ALLMERICA DRAFT
DECEMBER 15, 1999
SELLING GROUP AGREEMENT
THIS AGREEMENT ("Agreement") is made as of ___________, 2000 by and between
First Union Securities Inc., a Delaware corporation ("FUS"), and the undersigned
broker-dealer ("Broker-Dealer").
RECITALS:
A. FUS, pursuant to the provisions of a distribution agreement (the
"Distribution Agreement") between FUS and [Allmerica Financial Life Insurance
and Annuity Company - for non-New York sales and First Allmerica Financial Life
Insurance Company - for New York sales] ("Insurance Company"), acts as a
distributor of the variable annuity contracts and/or, as the case may be,
variable life insurance policies of the Insurance Company which are anticipated
to be registered under the Securities Act of 1933, as amended (the "1933 Act"),
identified on the Schedule of Products, attached hereto, and may in the future
act as distributor of other valuable annuity contracts and/or, as the case may
be, variable life insurance policies of the Insurance Company registered under
the 1933 Act which would be identified on a supplement to such Schedule of
Products (such contracts and policies are hereinafter collectively referred to
as the "Products").
B. FUS desires that the Broker-Dealer distribute the Products in those
jurisdictions in which the Broker-Dealer, FUS, the Insurance Company and the
Products are appropriately licensed, qualified or approved, as the case may be,
and the Broker-Dealer desires to sell the Products, through its agents in such
jurisdictions, on the terms and conditions set forth hereinafter.
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C. The Insurance Company, pursuant to the Distribution Agreement, has
authorized FUS to recommend broker-dealers, including the Broker-Dealer, for
appointment by the Insurance Company to engage in the distribution activities
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants hereinafter set forth, the parties agree as follows:
1. AUTHORITY TO SELL PRODUCTS.
1.1 GENERAL. FUS, subject to the terms and conditions contained
herein, hereby authorizes the Broker-Dealer, as an independent contractor, on a
non-exclusive basis, to offer and sell the Products. The Broker-Dealer hereby
agrees to use its best efforts to sell the Products.
1.2 COMPENSATION/EXPENSES. Except as otherwise provided herein,
the Broker-Dealer shall be entitled to commissions with respect to sales of the
Products made by the Broker-Dealer and its Registered Representatives, in
accordance with the Schedule of Commissions attached to this Agreement, as such
Schedule may be amended from time to time. FUS reserves the right to amend the
Schedule of Commissions at any time and from time to time. PROVIDED, HOWEVER,
that any such amendment shall apply only to Products applied for after the
effective date of each such amendment. All commissions shall be payable by FUS.
As a result, the Broker-Dealer understands and agrees that the Insurance Company
shall not be responsible for payment of any compensation due and payable to the
Broker-Dealer hereunder, and that FUS is solely responsible for the payment of
all such compensation. The Broker-Dealer shall be responsible for the payment
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of all expenses incurred by the Broker-Dealer in connection with this Agreement
and the performance of its obligations, and the exercise of its rights
hereunder.
2. REPRESENTATIONS AND WARRANTIES.
The Broker-Dealer represents and warrants to, and covenants with, FUS that:
(a) the Broker-Dealer (i) is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD"), (ii) is duly
registered as a broker-dealer with the Securities and Exchange Commission
("SEC") under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
and registered in each state or other jurisdiction in which the Broker-Dealer is
required to be registered in order to sell the Products, (iii) is licensed and
appointed to sell the Products under the insurance laws of each state or other
jurisdiction in which the Broker-Dealer is required to be licensed and appointed
in order to sell the Products, and (iv) otherwise maintains in effect all
governmental and other registrations, licenses and permits necessary for it to
carry out its obligations, and the transactions contemplated hereunder (the
"Required Registrations");
(b) the Broker-Dealer is in compliance, in all material respects,
with all applicable federal and state securities laws and regulations, the
requirements of the NASD and any applicable securities exchanges of which it is
a member and all codes of conduct and codes of ethics applicable to its
activities (collectively, the "Regulations");
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(c) the Broker-Dealer is a corporation duly organized and in good
standing under the law of its jurisdiction of organization and is qualified to
do business as a corporation in those states or jurisdictions where it is, or
will be, doing business pursuant to this Agreement; and
(d) this Agreement and the transactions contemplated hereby (i)
have been duly approved by all required corporate action on the part of the
Broker-Dealer and (ii) do not conflict with any law, regulation, court order or
agreement to which the Broker-Dealer is subject or the Broker-Dealer's
properties are bound.
3. COVENANTS OF THE BROKER-DEALER.
3.1 SALE OF PRODUCTS. The Broker-Dealer agrees that (a) offers and
sales of the Products will be made only through the use of a then current
prospectus which is a part of a registration statement which is then effective
under the 1933 Act (each a "Prospectus"), (b) a Prospectus relating to the
Product in question will be delivered prior to, or concurrently with any sales
presentation or other offer of such Product, (c) no oral or written statements
will be made by or on behalf of the Broker-Dealer to a prospective purchaser of
a Product other than statements identical to, or based solely on information set
forth in the Prospectus, and (d) in connection with offers and sales of the
Products, the Broker-Dealer will at all times comply with the Regulations and
offer and sell the Products only in those jurisdictions, and in the manner in
which the Products may be lawfully sold.
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3.2 REPRESENTATIONS AND WARRANTIES TRUE, ETC. At all times during the
term hereof the representations and warranties of the Broker-Dealer contained in
Section 2, above, shall be true.
3.3 REGISTERED REPRESENTATIVES. The Broker-Dealer may recommend
persons associated with it who are duly licensed and qualified under applicable
law and regulations to act in the offer or sale of the Products (the "Registered
Representatives") for appointment as insurance agents of the Insurance Company,
PROVIDED that such person: (a) has not been subject to any civil, administrative
or criminal actions or sanctions by, or entered into any settlement agreements
with, any governmental or quasi-governmental regulatory authority or self
regulatory organization, (b) has not been precluded or restricted for any period
of time by any entity from selling any securities, insurance products or other
products of such entity, (c) otherwise is qualified to offer and sell the
Products, (d) agrees in writing (i) to comply with all of the obligations of the
Broker-Dealer and the Registered Representatives hereunder, (ii) not to make any
recommendation to an applicant or prospective purchaser to purchase a Product
without having reasonable grounds to believe that the purchase of the Product is
suitable for the prospective purchaser, (iii) to report promptly in writing to
the Insurance Company and FUS all customer or regulatory complaints or inquiries
with respect to such Registered Representative, whether written or oral, and to
assist the Insurance Company and FUS in resolving any complaint to the
satisfaction of all parties involved, (e) possesses all Required Registrations
and agrees to maintain in force during the term hereof all Required
Registrations, and (f) agrees that prior to soliciting Products on behalf of the
Insurance Company that he/she must be
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appointed as an insurance agent of the Insurance Company. The Broker-Dealer is
authorized, except as hereinafter specifically provided, to cause the Registered
Representatives to offer and sell the Products in the states and jurisdictions
in which the Products, the Broker-Dealer and such Registered Representatives are
registered, licensed and appointed or otherwise appropriately qualified. The
Broker-Dealer shall be solely responsible for the supervision of the Registered
Representatives and shall enforce written supervisory procedures to assure
strict compliance with NASD rules and applicable rules and regulations under the
1934 Act, and other applicable federal and state statutes and regulations. The
Broker-Dealer agrees to provide to the Registered Representatives instructions
sufficient to provide them with information needed to offer and sell the
Products in compliance with this Agreement and the Regulations. The
Broker-Dealer shall direct the sales activities of the Registered
Representatives and shall be solely responsible for the conduct of the
Registered Representatives in the offer and sale of the Products.
3.4 NO AUTHORITY TO MODIFY, ETC. The Broker-Dealer acknowledges and
agrees that neither the Broker-Dealer nor any of the Registered Representatives
shall have the authority, on behalf of FUS or the Insurance Company or
otherwise, to (a) modify any of the terms of the Products, including, but not
limited to, any forfeiture provisions thereof, or (b) extend the time of payment
of any premiums with respect to a Product. The Broker-Dealer acknowledges that
neither the Broker-Dealer nor any Registered Representative may receive any
premiums or other funds from applicants for, or purchasers of the Products
(except for the sole purpose of forwarding such funds
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to the Insurance Company). If the Broker-Dealer or a Registered Representative
inadvertently receives any funds from applicants for, or purchasers of, the
Products they shall hold such funds in a fiduciary capacity on behalf of the
Insurance Company and promptly submit them to the Insurance Company.
3.5 REJECTION OF PRODUCT APPLICATIONS, ETC. The Broker-Dealer
acknowledges and agrees that (a) the Insurance Company, in its sole discretion,
may reject any application for a Product submitted to it by the Broker-Dealer or
any of the Registered Representatives, (b) nothing herein contained shall
constitute the Broker-Dealer or any of its Registered Representatives as
employees of FUS or the Insurance Company, and (c) the Schedule of Products may
be amended by FUS at its sole discretion from time to time to add other Products
distributed by FUS pursuant to the Distribution Agreement or other distribution
agreements with the Insurance Company, or to delete Products therefrom.
3.6 ACCESS TO INFORMATION. The Broker-Dealer shall give FUS and the
Insurance Company full access upon reasonable advance notice during the
Broker-Dealer's normal business hours to all information in the possession or
control of the Broker-Dealer or any Registered Representative relating to,
arising out of or in connection with the offer and sale of Products pursuant to
this Agreement, and shall be required to provide to FUS and the Insurance
Company copies of any documents relating thereto within ten (10) days after a
written request therefor. The Broker-Dealer
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shall be entitled to reimbursement of the expenses it incurs in connection with
providing documents to FUS or the Insurance Company, as required by the
preceding sentence.
3.7 BASIS FOR RECOMMENDATIONS. The Broker-Dealer shall be solely
responsible for the approval of suitability determinations for the purchase of
any Product or the selection of any investment option thereunder, in compliance
with the Regulations and shall appropriately supervise the Registered
Representatives in determining client suitability. The Broker-Dealer, through
the Registered Representatives or otherwise, shall not make any recommendations
to a prospective purchaser to purchase a Product without having reasonable
grounds to believe that the purchase of that Product is suitable for such
prospective purchaser. Among other things, a determination of suitability shall
be based on information supplied to a Registered Representative after a
reasonable inquiry concerning the prospective purchaser's insurance and
investment objectives, financial situation and needs.
3.8 NO MISREPRESENTATIONS; DISCLOSURE. The Broker-Dealer, through the
Registered Representatives or otherwise, shall not (a) make any
misrepresentation of a material fact with respect to the Products or omit to
state a material fact necessary to make statements made with respect to a
Product in light of the circumstances in which they were made, not misleading or
(b) otherwise engage in any deceptive or misleading practice or activity in
connection with the offer and the sale of the Products. The Broker-Dealer,
through the Registered Representatives or otherwise, shall not: (a) give any
oral information or make any representations or statements in connection with
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the offer or sale of a Product that is not the same as, or based solely on the
then current version provided by FUS or the Insurance Company of the
registration statement, Prospectus or statement of additional information, as
the case may be, relating to the such Product, or (b) provide prospective
purchasers of the Products or otherwise utilize in connection with the offer of
sale of the Products any advertising materials, sales literature, signage or
other promotional material, written, electronic, graphic or audio visual
materials other than materials supplied by, or approved in writing in advance,
by FUS or the Insurance Company (the "Disclosure Material"). The Broker-Dealer
shall not modify in any way any Disclosure Material which has been approved for
use by the Broker-Dealer by FUS or the Insurance Company. The Broker-Dealer
shall immediately cease using, and shall cause the Registered Representatives to
immediately cease using, any Disclosure Material previously approved by FUS or
the Insurance Company upon receipt of an oral or written instruction to do so by
FUS or the Insurance Company. FUS agrees to follow-up in writing within three
business days any such oral instruction from FUS or the Insurance Company to
discontinue such use. The Broker-Dealer will maintain complete records
indicating the manner and extent of distribution of any such Disclosure
Material, and will make such records available to the Insurance Company, FUS,
state insurance departments, the NASD, the SEC and any other regulatory agency
which has regulatory authority over the Insurance Company or FUS.
3.9 EXCHANGE OF PRODUCTS. The Broker-Dealer or the Registered
Representatives may solicit exchanges of contracts issued by insurance carriers
other than the Insurance Company
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or any of its affiliates for Products only when the Broker-Dealer can
demonstrate that the exchange would be beneficial to the prospective purchaser
or class of purchasers, as the case may be, and provided that the exchange offer
is approved in advance by an NASD-licensed principal of the Broker-Dealer. The
Broker-Dealer shall maintain records of the basis for any determination that an
exchange would be beneficial to a prospective purchaser, including the name of
such principal approving the exchange offer. Without the express written
permission of the Insurance Company, neither the Broker-Dealer nor the
Registered Representatives may solicit exchanges of contracts issued by the
Insurance Company or any of its affiliates for Products.
3.10 COMPLAINTS AND INVESTIGATION. The Broker-Dealer shall report
in writing within three (3) business days after the occurrence thereof to the
Insurance Company and FUS all customer complaints or inquiries relating to the
offer, sale or ownership of the Products or made by or on behalf of any
prospective purchaser or owner of a Product, whether written or oral, and shall
assist the Insurance Company and FUS in resolving those complaints to the
satisfaction of such prospective purchaser, owner, FUS and the Insurance
Company. The Broker-Dealer shall cooperate fully with FUS and the Insurance
Company in connection with any governmental or other investigation or proceeding
relating to any complaint related to the Products by any prospective purchaser
or owner of the Products.
3.11 NOTICE OF CLAIMS. If any action or proceeding shall be
brought against the Broker-Dealer or any of its Registered Representatives or
affiliates relating to the Products, the
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Broker-Dealer shall give written notice to FUS and the Insurance Company within
(3) business days after it receives notice of any such action or proceeding.
3.12 FIDELITY BOND. The Broker-Dealer represents and warrants
that all directors, officers and employees of the Broker-Dealer (including the
Registered Representative) who have access to funds of the Insurance Company
are, and will continue to be, covered by a blanket fidelity bond including
coverage for larceny, embezzlement and other defalcation, issued by a reputable
bonding company acceptable to the Insurance Company in an amount at least
equivalent to the minimal coverage required under the NASD Rules of Fair
Practice, and endorsed to extend coverage to variable life insurance and
variable annuity transactions. The Broker-Dealer acknowledges that the Insurance
Company may require evidence that such coverage is in force and the
Broker-Dealer shall promptly give notice to the Insurance Company of any notice
of cancellation or change of coverage. The Broker-Dealer hereby assigns any
proceeds received from the fidelity bond company to the Insurance Company to the
extent of the Insurance Company's loss due to activities covered by such bond.
If the payment to the Insurance Company under the fidelity bond is insufficient
to cover the Insurance Company's loss, the Broker-Dealer will promptly pay the
Insurance Company an amount equal to the balance of such loss on demand. The
Broker-Dealer indemnifies and holds harmless the Insurance Company from any
deficiency and from the cost of collection thereof. The Broker-Dealer agrees to
maintain the fidelity bond coverage described in this Section 3.12 at all times
while the Agreement remains in force.
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4. REPRESENTATIONS AND WARRANTIES OF FUS.
(a) FUS is (i) a member in good standing of the NASD, (ii) duly
registered as a broker-dealer with the SEC under the 1934 Act, and registered in
each state or other jurisdiction in which FUS is required to be registered in
order to sell the Products and otherwise maintains in effect all Required
Registrations;
(b) FUS conducts its operations is in compliance, in all material
respects, with all applicable federal and state securities laws and regulations,
with all applicable state insurance laws, and the requirements of the NASD and
any applicable securities exchanges of which it is a member;
(c) FUS is a corporation duly organized and in good standing
under the law of its jurisdiction of organization and is qualified to do
business as a corporation in those states or jurisdictions where it is, or will
be, doing business pursuant to this Agreement; and
(d) this Agreement and the transactions contemplated hereby (i)
have been duly approved by all required corporate action on the part of FUS and
(ii) do not conflict with any law, regulation, court order or agreement to which
FUS is subject or FUS's properties are bound.
5. COVENANTS OF FUS. FUS covenants with the Broker-Dealer that:
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5.1 PRODUCTS. The Products, when they are made available to the
Broker-Dealer for offer and sale, will be duly registered under applicable
federal and state securities laws.
5.2 INSURANCE COMPLIANCE. The Products, when they are made available
to the Broker-Dealer for offer and sale, will be in compliance with applicable
state insurance laws.
5.3 DISCLOSURE. With respect to the Product it purports to describe,
each Prospectus, provided to the Broker-Dealer by FUS or the Insurance Company:
(a) will be true, accurate and complete in all material respects;
(b) will not contain any false or misleading statements of
material fact or omit any material fact necessary to make statements contained
therein not misleading in light of the circumstances under which they are made;
and
(c) will fully and adequately disclose all material terms,
conditions, limitations and restrictions with respect to the Products.
5.4 REPRESENTATIONS AND WARRANTIES TRUE, ETC. At all times during the
term hereof, the representations and warranties of FUS contained in Section 4,
above, shall be true.
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5.5 DOCUMENTS. FUS shall provide the Broker-Dealer with quantities of
Prospectuses reasonably sufficient for the Broker-Dealer to effectively market
the Products.
6. TERM AND TERMINATION OF AGREEMENT
6.1 TERM. Unless sooner terminated pursuant to this Section 6, this
Agreement shall terminate on the earlier to occur of the date of termination of
the Distribution Agreement and the __________ anniversary of the date hereof.
6.2 TERMINATION. This Agreement shall be subject to termination at any
time by the Broker-Dealer or by FUS, with or without cause, upon the giving of
at least thirty (30) days' written notice to such effect to the other party.
6.3 EFFECT OF TERMINATION.
(a) In the event this Agreement is terminated, (i) the
Broker-Dealer and the Registered Representatives shall immediately cease to have
the right to offer or sell any of the Products; (ii) the Broker-Dealer shall
return forthwith, upon the request of FUS or the Insurance Company, all written
materials related to the Products delivered to the Broker-Dealer or the
Registered Representatives by or on behalf of FUS or the Insurance Company on or
before the date of such termination; (ii) all compensation required to be paid
to Broker-Dealer shall be paid in accordance with the Schedule of Commissions
attached hereto; (iii) all amounts due from the Broker-Dealer to FUS shall be
immediately due and payable to FUS, notwithstanding any other terms of such
payments that may have been in effect during the term of this Agreement; and
(iv) the
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Broker-Dealer shall carry out all residual obligations, if any, which arose
while this Agreement was in effect.
(b) In the event that this Agreement is terminated by FUS after a
breach by the Broker-Dealer of any of its representations and warranties or
covenants hereunder, then FUS may offset against any amounts owed to the
Broker-Dealer hereunder an amount equal to (i) the damages, losses and expenses
(including reasonable attorneys' fees) incurred by FUS as a result of such
breach and (ii) any amount that may be owed by the Broker-Dealer to FUS under
Section 9, below.
7. CONFIDENTIALITY
7.1 GENERALLY. Each party will hold the other party's Confidential
Information (as defined below) in confidence and will safeguard such
Confidential Information as provided herein. The party receiving Confidential
Information (a "Recipient") will not, directly or indirectly, report, publish,
distribute, disclose, or otherwise disseminate the Confidential Information, or
any portion thereof, to any individual or entity for any purpose, except as
necessary to perform such Party's duties hereunder, or as expressly authorized
in writing by the party providing the Confidential Information (the "Provider").
Disclosure of Confidential Information internally by the recipient thereof will
be limited to those of its officers, directors, employees and agents who are
required to have access to the Confidential Information to enable the party to
perform its duties hereunder. In order to safeguard Confidential Information,
the Recipient shall (a) inform each party
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to whom it discloses Confidential Information of the confidential nature thereof
and of the requirements of this Agreement, (b) direct such recipients to comply
with the terms of this Agreement, and (c) exercise any other precautions
reasonably necessary to prevent any improper disclosure of such Confidential
Information.
7.2 DEFINITION. For purposes of the Agreement, "Confidential
Information" shall mean information: (a) regarding the Provider's or any
affiliate of the Provider's financial condition, information systems, business
operations, plans and strategies, products or services, customers or prospective
customers, and marketing and distribution plans, methods and techniques; (b)
that is marked confidential, "proprietary" or in like words, or that is
indicated in writing as being confidential prior to or promptly after disclosure
to the Recipient; and (c) any and all research and designs, ideas, concepts, and
technology embodied in the items described in clauses 7.2(a) or (b). Information
shall not be deemed to be Confidential Information hereunder if that information
(a) is or becomes generally available to the public other than as a result of
disclosure by the Recipient; (b) was available to, or already known by the
Recipient on a non-confidential basis prior to its receipt from the Provider;
(c) is developed by the Recipient independently of any information or data
acquired from the Provider; or (d) is disclosed pursuant to a court order or the
requirement of any federal or state regulatory, judicial, or government
authority.
7.3 REMEDIES. Each party acknowledges and agrees that monetary damages
would not be a sufficient or adequate remedy for a breach or anticipated breach
of this Section 7 and
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that, in addition to any other legal or equitable remedies which may be
available, each party shall be entitled to specific performance and injunctive
relief, without the posting of a bond, for any breach or anticipated breach of
this Section.
7.4 SURVIVAL. The provisions of this Section 7 shall survive the
expiration or other termination of this Agreement.
8. MODIFICATION OF AGREEMENT
This Agreement may not be modified in any way unless by written agreement
signed by both of the parties, except for any amendment of the Schedule of
Products pursuant to the terms of Section 3.5 hereof or of the Schedule of
Commissions pursuant to the terms of Section 1.2 hereof, which Schedules shall
be deemed to be modified upon the giving by FUS to the Broker-Dealer of revised
versions thereof.
9. INDEMNIFICATION
9.1 GENERAL. The Broker-Dealer will indemnify FUS, each affiliate of
FUS (as defined in Rule 405 under the 1933 Act), the Insurance Company, each
affiliate of the Insurance Company (as defined in Rule 405 under the 1933 Act),
and each of their shareholders, officers, directors, employees, agents and
attorneys (each an "Indemnified Party") against, and hold each Indemnified Party
harmless from and in respect of, all losses, damages, costs, (expenses including
reasonable attorneys' fees) judgments, fines, penalties, settlements resulting
from claims, demands, actions, cases, proceedings, suits or investigations
conducted by, or pending before any
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governmental agency or authority or any arbitration proceeding based on, arising
from, related to or otherwise attributable to (a) any breach of the
representations and warranties of the Broker-Dealer set forth in this Agreement
or (b) any nonfulfillment of any covenant or agreement on the part of the
Broker-Dealer under this Agreement.
9.2 CONDITIONS OF INDEMNIFICATION.
(a) All claims for indemnification under this Agreement shall be
asserted and resolved as provided in this Section 9.2. An Indemnified Party
claiming indemnification under this Agreement shall promptly (i) notify the
Broker-Dealer (in this Section 9, the "INDEMNIFYING PARTY") of any third-party
claim or claims asserted against the Indemnified Party (a "THIRD PARTY CLAIM")
that could give rise to a right of indemnification under this Agreement and (ii)
transmit to the Indemnifying Party a written notice ("Claim Notice") describing
in reasonable detail the nature of the Third Party Claim, a copy of all papers
served with respect to that claim (if any), and the basis for the Indemnified
Party's request for indemnification under this Agreement. The failure to
promptly deliver a Claim Notice shall not relieve the Indemnifying Party of its
obligations to the Indemnified Party with respect to the related Third Party
Claim, except to the extent that the resulting delay is materially prejudicial
to the defense of that claim. Within fifteen (15) days after receipt of any
Claim Notice (the "Election Period"), the
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Indemnifying Party shall notify the Indemnified Party (i) whether the
Indemnifying Party disputes its potential liability to the Indemnified Party
under this Section 9 with respect to that Third Party Claim and (ii) if the
Indemnifying Party does not dispute its potential liability to the
Indemnified Party with respect to that Third Party Claim, whether the
Indemnifying Party desires, at the sole cost and expense of the Indemnifying
Party, to defend the Indemnified Party against that Third Party Claim.
(b) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party to a final conclusion or settled at the discretion of the
Indemnifying Party in accordance with this Section 9, and the Indemnified Party
will furnish the Indemnifying Party with all information in its possession with
respect to that Third Party Claim and otherwise cooperate with the Indemnifying
Party in the defense of that Third Party Claim; PROVIDED, HOWEVER, that the
Indemnifying Party shall not enter into any settlement with respect to any Third
Party Claim that purports to limit the activities of, or otherwise restrict in
any way, any Indemnified Party or any affiliate of any Indemnified Party without
the prior consent of that Indemnified Party (which consent may be withheld in
the sole discretion of that Indemnified Party). The Indemnified Party may
participate in, but not control, any defense or settlement of any Third Party
Claim controlled by the Indemnifying Party pursuant to this Section 9 and will
bear its own costs and expenses with respect
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to that participation; PROVIDED, HOWEVER, that if the named parties to any such
action (including any impleaded parties) include both the Indemnifying Party and
the Indemnified Party, and the Indemnified Party has been advised by counsel
that there may be one or more legal defenses available to it which are different
from or additional to those available to the Indemnifying Party, then the
Indemnified Party may employ separate counsel at the expense of the Indemnifying
Party, and, on its written notification of that employment, the Indemnifying
Party shall not have the right to assume or continue the defense of such action
on behalf of the Indemnified Party.
(c) If the Indemnifying Party (i) within the Election Period (A)
disputes its potential liability to the Indemnified Party under this Section 9,
(B) elects not to defend the Indemnified Party as described, above, or (C) fails
to notify the Indemnified Party that the Indemnifying Party elects to defend the
Indemnified Party as provided above, or (ii) elects to defend the Indemnified
Party as provided, above, but fails diligently and promptly to prosecute or
settle the Third Party Claim, then the Indemnified Party shall have the right to
defend, at the sole cost and expense of the Indemnifying Party (if the
Indemnified Party is entitled to indemnification hereunder), the Third Party
Claim by all appropriate proceedings, which proceedings shall be promptly and
vigorously prosecuted by the Indemnified Party to a final conclusion or settled.
The Indemnified Party shall have full control of such defense and proceedings.
Notwithstanding the foregoing, if the Indemnifying Party has delivered a written
notice to the Indemnified Party to the effect that the Indemnifying Party
disputes its potential liability to the Indemnified Party under this
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Section 9 and if that dispute is resolved in favor of the Indemnifying Party,
the Indemnifying Party shall not be required to bear the costs and expenses of
the Indemnified Party's defense pursuant to this Section 9, or of the
Indemnifying Party's participation therein at the Indemnified Party's request,
and the Indemnified Party shall reimburse the Indemnifying Party in full for all
reasonable costs and expenses of such participation. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by the
Indemnified Party pursuant to this Section 9, and the Indemnifying Party shall
bear its own costs and expenses with respect to that participation.
(d) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall transmit to the Indemnifying Party a written
notice (the "Indemnity Notice") describing in reasonable detail the nature of
the claim, an estimate of the amount of damages attributable to that claim to
the extent feasible (which estimate shall not be conclusive of the final amount
of that claim) and the basis of the Indemnified Party's request for
indemnification under this Agreement. If the Indemnifying Party does not notify
the Indemnified Party within fifteen (15) days from its receipt of the Indemnity
Notice that the Indemnifying Party disputes the claim specified by the
Indemnified Party in the Indemnity Notice, that claim shall be deemed a
liability of the Indemnifying Party hereunder. If the Indemnifying Party has
timely disputed that claim, as provided above, that dispute shall be resolved by
proceedings in an appropriate court of competent jurisdiction if the parties do
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ALLMERICA DRAFT
DECEMBER 15, 1999
not reach a settlement of that dispute within thirty (30) days after notice of
that dispute is given (the "INDEMNITY NOTICE PERIOD").
(e) Payments of all amounts owing by an Indemnifying Party
pursuant to this Section 9 relating to a Third Party Claim shall be made within
thirty (30) days after the latest of (i) the settlement of that Third Party
Claim, (ii) the expiration of the period for appeal of a final adjudication of
that Third Party Claim and (iii) the expiration of the period for appeal of a
final adjudication of the Indemnifying Party's liability to the Indemnified
Party under this Agreement in respect of that Third Party Claim. Payments of all
amounts owing by an Indemnifying Party with respect to claims other than Third
Party Claims shall be made within thirty (30) days after the later of the
expiration of (i) the Indemnity Notice Period and (ii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's liability
to the Indemnified Party under this Agreement.
9.3 SURVIVAL. The provisions of this Section 9 shall survive the
expiration or other termination of this Agreement.
10. REMEDIES CUMULATIVE; NON-WAIVER. The rights and remedies of the parties
contained in this Agreement are cumulative and are in addition to any and all
rights and remedies at law or in equity, which the parties hereto are entitled
to under applicable law. Failure of either party to insist upon strict
compliance with any of the conditions of this Agreement shall not be construed
as a waiver of any of the conditions, but the same shall remain in full force
and effect. No waiver of any
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ALLMERICA DRAFT
DECEMBER 15, 1999
of the provisions of this Agreement shall be deemed, or shall constitute, a
waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver.
11. MITIGATION OF LOSSES. In the event of any dispute between an owner of a
Product (a "Disputing Owner") and FUS, the Insurance Company, the Broker-Dealer,
a Registered Representative or any other party with respect to such Product, FUS
shall have the right, with prior written notice and consultation with the
Broker-Dealer and the Insurance Company, to take such action as FUS may deem
necessary to promptly effect a mitigation of damages or limitation of losses,
and without waiving or electing to relinquish any rights or remedies FUS may
have against the Broker-Dealer, FUS shall have the right to settle any such
dispute without the prior consent of the Broker-Dealer and without waiving or
electing to relinquish any rights or remedies FUS may have against the
Broker-Dealer.
12. GOVERNING LAW, ETC. This Agreement shall be governed by and construed
in accordance with the laws of _______, without regard to choice of law
provisions, and the venue for all actions or proceedings brought by either party
to this Agreement arising out of or relating to this Agreement shall be in the
state or federal courts, as the case may be, located in _______ County, _______
(collectively, the "Courts"). The Broker-Dealer hereby irrevocably waives any
objection which the Broker-Dealer now or hereafter may have to the laying of
venue of any action or proceeding arising out of or relating to this Agreement
brought in any of the Courts, and any objection on the ground that any such
action or proceeding in any of the Courts has been brought in
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ALLMERICA DRAFT
DECEMBER 15, 1999
an inconvenient forum. In the event of any litigation between the parties
hereto with respect to this Agreement, the prevailing party therein shall be
entitled to receive from the other party all of such prevailing party's
expenses in connection with such litigation, including, but not limited, to
reasonable attorneys' fees.
13. NOTICES. Any notices or demands given in connection herewith shall be
in writing and deemed given when (i) personally delivered, (ii) sent by
facsimile transmission to a number provided in writing by the addressee and a
confirmation of the transmission is received by the sender or (iii) three (3)
days after being deposited for delivery with a recognized overnight courier,
such as FedEx, and addressed or sent, as the case may be, to the address or
facsimile number set forth below or to such other address or facsimile number as
such party may in writing designate:
(a) TO FUS:
Attention:
(b) TO THE BROKER-DEALER:
Attention:
14. ARBITRATION
14.1 Any disagreement, dispute, claim or controversy arising out of or
relating to this Agreement, performance hereunder or the breach hereof, or
otherwise arising between the Broker-Dealer and FUS, shall be subject to
mandatory arbitration under the auspices, rules and bylaws of the NASD, to the
full extent applicable and as may be amended from time to time.
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ALLMERICA DRAFT
DECEMBER 15, 1999
14.2 Where the NASD Code of Arbitration Procedure is not applicable,
any dispute between the Broker-Dealer and FUS arising under or relating to this
Agreement shall be settled by compulsory arbitration before one arbitrator in
accordance with the Commercial Arbitration Rules then in force of the American
Arbitration Association. The arbitration shall take place in ______________,
unless the parties agree on another location. The arbitrator shall have no
authority to issue any decision or award for punitive damages or for treble or
any other type of multiple damages, consequential damages, or any compensatory
damages based on a claim of lost profits or similar claim. Each party shall bear
its own costs and expenses incurred by it in any such arbitration, except that
the parties shall bear the expenses of the arbitrator's services equally. The
provisions of this Section shall survive the expiration or other termination of
this Agreement.
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ALLMERICA DRAFT
DECEMBER 15, 1999
15. ENTIRE AGREEMENT; CERTAIN TERMS. This Agreement, together with the
Schedules hereto, constitutes and contains the entire agreement of the parties
with respect to the matters addressed herein and supersedes any and all prior
negotiations, correspondence, understandings and agreements between the parties
respecting the subject matter hereof. No waiver of any rights under this
Agreement, nor any modification or amendment of this Agreement shall be
effective or enforceable unless in writing and signed by the party to be charged
therewith. When used in this Agreement, the terms "hereof," "herein" and
"hereunder" refer to this Agreement in its entirety, including the Schedules
attached to this Agreement, and not to any particular provisions of this
Agreement, unless otherwise indicated.
16. HEADINGS
The headings in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
17. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which together
shall be deemed an original, but both of which together shall constitute one and
the same instrument.
18. SEVERABILITY. It is the intention of the parties hereto that any
provision of this Agreement found to be invalid or unenforceable be reformed
rather than eliminated. If any of the provisions of this Agreement, or any
part thereof, is hereinafter construed to be invalid or
26
ALLMERICA DRAFT
DECEMBER 15, 1999
unenforceable, the same shall not affect the remainder of such provision or the
other provisions of this Agreement, which shall be given full effect, without
regard to the invalid portions. In the event that the courts of any one or more
jurisdictions shall hold such provisions wholly or partially unenforceable by
reason of the scope thereof or otherwise, it is the intention of the parties
hereto that such determination not bar or in any way affect the parties' rights
provided for herein in the courts of any other jurisdictions as to breaches or
threatened breaches of such provisions in such other jurisdictions, the above
provisions as they relate to each jurisdiction being, for this purpose,
severable into diverse and independent covenants.
19. ASSIGNMENT Except as specifically set forth herein, the Broker-Dealer
may not assign any of its rights or obligations hereunder without the prior
written approval of FUS.
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DECEMBER 15, 1999
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first indicated above.
FUS
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
BROKER-DEALER
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Accepted and Agreed to
[Name of Insurance Company]
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
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ALLMERICA DRAFT
DECEMBER 15, 1999
29
SCHEDULE OF PRODUCTS
to
First Union Securities
SELLING GROUP AGREEMENT
-----------------------
--------------------------------------------------------------------------------
Policy/Certificate
Product Description Form
--------------------------------------------------------------------------------
Variable Universal Life
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SCHEDULE OF COMMISSIONS
to
First Union Securities
SELLING GROUP AGREEMENT
-----------------------
I. PURPOSE
This Schedule of Commissions ("Schedule") is adopted pursuant to
Section 1.2 of the Selling Group Agreement (the "Agreement") and
governs the determination and payment by FUS of commissions
("Compensation") to the Broker-Dealer in connection with premium
payments received under the products specified herein.
II. COVERED PRODUCTS
The only products covered by this Schedule ("Covered Products") are the
following variable universal life insurance policies:
Covered Product Policy Form
VUL
-------------
III. COMPENSATION
The Compensation to the Broker-Dealer under this Selling Group
Agreement shall be as outlined below:
VARIABLE UNIVERSAL LIFE
Target Premium %
Year 1:
Up to Target Premium 6.0% (maximum payout)
Excess Premium 6.0%
Years 2-4:
Up to Target Premium 6.0%
Excess Premium 6.0%
Years 5-10:
Up to Target Premium 3.0%
Excess Premium 3.0%
Years 11+: 1.50%
The foregoing amounts shall be payable by FUS within five (5) business
days after FUS receives such amounts from the Insurance Company.
IV. CHARGEBACK OF COMPENSATION
A. The termination of a Covered Product (1) within twelve (12) months
of its date of issue will result in a charge-back of one hundred
percent (100%) of the Compensation paid to the Broker-Dealer
respecting the sale of the Covered Product if the Covered Product
terminates for reasons other than death; (2) seventy-five percent
(75%) of the compensation paid to the Broker-Dealer if a Covered
Product terminates for reasons other than death during the second
twelve (12) months following issue; (3) fifty percent (50%) of the
Compensation paid to the Broker-Dealer if a Covered Product terminates
for reasons other than death during the third twelve (12) months
following issue; (4) twenty five percent (25%) of the Compensation
paid to the Broker-Dealer if a Covered Product terminates for reasons
other than death during the fourth twelve (12) months following issue;
and (5) nothing from the Broker-Dealer (i.e., no charge back) if the
Covered Product terminates thereafter. However, notwithstanding any
other provision of the Agreement, if termination of a Covered Product
at any time is due to the willful or negligent wrongful actions or
representations of the Broker-Dealer or any Representative, FUS
reserves the right to recover one hundred (100%) of the Compensation
paid to the Broker-Dealer respecting the sale of the Covered Product.
In the event a Covered Product owner makes a withdrawal from or
partially surrenders a Covered Product within forty-eight (48) months
following its date of issue, the charge back rules described in the
preceding paragraph shall apply, except that the amount of the charge
back shall be pro-rated. Any such pro-rated charge back shall be
determined in accordance with the following formula:
Charge Back = Charge Back Percentage* x WITHDRAWAL AMOUNT
-----------------
Covered Product
Cash Value**
*100% year one; 75% year two; 50% year three; 25% year four
**determined as of the date of the withdrawal
B. Compensation charge-backs will be due within 60 days of
notification by FUS. Compensation will be charged back by credit
against Compensation to be paid in the future and/or by requiring cash
repayment to be made by the Broker-Dealer.
V. MODIFICATIONS AND TERMINATION
A. No Compensation shall be paid on Covered Products that are changed
from their original version, either under a policy provision or
otherwise, or on Covered Products that are issued using cash values of
Insurance Company policies, either under a policy provision or
otherwise.
B. Except as otherwise provided in the Agreement, termination of the
Agreement for any reason shall not impair the right of the
Broker-Dealer to receive Compensation accrued and payable on account
of premium received under Covered Products issued on applications
procured by the Broker-Dealer, or by Registered Representatives
operating under supervision of the Broker-Dealer, prior to the
termination of the Selling Group Agreement.
VI. APPLICABILITY
This Schedule supersedes and replaces any and all previous Schedules
of Commissions and Allowances.
By signing this Schedule, the Broker-Dealer and FUS agree to comply with its
terms.
BROKER-DEALER
Name of Broker-Dealer:
----------------------------------------------------
By: Date:
--------------------------------------------------------- --------
Title:
---------------------------------------------------------------------
FUS
By: Date:
------------------------------------------------- -----------------
Title:
----------------------------------------------------------------------
