the Company and
the Underwriter to distribute the Contracts pursuant to a sales agreement
with the Company and the Underwriter entered into in accordance with Section
3 of this Agreement.
p. ASSOCIATED PERSON -- This term as used in this Agreement shall have the
meaning assigned to it in the 1934 Act.
q. REPRESENTATIVE -- An Associated Person of the Wholesaler or a Broker-
Dealer registered with the NASD as a registered representative or principal
of the Wholesaler or Broker-Dealer, as the case may be.
r. PURCHASE PAYMENT -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
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s. PROCEDURES -- The administrative procedures prepared and distributed by
the Company, as such may be amended or supplemented from time to time,
relating to the solicitation, sale and delivery of the Contracts. Provided,
however, that Broker-Dealers shall only be responsible for compliance with
those Procedures which have been furnished to them in writing.
t. PARTICIPATION AGREEMENT -- The agreement dated as of ____________, 1996,
among the Company, KDI, Zurich Xxxxxx Investments and the Fund relating to
the investment of assets of the separate accounts of the Company in the
Fund.
2. APPOINTMENT AND WHOLESALING RIGHTS
a. The Company hereby authorizes the Wholesaler to represent the Company in
the wholesaling activities contemplated by this Agreement. Where required
by relevant State insurance law, the Company hereby appoints the Wholesaler
as an agent under such State insurance laws to represent the Company in the
wholesaling activities contemplated by this Agreement. In those States in
which the Wholesaler is not licensed as an insurance agent and the relevant
State insurance law requires that the Wholesaler be licensed as an insurance
agent, the Company hereby appoints the appropriate entity or individual
("Wholesaler Agency Affiliate") affiliated with the Wholesaler (as set forth
on Schedule 1 to this Agreement, as such Schedule may be amended from time
to time by the Wholesaler to reflect changes in the licensing status, if
any, as required by relevant state insurance law of the Wholesaler or
Wholesaler Agency Affiliates) as its agent under the insurance laws to
engage in such wholesaling activities. The Underwriter hereby authorizes
the Wholesaler under applicable securities laws to engage in the activities
contemplated in this Agreement relating to the wholesaling of the Contracts
for which the Underwriter acts or may act as principal underwriter.
In jurisdictions where neither the Wholesaler nor any Wholesaler Agency
Affiliate is licensed as contemplated by the first paragraph of this
Section 2.a., when requested in writing by the Wholesaler, the
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Company will perform such wholesaling activities related to the Contracts
contemplated by this Agreement as are mutually agreed upon by the Company
and the Wholesaler. Any such wholesaling activities will be performed by
the Company as agent and for the benefit of the Wholesaler, until such
time as the Wholesaler notifies the Company and the Underwriter that the
Wholesaler or its Wholesaler Agency Affiliate is so licensed. The
Company shall be compensated by the Wholesaler for its performance of
such wholesaling activities on such basis as is mutually agreed upon by
the Company and the Wholesaler.
b. The Wholesaler (both on its own behalf and on behalf of Wholesaler
Agency Affiliates) undertakes to use its best efforts to recruit Broker-
Dealers in accordance with Section 3 of this Agreement, consistent with
market conditions and in compliance with its responsibilities under the
federal securities laws and NASD rules and regulations. The obligations of
the Wholesaler and Wholesaler Agency Affiliates hereunder are further
subject to the accuracy of the representations and warranties of the Company
and the Underwriter contained in this Agreement and to the performance by
the Company of its obligations hereunder.
c. The appointment and authorization of the Wholesaler and Wholesaler
Agency Affiliates to engage in wholesaling activities pursuant to this
Agreement is exclusive as to the Contracts listed on Schedule 3, as amended
from time to time in accordance with Section 2.e. of this Agreement.
Neither the Company nor the Underwriter shall authorize any other person (as
principal underwriter or otherwise) to engage in wholesaling or distribution
activities with respect to the Contracts or to recruit business firms to
engage in wholesaling or distribution activities with respect to the
Contracts (other than business firms recommended by the Wholesaler pursuant
to Section 3 of this Agreement) without the Wholesaler's prior written
consent, nor shall the Company or the Underwriter, without the Wholesaler's
prior written consent, separately engage in wholesaling or distribution
activities relating to the Contracts.
The Company shall design the Contracts, and any amendments or riders
thereto, subject to approval by the Wholesaler. Throughout the term of
this Agreement, the Contracts shall be issued and offered for sale by the
Company and the variable portion thereof shall be supported by the Accounts.
The Company alone
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shall be responsible for filing the initial Registration Statements and
any amendments thereto with the SEC in accordance with the 1933 Act, 1934
Act, 1940 Act and the Regulations to register interests in each class of
Contracts. The Company will not make any amendment or rider to the
Contracts or a class of Contracts, or file a Registration Statement, or
make an amendment to a Registration Statement or supplement to a
Prospectus, without the Wholesaler having been given the opportunity to
review any such filing, amendment, rider or supplement. However, such
opportunity to review shall not make the Wholesaler responsible for the
content of any such filing, amendment, rider or supplement; the Company
alone shall be responsible for such content.
The Company shall register its Accounts with the SEC. All amounts available
under the Contracts shall be invested only in the Fund (through the
Account(s) supporting the Contracts) and/or allocated to the Company's
general account, or to one or more of the Guarantee Period Accounts referred
to in the Prospectus, provided that such amounts may also be invested in an
investment company or investment vehicle other than the Fund if: (1) such
other investment company is advised by the Fund's investment adviser; (2)
the Fund and/or Wholesaler, in their sole discretion, consents to the use of
such other investment company or investment vehicle; (3) there is a
substitution of the Fund made in accordance with Section 10.1(e) of the
Participation Agreement; or (4) the Participation Agreement is terminated
pursuant to Article X of the Participation Agreement. The Company will not
take action to operate any Account or any subaccount(s) of an Account, as a
management investment company under the 1940 Act without the Fund's and
Wholesaler's prior written consent.
All assets in the Guarantee Period Accounts referred to in the Prospectus
shall be managed by Zurich Investment Management, Inc. ("ZIM") pursuant to
the Investment Management Agreement being executed contemporaneously
herewith by the Company and ZIM for so long as such Investment Management
Agreement is in effect.
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d. The Company shall obtain appropriate authorizations, to the extent
necessary, whether by registration, qualification, approval or otherwise,
for the issuance and sale of the Contracts (including all investment
options) in each State. The Company shall also use its best efforts to
obtain any additional State regulatory approvals necessary for the sale and
issuance of the Contracts. From time to time, the Company shall notify the
Wholesaler in writing of all States in which the Contracts can then lawfully
be offered. To the extent that the Company is not authorized to issue the
Contracts in a State, the Company shall employ all reasonable efforts to
obtain such authorization in such State.
e. The Wholesaler may unilaterally amend Schedule 1 from time to time
pursuant to Section 2.a. of this Agreement. The parties to this Agreement
may amend Schedules 2 and 3 to this Agreement from time to time by mutual
agreement to reflect changes in or relating to the Contracts and the
Accounts and to add new classes of variable annuity contracts and variable
life insurance contracts to be issued by the Company or for which the
Wholesaler will act as wholesaler. Schedule 2 to this Agreement will be
automatically amended by the Company from time to time to reflect the
addition and deletion of subaccounts and Fund portfolios. The provisions
of this Agreement shall be equally applicable to each such class of
Contracts, unless the context otherwise requires. Schedule 4 to this
Agreement may be amended only by mutual agreement of the parties to this
Agreement pursuant to Section 9 of this Agreement.
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3. RECRUITMENT OF BROKER-DEALERS AND RELATED RESPONSIBILITIES
a. The Company and the Underwriter hereby authorize the Wholesaler and any
Wholesaler Agency Affiliates to contact and recommend business firms to act
as Broker-Dealers for the sale of the Contracts. The Company shall have the
right to reject any such recommendation, but shall not do so arbitrarily or
unreasonably, and any such rejection shall be in writing and state the
reasons therefor.
b. The Company and the Underwriter shall have the responsibility for: (i)
executing appropriate sales agreements with the business firms recommended
by the Wholesaler or Wholesaler Agency Affiliates and (ii) appointing such
business firms, and/or Associated Persons of such firms, as insurance agents
of the Company in those States where such business firms and/or Associated
Persons possess insurance agent licenses. None of the Wholesaler, the
Wholesaler Agency Affiliates, the Company or the Underwriter shall have
responsibility for, or bear the cost of, any registration or licensing of
Broker-Dealers or any of their Associated Persons with the SEC, NASD or any
State insurance, governmental or regulatory agency. The costs of
appointment shall be borne as provided in Section 9.c. hereof. The Company
shall maintain the appointment records of all agents appointed by the
Company to distribute the Contracts or, if required by relevant State law,
to engage in the wholesaling activities contemplated by this Agreement. The
Company shall provide KDI with a complete listing of all agents appointed by
the Company to distribute the Contracts and shall provide KDI with an
updated listing at least monthly.
c. Any sales agreement entered into by the Company and/or the Underwriter
with a Broker-Dealer shall provide that:
(i) The Broker-Dealer (or an affiliated person duly registered as a
broker-dealer with the SEC) shall train, supervise, and be solely
responsible for the conduct of all of its Associated Persons in the proper
method of solicitation, sale and delivery of the Contracts for the purpose
of complying on a continuous basis with
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the NASD Rules of Fair Practice and with federal and State securities and
insurance law requirements applicable in connection with the offering and
sale of the Contracts;
(ii) Purchase Payments for the Contracts shall be made payable to the
Company and shall be delivered together with all applications and related
information in accordance with the Procedures;
(iii) The Broker-Dealer and/or its duly licensed insurance agency
affiliates shall be solely responsible for all compensation paid to its
Representatives and all related tax reporting that may be required under
applicable law;
(iv) The Broker-Dealer and its Representatives shall not use, develop or
distribute any promotional, sales or advertising material that has not been
approved in writing by the Company, the Underwriter and the Wholesaler and
filed with the appropriate governmental or regulatory agencies; and
(v) The Broker-Dealer shall not have authority, on behalf of the Company,
the Underwriter, the Wholesaler or the Wholesaler Agency Affiliates, to
make, alter or discharge any Contract or other contract entered into
pursuant to a Contract; to waive any Contract forfeiture provision; to
extend the time of paying any Purchase Payment; to receive any monies or
Purchase Payments (except for the sole purpose of forwarding monies or
Purchase Payments to the Company); or to expend, or contract for the
expenditure of, funds of the Company, the Underwriter, the Wholesaler or
the Wholesaler Agency Affiliates.
d. The Wholesaler and Wholesaler Agency Affiliates shall provide such
assistance to the Company in the appointment procedure applicable to Broker-
Dealers and their Representatives as may be reasonably requested by the
Company.
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e. The Wholesaler shall train, supervise, and be solely responsible for the
conduct of all of its Associated Persons (including Wholesaler Agency
Affiliates, but not Broker-Dealers or their Representatives unaffiliated
with the Wholesaler or the Wholesaler Agency Affiliates), for the purpose of
complying on a continuous basis with the NASD Rules of Fair Practice and
with federal and State securities and insurance laws applicable to the
wholesaling activities contemplated in this Agreement. The Wholesaler and
the Wholesaler Agency Affiliates shall be responsible for the maintenance of
licenses, certifications or permits that they determine to be necessary for
themselves and/or their Associated Persons pursuant to any federal or State
securities law or State insurance law.
f. None of the Wholesaler, the Wholesaler Agency Affiliates, the Company or
the Underwriter will have any supervisory responsibility (as such
supervision is contemplated by the 1934 Act or the NASD's Rules of Fair
Practice) with respect to Broker-Dealers or their Representatives. Under no
circumstances will the Wholesaler or the Wholesaler Agency Affiliates be
responsible for Broker-Dealers' or their Representatives' failure to comply
with applicable law or the Procedures.
g. The Wholesaler shall not have authority on behalf of the Company to
make, alter or discharge any Contract or other contract entered into
pursuant to a Contract; to waive any Contract forfeiture provision; to
extend the time of paying any Purchase Payment; or to receive any monies or
Purchase Payments. The Wholesaler shall not expend, nor contract for the
expenditure of, funds of the Company; nor shall the Wholesaler possess or
exercise any authority on behalf of the Company other than that expressly
conferred on the Wholesaler by this Agreement.
h. The Wholesaler and the Wholesaler Agency Affiliates shall act as
independent contractors in the performance of their duties and obligations
under this Agreement and nothing contained in this Agreement shall
constitute the Wholesaler or any Wholesaler Agency Affiliate or their
respective Associated Persons as employees of the Company or the Underwriter
in connection with the wholesaling activities contemplated by this Agreement
or otherwise.
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i. It is the intention of the parties hereto that the wholesaling
activities contemplated by this Agreement shall not involve the
solicitation of any insurance business from the public, or any act or
activity which would require registration as a life insurance or variable
annuity agent dealing with the public, including without limitation,
activities or conduct involving the solicitation, negotiation,
procurement, collection or transmittal of any premium or other
consideration on any insurance policy or annuity contract, or any other
act involving the consummation or delivery of any insurance policy or
annuity contract to a policy holder or the general public.
4. MARKETING AND SALES
a. Except as otherwise agreed to by the Company and the Wholesaler, the
Wholesaler shall be responsible for the design and cost of all promotional,
sales and advertising material relating to the Contracts, which include the
marketing brochure, application, broker-dealer guide book, asset allocator
worksheet and Prospectus covers.
Prior to use with any member of the public, the Wholesaler shall provide to
the Company copies of all promotional, sales and advertising material
developed by the Wholesaler for the Company's review and written approval.
Upon receipt of such material from the Wholesaler, the Company shall be
given a reasonable amount of time to complete its review. The Company will
respond on a prompt and timely basis in approving any such material.
Failure to respond shall not relieve the Wholesaler of the obligation to
obtain the prior written approval of the Company.
In the event that the Company shall design any promotional, sales or
advertising material relating to the Contracts, the Company shall provide to
the Wholesaler copies of such material for the Wholesaler's review and
written approval. Upon receipt of such material from the Company, the
Wholesaler shall be given a reasonable amount of time to complete its
review. The Wholesaler will respond on a prompt and timely
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basis in approving any such material. Failure to respond shall not
relieve the Company of the obligation to obtain the prior written
approval of the Wholesaler.
The Underwriter shall be responsible for filing, as required, all
promotional, sales or advertising material, whether developed by the
Company, the Underwriter or the Wholesaler, with the NASD and any federal
and state securities, governmental or regulatory agencies. The Company
shall be responsible for filing, as required, such material, whether
developed by the Company, the Underwriter or the Wholesaler, with any State
insurance, governmental or regulatory agencies. Neither the Wholesaler nor
the Wholesaler Agency Affiliates shall have any responsibility for any of
the filings referred to in this paragraph.
If any such promotional, sales or advertising material names the Fund or the
Fund's investment adviser, the Company shall furnish such material to the
Fund or the Fund's distributor (if other than the Wholesaler) prior to its
use. Such material shall not be used unless written approval has been
obtained from the Fund or the Fund's distributor. Failure of the Fund or
the Fund's distributor to respond shall not relieve the Company or the
Underwriter of the obligation to obtain the prior written approval of the
Fund or the Fund's distributor.
b. The Wholesaler acknowledges that the Company shall have the right to
reject, in whole or in part, any application for a Contract, provided (i)
that there must be a reasonable basis (as determined by the Company) for any
such rejection, which basis shall be specified in writing by the Company
upon request by the Wholesaler and (ii) that the projected profitability or
lack of profitability of a Contract shall not be a basis for rejection. In
the event an application is rejected, any Purchase Payment submitted will be
returned by or on behalf of the Company to the applicant. The Company will
notify the Wholesaler and the Broker-Dealer who submitted the Purchase
Payment of such action. In the event that a purchaser exercises his/her
free look right under his/her Contract, any amount to be refunded as
provided in such Contract will be so refunded to the purchaser by or on
behalf of the Company. The Company will notify the Wholesaler and the
Broker-Dealer who solicited the sale of the Contract of such action.
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c. The Company and the Wholesaler shall equally share the costs (other than
those borne by the Fund pursuant to the Participation Agreement) for
printing any preliminary and all definitive Prospectuses for the Contracts
and Fund Prospectuses and any supplements thereto.
d. The Wholesaler will pay the following expenses related to its
wholesaling activities contemplated by this Agreement:
(i) the compensation, if any, of its Associated Persons;
(ii) expenses associated with the initial licensing, if any, and training
of its Associated Persons involved in the wholesaling activities;
(iii) the development, printing and mailing of any promotional, sales or
advertising material for use in connection with the distribution of the
Contracts;
(iv) the printing, mailing, and all other activities associated with
proxy solicitations;
(v) expenses associated with telecommunications with the Company at the
sites of the Wholesaler or its Associated Persons, including site
installations and purchases, leases or rentals of modems, terminals and
other hardware, and lease line telephone charges; and
(vi) any other expenses incurred by the Wholesaler or its Associated
Persons for the purpose of carrying out the obligations of the Wholesaler
hereunder.
Except for such expenses and the expenses described in Section 4.c. of
this Agreement, the Wholesaler shall not be responsible for any expenses
relating to the Contracts or distribution of the Contracts or the
processing of Contracts or applications, including without limitation
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any expenses incurred in connection with the return of Purchase Payments
solicited by Broker-Dealers for applications rejected or not timely
received by the Company.
e. The Company will pay all expenses in connection with:
(i) the preparation and filing with appropriate governmental or
regulatory agencies of the Registration Statements and each preliminary
Prospectus and definitive Prospectus;
(ii) the preparation and issuance of the Contracts;
(iii) any authorization, registration, qualification or approval of the
Contracts required under the securities, blue-sky laws or insurance laws
of the States;
(iv) registration fees for the Contracts payable to the SEC, the NASD or
any other governmental or regulatory agency;
(v) the mailing of Prospectuses for the Contracts and Fund Prospectuses,
any supplements thereto, as required by federal securities laws, and
periodic reports relating to the Fund or the Accounts to Contract owners;
(vi) the preparation of administrative forms utilized in connection with
the distribution of the Contracts;
(vii) the preparation of Contract owner lists for the purposes of proxy
solicitations; and
(viii) compensation as provided in Section 9 hereof.
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f. The Company alone shall be responsible for and bear the cost of
administration of the Contracts following their issuance, including all
Contract owner service and communication activities, but the Wholesaler
shall be responsible for answering inquiries from Broker-Dealers or
Representatives regarding the investment performance of the Contracts, as
permitted by applicable law. The Company agrees that its service standards
for the Contracts shall be always equal to or better than its current
service standards for the other variable annuity and variable life
insurance contracts that it is actively marketing on the effective date of
this Agreement.
g. The Company, as agent for the Underwriter, will confirm to each
applicant for and owner of a Contract in accordance with Rule lOb-10 under
the 1934 Act its acceptance of Purchase Payments and such other transactions
as are required by Rule l0b-10 or administrative interpretations thereunder
and in accordance with Release 8389 under the 1934 Act.
h. At the end of 15 months from the later of the date (a) on which the
Company and its affiliate, Allmerica Financial Life Insurance and Annuity
Company ("AFLIAC") notify the Underwriter and the Wholesaler that they have
received approval of (i) "Xxxxxx Gateway Elite" variable annuity contracts
and (ii) "Xxxxxx Gateway Custom" variable annuity contracts (collectively,
the "Contracts") from at least thirty (30) states or (b) on which both the
Company and AFLIAC versions of the Contracts may be legally distributed
under the Federal Securities Laws, reimbursement (if any) from the
Wholesaler for development and administrative costs of the Contracts shall
be computed and paid to the Company and AFLIAC as provided in Sections 4.h.
and 21.a. of the Wholesaling Agreement between the Wholesaler and AFLIAC
being executed contemporaneously herewith. In accordance with the terms of
such Wholesaling Agreement, Wholesaler shall be responsible for only a
single reimbursement amount, and such reimbursement shall be divided between
the Company and AFLIAC, as they may mutually agree.
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5. REPRESENTATIONS AND WARRANTIES
a. The Company and the Underwriter each represent and warrant to the
Wholesaler and each Wholesaler Agency Affiliate, on the effective date of
each Registration Statement for the Contracts (or class of Contracts) and at
each time that a Contract is sold and, with respect to Clauses (vi), (vii),
(x), and (xi) below, also on the date of this Agreement, as follows:
(i) The Registration Statement has been declared effective by the SEC or
has become effective in accordance with the Regulations.
(ii) The Registration Statements and the Prospectuses each comply in
all material respects with the provisions of the 1933 Act and the 1940
Act and the Regulations, and neither the Registration Statements nor
the Prospectuses contain an untrue statement of a material fact or
omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of
the circumstances in which they were made; provided, however, that none
of the representations and warranties in this Clause (ii) shall apply
to statements in or omissions from the Registration Statements or
Prospectuses made in reliance upon and in conformity with information
furnished to the Company in writing by the Wholesaler expressly for use
in the Registration Statements.
(iii) Neither the Company nor the Underwriter has received any notice
from the SEC with respect to the Registration Statement or the Account
supporting the Contracts described in the Registration Statements
pursuant to Section 8(e) of the 1940 Act and no stop order under the
1933 Act has been issued and no proceeding therefor has been instituted
or threatened by the SEC.
(iv) The accountants who certified the financial statements included in
the Registration Statements and Prospectuses are independent public
accountants as required by the 1933 Act and the Regulations and such
independent public accountants shall have certified that the financial
statements included in the
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Registration Statements present fairly the respective financial
positions of the Company and the Account supporting the Contracts
described in the Registration Statements as of the dates indicated; and
such financial statements have been prepared in conformity with
generally accepted accounting principles in the United States applied
on a consistent basis.
(v) Subsequent to the respective dates as of which information is given in
the Registration Statement or the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, of the
Company, the Underwriter or the Account supporting the Contracts described
in the Registration Statements that would cause such information to be
materially misleading.
(vi) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of
Massachusetts with full power and authority to own, lease and operate its
properties and conduct its business in the manner described in the
Prospectus; is duly qualified to transact the business of a life insurance
company; and is in good standing in each State.
(vii) The Underwriter has been duly organized and is validly existing as a
corporation in good standing under the laws of the Commonwealth of
Massachusetts with full power and authority to own, lease and operate its
properties and conduct its business in the manner described in the
Prospectuses; is duly registered as a broker-dealer with the SEC and with
the securities commission of each State where such registration is
required; and is a member in good standing with the NASD.
(viii) Each Account supporting the Contracts described in the
Registration Statements has been duly authorized and established and is
validly existing as a separate account under the insurance laws of the
Commonwealth of Massachusetts, and is duly registered with the SEC as a
unit investment trust under the 1940 Act.
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(ix) The form of the Contracts has been approved to the extent required by
the Insurance Commissioner of each State.
(x) The execution and delivery of this Agreement and the consummation
of the transactions contemplated in this Agreement have been duly
authorized by all necessary corporate action by the Company and the
Underwriter and when so executed and delivered this Agreement will be
the valid and binding obligation of the Company and the Underwriter,
enforceable in accordance with its terms.
(xi) The consummation of the transactions contemplated by this
Agreement, and the fulfillment of the terms of this Agreement, will
not conflict with, result in any breach of any of the terms and
provisions of, or constitute (with or without notice or lapse of time)
a default under, the charter or bylaws of the Company or the
Underwriter, or any indenture, agreement, mortgage, deed or trust, or
other instrument to which the Company or the Underwriter is a party or
by which either is bound, or violate any law, or, to the best of the
Company's or the Underwriter's knowledge, any order rule or regulation
applicable to the Company or the Underwriter of any court or any
federal or state regulatory body, administrative agency or any other
governmental instrumentality having jurisdiction over the Company or
the Underwriter or any of their respective properties.
(xii) No consent, approval, authorization or order of any court or
governmental authority or agency is required for the issuance or sale of
the Contracts or for the consummation of the transactions contemplated by
this Agreement, that has not been obtained.
(xiii) The Company has filed with the SEC all statements and other
documents required for registration under the provisions of the 1940
Act and the Regulations thereunder of the Account supporting the
Contracts described in the Registration Statement, and such
registration has been effected; there are no agreements or documents
required by the 1933 Act, the 1940 Act, or the Regulations to be filed
with the SEC as exhibits to the Registration Statement, that have not
been so filed; and the Company has
19
obtained all exemptive or other orders of the SEC necessary to make the
public offering and consummate the sale of the Contracts pursuant to
this Agreement and to permit the operation of the Accounts supporting
the Contracts described in the Registration Statements, as contemplated
in the Prospectuses.
(xiv) The Contracts have been duly authorized by the Company and
conform to the descriptions thereof in the Registration Statements and
the Prospectuses and, when issued as contemplated by the Registration
Statements, will constitute legal, validly issued and binding
obligations of the Company in accordance with their terms.
b. KDI and ZKIA represent and warrant to the Company on the date hereof as
follows:
(i) KDI and ZKIA have taken all action including, without limitation,
those necessary under their respective certificates of incorporation,
by-laws and applicable state corporate law, necessary to authorize the
execution, delivery and performance of this Agreement, and have taken
or will take all requisite action to enable them to perform all
transactions contemplated hereunder in accordance with the terms
hereof; and
(ii) KDI is and during the term of this Agreement shall remain duly
registered as a broker-dealer under the 1934 Act, a member in good
standing with the NASD, and duly registered as a broker-dealer under
applicable state securities laws.
20
6. ADDITIONAL RESPONSIBILITIES OF THE COMPANY
a. The Company shall use its best efforts:
(i) to maintain the registration of the Contracts with the SEC and any
State securities commissions where the securities or blue-sky laws of
such State require registration of the Contracts, including without
limitation using its best efforts to prevent a stop order from being
issued or if a stop order has been issued to cause such stop order to
be withdrawn;
(ii) to gain approval or other authorization of the Contract forms
where required under the insurance laws and regulations of each State;
and
(iii) to keep such registration, approval and authorization in effect
thereafter so long as the Contracts are outstanding.
b. During the term of this Agreement the Company shall take all action
required to cause each class of Contracts to comply, and to continue to
comply, as annuity contracts or life insurance contracts, as the case may
be, and to cause the Registration Statements and the Prospectus for each
class of Contracts to comply, and to continue to comply, with all applicable
federal laws and regulations and all applicable laws and regulations of each
State.
c. The Company, during the term of this Agreement, shall notify the
Wholesaler immediately:
(i) when each Registration Statement has become effective or any
post-effective amendment with respect to the Registration Statement
thereafter becomes effective;
21
(ii) of any request by the SEC for any amendment to a Registration
Statement or supplement to a Prospectus or for additional information;
(iii) of any event that makes any material statement made in a
Registration Statement or a Prospectus untrue in any material respect
or results in a material omission in a Registration Statement or a
Prospectus;
(iv) of the issuance by the SEC of any stop order with respect to a
Registration Statement or any amendment thereto, or the initiation of
any proceedings for that purpose, or for any other purpose relating to
the registration and/or offering of the Contracts (or a class of
Contracts);
(v) in which States registration of the Contracts (or a class of
Contracts) is required under the securities or blue-sky laws, and when
such registrations have become effective.
d. The Company shall furnish to the Wholesaler without charge promptly
after filing five (5) copies of each Registration Statement as originally
filed and any pre-effective or post-effective amendment thereto, including
financial statements and all exhibits, including exhibits incorporated
therein by reference.
e. The Company shall timely file all reports, statements and amendments
required to be filed by or for each Account or class of Contracts under the
1933 Act and/or the 1940 Act or the Regulations.
f. The Company shall deliver to the Wholesaler, as soon as practicable
after it becomes available, the Annual Statements for the Company and for
each Account in the form filed with their respective state of domicile, and
any quarterly reports upon the Wholesaler's request.
g. The Company and the Underwriter will provide the Wholesaler access to
such records, officers and employees of the Company, the Underwriter and
each Account at reasonable times as is necessary to
22
enable the Wholesaler to fulfill its obligations under the federal
securities laws and NASD rules. The Wholesaler will provide the Company
and the Underwriter access to such of its records, officers and employees
at reasonable times as is necessary to enable the Company and the
Underwriter to fulfill their obligations under the federal securities
laws and NASD rules.
h. The Company shall provide the Wholesaler at least monthly with a sales
report or reports and an assets under management report in such form as
shall be acceptable to both the Company and the Wholesaler. Any such sales
report shall include, among other items, a break-down of sales by
Representative, Broker-Dealer, product type and Contract state of issue.
7. CONFIDENTIALITY
a. The Company and the Underwriter acknowledge that the names and addresses
of all customers and prospective customers (for purposes of this Section
7.a., the terms "customers" and "prospective customers" shall not mean
Broker-Dealers) of the Wholesaler, of its parent company and of any
affiliated person of the Wholesaler, the Wholesaler Agency Affiliates and
the names and addresses of all customers and prospective customers of any
Broker-Dealer that may come to the attention of the Company, the
Underwriter or any person affiliated with the Company or the Underwriter
solely as a result of their relationship with the Wholesaler, its parent
company or any affiliated person of the Wholesaler, the Wholesaler Agency
Affiliates or any Broker-Dealer and not from any independent source, are
confidential and shall not be used by the Company, the Underwriter or any
person affiliated with the Company or the Underwriter for any purpose
whatsoever except as may be necessary in connection with the administration
of the Contracts sold by the Broker-Dealers, including responses to specific
requests made to the Company for service by Contract owners, efforts to
prevent the replacement of such Contracts or communications with customers
concerning option rights available under the terms of the Contracts. The
restrictions set forth in the previous sentence do not apply if and to the
extent a Broker-Dealer knowingly discloses the names and addresses of its
customers or prospective customers to the Company or the Underwriter outside
23
the operation of this Agreement. In no event shall the names and addresses
of such customers and prospective customers, whether disclosed to the
Company or the Underwriter by the Wholesaler or by any Broker-Dealer, be
furnished by the Company, the Underwriter or any of their affiliated
persons to any other person. The intent of this paragraph is that neither
the Company nor the Underwriter, nor persons affiliated with the Company or
the Underwriter, shall utilize, or permit to be utilized, for any purpose
other than for the sale and administration of the Contracts or for the sale
and administration of other financial products distributed or managed by the
Wholesaler and/or its affiliates, their knowledge of the Wholesaler, of its
parent company or of any affiliated person of the Wholesaler, the Wholesaler
Agency Affiliates or the identity of all customers and prospective
customers, derived solely as a result of the relationship created through
the funding and sale of the Contracts. This paragraph shall remain
operative and in full force and effect regardless of the termination of this
Agreement, and shall survive any such termination.
In addition to the foregoing, the Company and the Underwriter agree that
neither during the term of this Agreement nor after its termination shall
the names and addresses of Broker-Dealers and their Representatives
recruited by the Wholesaler to solicit the Contracts be furnished by the
Company, the Underwriter or any of their affiliated persons to any other
person, or be utilized by the Company, the Underwriter or their affiliated
persons for any purpose except as the Company deems necessary or appropriate
for the sale and administration of the Contracts subject to this Agreement.
8. RECORDS
The Company, the Underwriter, the Wholesaler and the Wholesaler Agency
Affiliates shall each maintain such accounts, books and other documents as
are required to be maintained by each of them by applicable laws and
regulations and shall preserve such accounts, books and other documents for
the periods prescribed by such laws and regulations. The accounts, books
and records of the Company, the Underwriter, the Account, the Wholesaler and
the Wholesaler Agency Affiliates as to all transactions hereunder shall be
maintained so as to clearly and accurately disclose the nature and details
of the
24
transactions, including such accounting information as is necessary
to support the reasonableness of the amounts paid by the Company hereunder.
Each party shall have the right to inspect and audit such accounts, books
and records of the other party during normal business hours upon reasonable
written notice to the other party. Each party shall keep confidential all
information obtained pursuant to such an inspection or audit, and shall
disclose such information to third parties only upon receipt of written
authorization from the other party, except as required by law.
9. BROKER-DEALER COMPENSATION AND WHOLESALER PROMOTIONAL ALLOWANCES
a. The Company shall compensate Broker-Dealers and/or their duly licensed
insurance affiliates for sales of the Contracts by their Representatives
pursuant to Schedule 4 to this Agreement, as such Schedule may be amended
from time to time upon mutual agreement of the parties to this Agreement.
As of the effective date of this Agreement, Schedule 4 governs only
compensation and Promotional Allowances related to sales of Xxxxxx Gateway
Elite and Custom annuity Contracts. When additional Contracts are developed
and offered for sale, Schedule 4 will be appropriately amended to reflect
the compensation and Promotional Allowances payable as a result of sales of
such additional Contracts. Such compensation shall be based on Purchase
Payments received and accepted by the Company for all Contracts issued on
applications obtained by the Broker-Dealers or any of their respective
Representatives. The Company will pay compensation due Broker-Dealers
and/or their insurance affiliates in accordance with the procedures set
forth in Schedule 4. The compensation provided for in this Section 9 shall
be payable to the Broker-Dealer and/or its duly licensed insurance affiliate
in accordance with the sales agreement between the Underwriter and the
Broker-Dealer for so long as the Contracts are outstanding, regardless of
whether this Agreement is still in effect. In addition to the compensation
payable to the Broker-Dealers and their insurance affiliates, the Company
shall pay the Wholesaler a Promotional Allowance as a reimbursement for its
expenses incurred relating to its wholesaling activities contemplated by
this Agreement. Promotional Allowances shall be payable to the Wholesaler
in such amount and in accordance with the procedures as set forth in
Schedule 4, as such Schedule may be amended from time to time upon mutual
agreement of
25
the parties to this Agreement. Promotional Allowances shall be
payable to the Wholesaler for so long as the Contracts are outstanding,
regardless of whether this Agreement and the Participation Agreement are
still in effect. Nothing herein or in any sales agreement shall be
construed to create any obligation on the part of the Wholesaler to
compensate any Broker-Dealer for sales of the Contracts.
If either State by insurance rule, regulation or statute, prohibits payment
of Promotional Allowances to the Wholesaler, the Wholesaler shall designate
in writing a business entity or natural person, including Wholesaler Agency
Affiliates, meeting the requirements of such State to receive any amounts
that may otherwise be payable to the Wholesaler hereunder. The Wholesaler
may change such designation from time to time upon written notice to the
Company. Any payments made by the Company to any person or entity so
designated by the Wholesaler shall discharge the Company's liability to the
Wholesaler hereunder.
If a purchaser rescinds a Contract or exercises a right to surrender a
contract for return of all Purchase Payments, the Wholesaler will pay to
the Company on demand the amount of any Promotional Allowances it
received on the Purchase Payments returned. Promotional Allowance
chargebacks will be calculated by the Company on the same basis, as
described in Schedule 4 hereto, as was utilized in calculating the
Contract Promotional Allowances received.
b. INDEBTEDNESS. Nothing in this Agreement shall be construed as giving
the Wholesaler the right to incur any indebtedness on behalf of the Company.
c. APPOINTMENT FEES. The Company will pay the initial and renewal fees for
agent appointments by the Company of duly licensed Wholesaler Agency
Affiliates and Broker-Dealers and their respective Associated Persons;
provided, however, (a) that if total Aggregate Annual Sales of the
Contracts, as described in Section 21.a., do not exceed $60 million during
any calendar year beginning after December 31, 1997, the Wholesaler will
reimburse the Company for the total amount of initial or renewal fees paid
by the Company during such calendar year(s), and (b) that the Company
reserves the right to refuse to pay renewal fees for
26
Representatives not meeting such minimal sales as may be agreed upon from
time to time. For purposes of (b) above, the minimal sales target for
Representatives shall be $25,000 per calendar year, unless the parties
hereto mutually agree on a different sales target for a calendar year.
Notwithstanding Clause (a) above, in calculating the amount of agent fee
reimbursements, if an agent solicited products of the Company in addition to
the Contracts described in this Agreement, the reimbursement otherwise
required under Clause (a) will be pro-rated, as described below:
The otherwise reimbursable amount shall be multiplied by a
fraction, the numerator of which is the number of Xxxxxx products
covered by this Agreement on the date of determination (two as of
the effective date of this Agreement) and the denominator of
which is the aggregate number of products of the Company and its
insurance affiliates being solicited by the agent on the date of
determination.
d. REPORTING. The Wholesaler shall be responsible for all tax reporting
information, if any, that the Wholesaler is required to provide under
applicable tax law to its Associated Persons with respect to the Contracts.
Nothing contained in this Agreement or any sales agreement with a Broker-
Dealer is to be construed to require the Wholesaler to provide any tax
reporting information directly or indirectly to any Broker-Dealer or its
Representatives.
e. SURVIVAL. Except for Section 9.c.(a), this Section 9 shall remain
operative and in full force and effect regardless of the termination of this
Agreement, and shall survive any such termination.
10. INVESTIGATION AND PROCEEDINGS
a. The Company, the Underwriter and the Wholesaler will cooperate fully in
any securities, insurance, governmental or regulatory investigation or
proceeding or judicial proceeding arising out of or in connection
27
with the offering, sale or distribution of the Contracts for which the
Wholesaler acts as wholesaler pursuant to this Agreement. Without
limiting the foregoing, the Company, the Underwriter and the Wholesaler
agree to notify one another promptly of any customer complaint or notice
of any governmental, judicial or regulatory investigation or proceeding
described in this Section 10.
b. In the case of a substantive customer complaint, the Company, the
Underwriter, the Wholesaler and the Wholesaler Agency Affiliates will
cooperate in investigating such complaint and any response by the Company or
Underwriter, as one party, or the Wholesaler or Wholesaler Agency
Affiliates, as another party, to such complaint will be sent to the other
party for approval not less than five business days prior to its being sent
to the customer or to any governmental or regulatory agency, except that if
a more prompt response is required, the proposed response shall be
communicated by telephone, telegraph or facsimile. Neither such party will
release any such response without the other party's prior written approval,
unless otherwise required by applicable law. Failure of any party to object
to a proposed response within four business days shall be deemed to
constitute approval of a proposed response by the non-objecting party.
11. INDEMNIFICATION
a. The Company and the Underwriter, jointly and severally, shall indemnify
and hold harmless the Wholesaler and the Wholesaler Agency Affiliates and
each person who controls or is associated with the Wholesaler or the
Wholesaler Agency Affiliates within the meaning of such terms under the
federal securities laws, and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities, joint
or several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any
action, suit or proceeding or any claim asserted), to which the Wholesaler,
the Wholesaler Agency Affiliates and/or such person may become subject,
under any statute or regulation, at common law or otherwise, insofar as such
losses, claims, damages or liabilities:
28
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Registration
Statement, Prospectus, blue sky application or other document executed
by the Company specifically for the purpose of qualifying any or all of
the Contracts for sale under the securities laws of either State,
promotional, sales or advertising material for the Contracts prepared by
the Company, or the Contracts themselves (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
untrue statement or omission or such alleged untrue statement or alleged
omission was made in reliance upon and in conformity with information
furnished in writing to the Company or the Underwriter by the Wholesaler
specifically for use in the preparation of any such Registration
Statement, Prospectus or blue-sky application or other document,
material or Contract (or any such amendment or supplement thereto); or
(ii) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact contained in any Fund Registration
Statement, Fund Prospectus, blue sky application or other document
executed by the Fund specifically for the purpose of qualifying any or
all of the shares of the Fund for sale under the securities laws of
either State, or in any promotional, sales or advertising material or
written information relating to the shares of the Fund authorized by the
Fund (or any amendment or supplement to any of the foregoing), or arise
out of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
in which they were made, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with information furnished in writing to the Wholesaler or the Fund by
the Company specifically for use in the preparation of any such Fund
Registration Statement, Fund Prospectus, blue-sky application or other
document (or any such amendment or supplement thereto); or
29
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement or omission or alleged omission of a material fact by
or on behalf of the Company or the Underwriter (other than statements or
representations contained in the Fund Registration Statement, Fund
Prospectus or promotional, sales or advertising material of the Fund
that were not supplied by the Company, the Underwriter or persons under
their control) or wrongful conduct of the Company or the Underwriter or
persons under their control with respect to the sale or distribution of
the Contracts; or
(iv) result because of the terms of any Contract or because of any
material breach by the Company or the Underwriter of any terms of this
Agreement or of any Contract or that proximately result from any
activities of the Company's or Underwriter's officers, directors,
employees or agents or their failure to take action in connection with
the sale of a Contract, to the extent of the Company's or the
Underwriter's obligations under this Agreement or otherwise, or the
processing or administration of the Contracts.
This indemnification obligation will be in addition to any liability
that the Company or Underwriter may otherwise have; provided, however,
that no person shall be entitled to indemnification pursuant to this
Section 11.a. if such loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or reckless disregard
of duty by the person seeking indemnification.
b. The Wholesaler shall indemnify and hold harmless the Company and the
Underwriter and each person who controls or is associated with the Company
or the Underwriter within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the
foregoing, against any and all losses, claims, damages or liabilities, joint
or several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any
action, suit or proceeding or any claim asserted), to which the Company, the
Underwriter and/or any such person may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities arise out of or are based upon:
30
(i) any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or blue-sky
application or other document executed by the Company specifically for
the purpose of qualifying any or all of the Contracts for sale under the
securities laws of either State (or any amendment or supplement to the
foregoing), or omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, in light of the circumstances in
which they were made, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity
with information furnished in writing to the Company or the Underwriter
by the Wholesaler specifically for use in the preparation of any such
Registration Statement, Prospectus, such blue-sky application or other
document (or any such amendment or supplement thereto), the parties
hereby confirming that the only such information is the information
which appears in the Prospectus under the sub-caption "Xxxxxx Investors
Fund" and in the Statement of Additional Information filed with the
Prospectus under the caption "Performance Information;" or
(ii) any use of promotional, sales or advertising material for the
Contracts not approved in writing by the Company or any verbal or
written misrepresentations or any unlawful sales practices concerning
the Contracts by the Wholesaler or the Wholesaler Agency Affiliates
under federal securities laws or NASD regulations (but not including
State insurance laws, compliance with which is a responsibility of the
Company or the Underwriter under this Agreement or otherwise); or
(iii) claims by agents, representatives or employees of the Wholesaler
for compensation or other remuneration of any type other than claims by
any Broker-Dealer relating to compensation described or referred to in
Schedule 4 hereto; or
(iv) any material breach by the Wholesaler or the Wholesaler Agency
Affiliates of any provision of this Agreement.
31
This indemnification obligation will be in addition to any liability
that the Wholesaler may otherwise have; provided, however, that no
person shall be entitled to indemnification pursuant to this Section
11.b. if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty
by the person seeking indemnification.
c. If the indemnification provided for in this Section is unavailable to an
indemnified party under paragraphs (a) or (b) hereof in respect to any
losses, claims, damages or liabilities referred to therein, then each
applicable indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of the Company
and the Underwriter, on the one hand, and the Wholesaler, on the other, as
well as any other relevant equitable considerations. The relative fault of
the Company and the Underwriter, on the one hand, and the Wholesaler, on the
other, with respect to untrue or alleged untrue statements of material fact
or omissions or alleged omissions of material facts shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or by the Underwriter, on the
one hand, and by the Wholesaler, on the other, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The amount paid or payable by a party
as a result of the losses, claims, damages and liabilities referred to above
shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any
action or claim.
The Company, the Underwriter and the Wholesaler agree that it would not be
just and equitable if contribution pursuant to this Section were determined
by pro rata allocation or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph.
32
If the Company and the Underwriter, as one party, and the Wholesaler, as the
other party, cannot agree on the appropriate amount of any contribution
payable pursuant to this Section, the matter shall be settled by arbitration
pursuant to Section 16 hereof. The costs of any such arbitration shall be
divided equally between the Company and the Underwriter, as one party, and
the Wholesaler, as the other party.
d. After receipt by a party entitled to indemnification ("indemnified
party") under this Section 11 of notice of the commencement of any action,
if a claim in respect thereof is to be made by the indemnified party against
any person obligated to provide indemnification under this Section 11
("indemnifying party"), such indemnified party will notify the indemnifying
party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party
will not relieve it from any liability under this Section 11, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged as a result of the
failure to give such notice. The indemnifying party, upon the request of
the indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees
and disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but if settled with such
consent or if there be a final judgment for the plaintiff, the indemnified
party shall indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment.
33
e. The indemnification provisions contained in this Section 11 shall remain
operative in full force and effect, regardless of (i) any investigation made
by or on behalf of the Company or by or on behalf of any controlling person
thereof, (ii) delivery of any Contracts and Purchase Payments therefor, or
(iii) any termination of this Agreement. A successor by law of the
Wholesaler or the Company, as the case may be, shall be entitled to the
benefits of the indemnification provisions contained in this Section 11.
12. TERMINATION
a. This Agreement may be terminated at the option of any party upon twelve
months advance written notice to the other parties, such termination to be
effective no earlier than six years following the date on which the first
Contract is issued to the public. Notwithstanding the foregoing, this
Agreement shall terminate automatically on the termination date of the
Participation Agreement among the Fund, Zurich Xxxxxx Investments Inc., KDI
and the Company entered into contemporaneously herewith.
b. This Agreement may not be assigned without the express written consent
of the other parties hereto. This Agreement may be terminated at the option
of the Company and the Underwriter, as one party, or the Wholesaler and the
Wholesaler Agency Affiliates, as one party, upon the other party's material
breach of any provision of this Agreement, if any such breach is not cured
within ninety days after notice thereof to the breaching party and all other
parties.
c. Upon termination of this Agreement all authorizations, rights and
obligations shall cease except: (i) the obligation to continue to pay
compensation to Broker-Dealers and compensation and Promotional Allowances
to the Wholesaler, as set forth in Section 9.a. and Schedule 4; (ii) the
provisions contained in Sections 7, 9 and 11 of this Agreement; and (iii)
the indemnification provisions set forth in Section 11 of this Agreement, or
as otherwise specifically noted in this Agreement.
34
13. RIGHTS, REMEDIES, ETC. ARE CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties to this Agreement are
entitled to under state and federal laws. Failure of the Wholesaler or
the Wholesaler Agency Affiliates, as one party, or the Company or the
Underwriter, as another party, to insist upon strict compliance by the
other party with any of the conditions of this Agreement shall not be
construed as a waiver of any of the conditions, but the same shall remain
in full force and effect. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a
continuing waiver.
14. NOTICES
All notices hereunder are to be made in writing and shall be given:
if to the Company to:
Xxxx X. Xxxxx, Assistant Vice President
First Allmerica Financial Life Insurance Company
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
if to the Underwriter to:
Xxxxxxx Xxxxxx, President
Allmerica Investments, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
35
if to the Wholesaler or Wholesaler Agency Affiliates, to any such party at:
[Name of Party]
000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: President
or such other address as such party may hereafter specify in writing.
Each such notice to a party shall be either hand delivered or
transmitted by registered or certified United States mail with return
receipt requested, and shall be effective upon delivery.
15. INTERPRETATION, JURISDICTION, ETC.
This Agreement constitutes the whole agreement between the parties to this
Agreement relating to the wholesaling activities contemplated in this
Agreement, and supersedes all prior oral or written negotiations between the
parties to this Agreement with respect to the subject matter of this
Agreement. The parties acknowledge that the Company, the Wholesaler and the
Fund have entered into the Participation Agreement in contemplation of
entering into this Agreement. This Agreement shall be construed and the
provisions of this Agreement interpreted under and in accordance with the
internal laws of the Commonwealth of Massachusetts without giving effect to
principles of conflict of laws.
16. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement, or
the breach of this Agreement, shall be settled by arbitration in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may
be entered in any court having jurisdiction thereof.
36
17. HEADINGS
The headings in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions of this
Agreement or otherwise affect their construction or effect.
18. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
taken together shall constitute one and the same instrument.
19. SEVERABILITY
This is a severable agreement and in the event that any part or parts of
this Agreement shall be held to be unenforceable to its or their full
extent, then it is the intention of the parties to this Agreement that such
part or parts shall be enforced to the extent permitted under the law, and,
in any event, that all other parts of this Agreement shall remain valid and
duly enforceable as if the unenforceable part or parts had never been a part
of this Agreement.
20. REGULATION
This Agreement shall be subject to the provisions of the 1933 Act, 1934
Act and 1940 Act and the Regulations and the rules and regulations of the
NASD, from time to time in effect, including such exemptions from the
1940 Act as the SEC may grant, and the terms of this Agreement shall be
interpreted and construed in accordance therewith.
37
21. MISCELLANEOUS
a. For the purposes of Section 9.c.(a), "Aggregate Annual Sales" shall
refer to the total annual sales of the Contracts pursuant both to this
Agreement and to the Wholesaling Agreement with Allmerica Financial Life
Insurance and Annuity Company ("AFLIAC") and "total amount of initial or
renewal fees" shall refer to the aggregate amount of such fees incurred by
the Company and AFLIAC.
b. The Company and the Underwriter acknowledge that the names "Gateway
Elite," "Gateway Custom," "Xxxxxx Gateway Elite" and "Xxxxxx Gateway
Custom," and any and all variations thereof, are the exclusive property
of the Wholesaler and their respective affiliates, and that any use of
any such names or any variation thereof during or after the term of this
Agreement are and will be subject to the express prior written consent of
KDI and/or ZKIA thereto. Notwithstanding the foregoing, KD and ZKIA
hereby specifically permit the Company to use the above names as the
Company deems necessary or appropriate in its administration of the
Contracts subject to this Agreement. The Company and the Wholesaler
agree that in the event of any breach of this Section 21.b, as a remedy
therefor and in addition to all other remedies, the Wholesaler shall be
entitled to specific performance and injunctive or other equitable relief
without proof of actual damages, and that the Company and the Underwriter
will not oppose or impede the granting of such relief.
38
IN WITNESS WHEREOF, each party hereto represents that the officer signing this
Agreement on the party's behalf is duly authorized to execute this Agreement;
and each party has caused this Agreement to be duly executed by such authorized
officer on the date specified below.
FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
Date: 11/6/96 By: /s/ Xxxxxxx X. Xxxxxx
------- ------------------------------
Name: Xxxxxxx X. Xxxxxx
-------------------------------
Title: Vice President
-------------------------------
ALLMERICA INVESTMENTS, INC.
Date: 11/6/96 By: /s/ Xxxxxxx X. Xxxxxx
------- -------------------------------
Name: Xxxxxxx X. Xxxxxx
-------------------------------
Title: Director
-------------------------------
XXXXXX DISTRIBUTORS, INC.
(on its own behalf and on behalf of
the Wholesaler Agency Affiliates)
Date: 11/5/96 By: /s/ Xxxxx X. Xxxxxxxxxx
------- -------------------------------
Name: Xxxxx X. Xxxxxxxxxx
-------------------------------
Title: President
-------------------------------
ZKI AGENCY, INC.
Date: 11/5/96 By: /s/ Xxxxx X. Xxxxxxxxxx
------- -------------------------------
Name: Xxxxx X. Xxxxxxxxxx
-------------------------------
Title: President
-------------------------------
39
SCHEDULE 1
Wholesaler Agency Affiliates
Effective _____________, 1996
Name of State(s) In
Wholesaler Agency Affiliate Which Licensed
None
Schedule 2
Separate Accounts
Available under the Contracts
Effective ___________, 1996
Separate Account Subaccounts are
invested in the following Xxxxxx
Name of Separate Account Investors Fund Portfolios
------------------------ ---------------------------------
Separate Accounts KG (Xxxxxx XX
Gateway Elite) and KGC (Xxxxxx Gov Sec
Gateway Custom) of First Allmerica Inv Grade
Financial Life Insurance High Yield
Company Horizon 5
Horizon 10+
Horizon 20+
Total Return
Growth
Value
Value and Growth
Small Cap Value
Small Cap Growth
International
SCHEDULE 3
Contracts Subject to Wholesaling Agreement
Effective _____________, 1996
SEC
Marketing Policy Registration
Name Form No. No.
------------- -------------- ---------------
Xxxxxx Gateway Elite A3025-96 333-10285
Xxxxxx Gateway Custom A3026-96 333-10395
SCHEDULE 4
Broker-Dealer Compensation and
Wholesaler Promotional Allowance Schedule
The Broker-Dealer Compensation payable by the Company with respect to the sale
and distribution of the Contracts, based on initial and subsequent Purchase
Payments received and accepted by the Company, shall be computed under one of
the options shown below:
For non-401(k) contracts:
Option A: 6.00% and no trail
For 401(k) contracts:
Option A: 5% and no trail
These amounts shall be payable to Broker-Dealers as sales commissions. Such
amounts will be paid according to the then current practice of the Company, but
no less frequently than twice each calendar month. Alternative sales
commission options involving a combination of both up-front amounts and asset
based trails may be made available by mutual agreement, if permissible under
applicable State laws and regulations.
Promotional Allowances shall be payable to the Wholesaler as reimbursement for
its expenses incurred with respect to the distribution of the Contracts
("Support Services"); provided, however, that the Company shall pay such amounts
from Promotional Allowances to Broker-Dealers who provide Support Services, as
the Wholesaler may from time to time direct.
Promotional Allowances shall be determined as follows:
- .15% on an annual basis of the average daily assets in the Elite
separate accounts (excluding the GPA accounts); plus
- .15% on an annual basis of the average monthly account balance in the
GPA and fixed accounts for both the Elite and Custom Contracts; plus
- .25% of initial and subsequent Purchase Payments received and accepted
by the Company on any Contract for which commission Option B was
chosen; plus
- 1.00% of initial and subsequent Purchase Payments received and
accepted by the Company for 401(k) Contracts.
Promotional allowances will be reduced by the following amounts:
- .50% of initial and subsequent Purchase Payments for Contracts issued
in a State which levies an up-front premium tax; plus
- $35 each contract anniversary and on surrender for Contracts issued to
fund 401(k) plans with Contract values of $50,000 or less.
The net Promotional Allowance will be paid to the Wholesaler according to the
then current practice of the Company, but no less frequently than monthly.
