<PAGE>
Registration No. 333-93031
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM
N-8B-2
Pre-Effective Amendment No. 1
SEPARATE ACCOUNT FUVUL
OF ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(Exact Name of Registrant)
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
440 Lincoln Street
Worcester, MA 01653
(Address of Principal Executive Office)
Mary Eldridge, Secretary
440 Lincoln Street
Worcester, MA 01653
(Name and Address of Agent for Service of Process)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
----
on (date) pursuant to paragraph (b)
----
60 days after filing pursuant to paragraph (a) (1)
----
on (date) pursuant to paragraph (a) (1) of Rule 485
----
this post-effective amendment designates a new effective
----
date for a previously filed post-effective amendment
----
FLEXIBLE PREMIUM VARIABLE LIFE
Pursuant to Reg. Section 270.24f-2 of the Investment Company Act of 1940 ("1940
Act"), Registrant hereby declares that an indefinite amount of its securities Is
being registered under the Securities Act of 1933 ("1933 Act").
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until Registrant shall file a
further amendment which specifically states that this Registration Statement
shall become effective in accordance with section 8(a) of the Securities Act of
1933 or until this Registration Statement shall become effective on such date or
dates as the Commission, acting pursuant to said section 8(a), may determine.
<PAGE>
RECONCILIATION AND TIE BETWEEN ITEMS
IN FORM N-8B-2 AND THE PROSPECTUS
<TABLE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<C> <S>
1..............................Cover Page
2..............................Cover Page
3..............................Not Applicable
4..............................Distribution
5..............................The Company, The Separate Account and the Underlying Funds
6..............................The Separate Account
7..............................Not Applicable
8..............................Not Applicable
9..............................Legal Proceedings
10.............................Summary; Description of the Company, The Separate Account and the Underlying
Funds; The Policy; Policy Termination and Reinstatement; Other Policy Provisions
11.............................Objectives and Policy
12.............................Summary; the Underlying Funds;
13.............................Summary; the Underlying Funds; Investment Advisory Services to the
Underlying Funds; Charges and Deductions
14.............................Summary; Applying for a Policy
15.............................Summary; Applying for a Policy; Payments; Allocation of Premiums
16.............................The Separate Account; the Underlying Funds; Payments; Allocation of
Net Premiums
17.............................Summary; Surrender; Partial Withdrawal; Charges and Deductions;
Policy Termination and Reinstatement
18.............................The Separate Account; the Underlying Funds; Payments
19.............................Reports; Voting Rights
20.............................Not Applicable
21.............................Summary; Policy Loans; Other Policy Provisions
22.............................Other Policy Provisions
23.............................Not Required
24.............................Other Policy Provisions
25.............................The Company
26.............................Not Applicable
27.............................The Company
28.............................Directors and Principal Officers of the Company
29.............................The Company
30.............................Not Applicable
31.............................Not Applicable
32.............................Not Applicable
33.............................Not Applicable
34.............................Not Applicable
35.............................Distribution
36.............................Not Applicable
37.............................Not Applicable
38.............................Summary; Distribution
<PAGE>
<CAPTION>
ITEM NO. OF
FORM N-8B-2 CAPTION IN PROSPECTUS
- ----------- ---------------------
<C> <S>
39.............................Summary; Distribution
40.............................Not Applicable
41.............................The Company, Distribution
42.............................Not Applicable
43.............................Not Applicable
44.............................Payments; Policy Value and Cash Surrender Value
45.............................Not Applicable
46.............................Policy Value and Cash Surrender Value; Federal Tax Considerations
47.............................The Company
48.............................Not Applicable
49.............................Not Applicable
50.............................The Separate Account
51.............................Cover Page; Summary; Charges and Deductions; The Policy; Policy Termination and
Reinstatement; Other Policy Provisions
52.............................Addition, Deletion or Substitution of Investments
53.............................Federal Tax Considerations
54.............................Not Applicable
55.............................Not Applicable
56.............................Not Applicable
57.............................Not Applicable
58.............................Not Applicable
59.............................Not Applicable
</TABLE>
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
WORCESTER, MASSACHUSETTS
INDIVIDUAL FLEXIBLE PAYMENT VARIABLE LIFE INSURANCE POLICIES
This Prospectus provides important information about an individual flexible
payment variable life insurance policy issued by Allmerica Financial Life
Insurance and Annuity Company. The policies are funded through the Separate
Account FUVUL, a separate investment account of the Company that is referred to
as the Variable Account. PLEASE READ THIS PROSPECTUS CAREFULLY BEFORE INVESTING
AND KEEP IT FOR FUTURE REFERENCE.
The Separate Account is subdivided into Sub-Accounts. Each Sub-Account invests
exclusively in shares of one of the following Funds:
<TABLE>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. FEDERATED INSURANCE SERIES
AIM V.I. Value Fund Federated American Leaders Fund II
AIM V.I. Capital Appreciation Fund Federated High Income Bond Fund II
THE ALGER AMERICAN FUND PORTFOLIOS Federated Prime Money Fund II
Alger American Balanced Portfolio MFS - VARIABLE INSURANCE TRUST-SM-
Alger American Growth Portfolio MFS - Emerging Growth Series
Alger American Leveraged AllCap Portfolio MFS - Growth with Income Series
Alger American Small Capitalization Portfolio MFS - Utilities Series
ALLMERICA INVESTMENT TRUST OPPENHEIMER VARIABLE ACCOUNT FUNDS
AIT Money Market Fund Oppenheimer Aggressive Growth Fund/VA
DREYFUS VARIABLE INVESTMENT FUND Oppenheimer Main Street Growth & Income Fund/VA
Dreyfus Capital Appreciation Portfolio Oppenheimer Small Cap Growth/VA
Dreyfus Quality Bond Portfolio Oppenheimer Strategic Bond
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH TEMPLETON VARIABLE PRODUCTS SERIES FUND
FUND, INC. Templeton International Fund
Dreyfus Socially Responsible Growth Fund Templeton Asset Allocation Fund
EVERGREEN VARIABLE ANNUITY TRUST
Evergreen VA Small Cap Value Fund
Evergreen VA Equity Index Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
</TABLE>
Policy owners may choose the amount of initial payment and vary the frequency
and amount of future payments, within limits. The Policy allows partial
withdrawals and full surrender of the Policy's Surrender Value, within limits.
THE POLICIES ARE NOT SUITABLE FOR SHORT-TERM INVESTMENT. VARIABLE LIFE POLICIES
INVOLVE RISKS INCLUDING POSSIBLE LOSS OF PRINCIPAL. IT MAY NOT BE ADVANTAGEOUS
TO REPLACE EXISTING INSURANCE WITH THE POLICY. THIS LIFE POLICY IS NOT: A BANK
DEPOSIT OR OBLIGATION; FEDERALLY INSURED; ENDORSED BY ANY BANK OR GOVERNMENTAL
AGENCY.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED THAT THE INFORMATION IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus can also be obtained from the Securities and Exchange
Commission's website (http:// www.sec.gov).
<TABLE>
<S> <C>
CORRESPONDENCE MAY BE MAILED TO: DATED MARCH , 2000
ALLMERICA LIFE WORCESTER, MASSACHUSETTS 01653
P.O. BOX 8179 (508) 855-1000
BOSTON, MA 02266-8179
</TABLE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SPECIAL TERMS............................................... 4
SUMMARY OF FEES AND EXPENSES................................ 7
SUMMARY OF POLICY FEATURES.................................. 11
DESCRIPTION OF THE COMPANY, THE VARIABLE ACCOUNT AND THE
UNDERLYING FUNDS............................................ 17
INVESTMENT OBJECTIVES AND POLICIES.......................... 19
THE POLICY.................................................. 23
Applying for a Policy..................................... 23
Free-Look Period.......................................... 23
Conversion Privilege...................................... 24
Payments.................................................. 24
Allocation of Payments.................................... 25
Transfer Privilege........................................ 25
Death Benefit............................................. 26
Election of Death Benefit Options......................... 27
Changing Between Death Benefit Option 1 and
Death Benefit 2......................................... 30
Guaranteed Death Benefit Rider............................ 31
Change in Face Amount..................................... 32
Policy Value.............................................. 33
Payment Options........................................... 34
Optional Insurance Benefits............................... 34
Surrender................................................. 34
Partial Withdrawal........................................ 35
CHARGES AND DEDUCTIONS...................................... 36
Monthly Charges (The Monthly Deduction)................... 36
Computing Monthly Policy Charges.......................... 37
Fund Expenses............................................. 39
Partial Withdrawal Transaction Charge..................... 39
Transfer Charges.......................................... 39
Other Administrative Charges.............................. 39
POLICY LOANS................................................ 40
Preferred Loan Option..................................... 40
Repayment of Outstanding Loan............................. 40
Effect of Policy Loans.................................... 41
POLICY TERMINATION AND REINSTATEMENT........................ 41
Termination............................................... 41
Reinstatement............................................. 41
OTHER POLICY PROVISIONS..................................... 42
Policy Owner.............................................. 42
Beneficiary............................................... 42
Assignment................................................ 42
Limit on Right to Challenge Policy........................ 43
Suicide................................................... 43
Misstatement of Age or Sex................................ 43
Delay of Payments......................................... 43
FEDERAL TAX CONSIDERATIONS.................................. 43
The Company and The Variable Account...................... 44
Taxation of The Policies.................................. 44
Policy Loans.............................................. 44
Modified Endowment Policies............................... 45
VOTING RIGHTS............................................... 45
</TABLE>
2
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<TABLE>
<S> <C>
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY............. 46
DISTRIBUTION................................................ 47
REPORTS..................................................... 48
LEGAL PROCEEDINGS........................................... 48
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS........... 48
FURTHER INFORMATION......................................... 49
MORE INFORMATION ABOUT THE FIXED ACCOUNT.................... 49
General Description....................................... 49
Fixed Account Interest.................................... 49
Partial Withdrawals and Transfers......................... 50
INDEPENDENT ACCOUNTANTS..................................... 50
FINANCIAL STATEMENTS........................................ 50
APPENDIX A -- GUIDELINE MINIMUM DEATH BENEFIT FACTORS
TABLE....................................................... A-1
APPENDIX B -- OPTIONAL INSURANCE BENEFITS................... B-1
APPENDIX C -- GUARANTEED MONTHLY POLICY CHARGE RATES........ C-1
APPENDIX D -- ILLUSTRATIONS................................. D-1
FINANCIAL STATEMENTS........................................ FIN-1
</TABLE>
3
<PAGE>
SPECIAL TERMS
AGE: how old the Insured is on the birthday closest to a Policy anniversary.
BENEFICIARY: the person or persons you name to receive the Net Death Benefit
when the Insured dies.
COMPANY: Allmerica Financial Life Insurance and Annuity Company. "We," "our,"
"us," and "the Company" refer to Allmerica Financial Life Insurance and Annuity
Company in this Prospectus.
DATE OF ISSUE: the date the Policy was issued, used to measure the monthly
processing date, Policy months, Policy years and Policy anniversaries.
DEATH BENEFIT: the amount payable when the Insured dies prior to the Final
Payment Date, before deductions for any Outstanding Loan, partial withdrawals,
partial withdrawal transaction charge, and due and unpaid Monthly Deductions.
EVIDENCE OF INSURABILITY: information, including medical information, used to
decide the Insured's underwriting class.
FACE AMOUNT: the amount of insurance coverage applied for. The initial Face
Amount is shown in your Policy.
FINAL PAYMENT DATE: the Policy anniversary nearest the Insured's 100th birthday.
After this date, no payments may be made. The Net Death Benefit may be different
before and after the Final Payment Date. See NET DEATH BENEFIT.
FIXED ACCOUNT: a guaranteed account of the general account that guarantees
principal and a fixed interest rate.
FUNDS (UNDERLYING FUNDS): a subdivision of the Variable Account investing
exclusively in the shares of a corresponding portfolios of AIM Variable
Insurance Funds, Inc., The Alger American Fund, Allmerica Investment Trust,
Dreyfus Variable Investment Fund, Dreyfus Socially Responsible Growth Fund,
Inc., Evergreen Variable Annuity Trust, Federated Insurance Series, MFS Variable
Insurance Trust, Oppenheimer Variable Account Funds, and Templeton Variable
Products Series Fund.
GENERAL ACCOUNT: all our assets other than those held in a separate investment
account.
GUIDELINE MINIMUM DEATH BENEFIT: the minimum death benefit required to qualify
the Policy as "life insurance" under federal tax laws. The Guideline Minimum
Death Benefit is the PRODUCT of:
- the Policy Value TIMES
- a percentage factor.
The percentage factor is a percentage that, when multiplied by the Policy Value,
determines the minimum death benefit required under federal tax laws. If Death
Benefit Option 3 is in effect, the percentage factor is based on the Insured's
attained age, sex, and underwriting class, as set forth in the Policy. If Death
Benefit Option 1 or Death Benefit Option 2 is in effect, the percentage factor
is based on the Insured's attained age, as set forth in APPENDIX A, Guideline
Minimum Death Benefit Factors Table.
INSURANCE AMOUNT: the death benefit less the Policy Value.
LOAN VALUE: the maximum amount you may borrow under the Policy.
4
<PAGE>
MINIMUM MONTHLY PAYMENT: a monthly amount shown in your Policy. If you pay this
amount, we guarantee that your Policy will not lapse before the 49th monthly
processing date from the Date of Issue or increase in Face Amount, within
limits.
MONTHLY PROCESSING DATE: the date, shown in your Policy, when Monthly Deductions
are taken from Policy Value.
NET DEATH BENEFIT: Before the Final Payment Date, the Net Death Benefit is:
- the death benefit under either Death Benefit Option 1, Death Benefit
Option 2, or Death Benefit Option 3, MINUS
- any Outstanding Loan on the Insured's death, partial withdrawals, partial
withdrawal transaction charge, and due and unpaid Monthly Deductions.
Where permitted by state law, we will compute the Net Death Benefit on the date
we receive due proof of the Insured's death under Death Benefit Option 2 and on
the date of death for Death Benefit Options 1 and 3. If required by state law,
we will compute the Net Death Benefit on the date of death for Death Benefit
Option 2.
After the Final Payment Date, the Net Death Benefit generally is:
- the Policy Value MINUS
- any Outstanding Loan.
If the Guaranteed Death Benefit Rider is in effect, after the Final Payment
Date, the death benefit is the greater of:
- the Face Amount as of the Final Payment Date; or
- the Policy Value as of the date due proof of death is received by the
Company.
OUTSTANDING LOAN: all unpaid Policy loans plus loan interest due or accrued.
POLICY CHANGE: any change in the Face Amount, the addition or deletion of a
Rider, underwriting reclassifications, or a change in death benefit option
(Option 1 or Option 2).
POLICY OWNER: the person who may exercise all rights under the Policy, with the
consent of any irrevocable beneficiary. "You" and "your" refer to the Policy
owner in this Prospectus.
POLICY VALUE: the total value of your Policy. It is the SUM of the:
- Value of the units of the sub-accounts credited to your Policy PLUS
- Accumulation in the Fixed Account credited to the Policy
PREMIUM: a payment you must make to us to keep the Policy in force.
PRINCIPAL OFFICE: our office at 440 Lincoln Street, Worcester, Massachusetts
01653.
PRO-RATA ALLOCATION: an allocation among the Fixed Account and the Sub-Accounts
in the same proportion that, on the date of allocation, the unloaned Policy
Value in the Fixed Account and the Policy Value in each sub-account bear to the
total unloaned Policy Value.
5
<PAGE>
SUB-ACCOUNT: a subdivision of the Variable Account investing exclusively in the
shares of a fund.
SURRENDER VALUE: the amount payable on a full surrender. It is the Policy Value
less any Outstanding Loan.
UNDERWRITING CLASS: the insurance risk classification that we assign the Insured
based on the information in the application or enrollment form and other
evidence of insurability we consider. The Insured's underwriting class will
affect the monthly charges and the payment required to keep the Policy in force.
UNIT: a measure of your interest in a Sub-Account.
VALUATION DATE: any day on which the net asset value of the shares of any funds
and unit values of any sub-accounts are computed. Valuation Dates currently
occur on:
- Each day the New York Stock Exchange is open for trading
- Other days (other than a day during which no payment, partial withdrawal
or surrender of a Policy was received) when there is a sufficient degree
of trading in a fund's portfolio securities so that the current net asset
value of the sub-accounts may be materially affected
VALUATION PERIOD: the interval between two consecutive Valuation Dates.
VARIABLE ACCOUNT: Separate Account FUVUL, one of our separate investment
accounts.
WRITTEN REQUEST: your request in writing, satisfactory to us, received at our
Principal Office.
6
<PAGE>
SUMMARY OF FEES AND EXPENSES
WHAT CHARGES WILL I INCUR UNDER MY POLICY?
Charges will be deducted in connection with the Policy to compensate the Company
for:
- Administering the Policy
- Providing the insurance benefits set forth in the Policy and any optional
insurance benefits added by rider
- Payment of any applicable taxes
- Assuming certain risks in connection with the Policy
- Incurring expenses in distributing the Policy
The following charges will apply to your Policy under the circumstances
described. Some of these charges apply throughout the Policy's duration. Other
charges apply only if you choose options under the Policy.
On each monthly processing date, we will deduct certain monthly charges (the
"Monthly Deduction") from Policy Value. You may allocate the Monthly Deduction
to any number of sub-accounts and to the unloaned Policy Value in the Fixed
Account. If you make no allocation, we will make a Pro-Rata Allocation. If the
accounts you chose do not have sufficient funds to cover the Monthly Deduction,
we will make a Pro-Rata Allocation. The following monthly charges comprise the
Monthly Deduction:
- THE MONTHLY POLICY CHARGE -- will be charged on each monthly processing
date until the Final Payment Date. The primary purpose of the Monthly
Policy Charge is to compensate us for providing life insurance coverage
for the Insured. In addition, a portion of this charge compensates us for
administrative, tax and distribution expenses. The Monthly Policy Charge
is equal to a current Monthly Policy Charge rate per $1,000 times the
Insurance Amount. See CHARGES AND DEDUCTIONS. As indicated in the table in
Appendix C, the maximum Monthly Policy Charge for each $1000 of Insurance
Amount is $83.33 at age 99. For examples, see APPENDIX C.
- MONTHLY MORTALITY AND EXPENSE RISK CHARGE -- This monthly charge is
currently equal to and may not exceed 1/12th of 0.75% of the Policy Value
in each sub-account for the first 10 Policy years, 1/12th of 0.50% for
Policy Years 11 through 20, and 0.25% for Policy years 21 and later. The
charge is calculated based on the Policy Value in the sub-accounts of the
Variable Account (but not the Fixed Account) as of the prior Monthly
Processing Date. This charge compensates us for assuming mortality and
expense risks for variable interests in the Policies. This charge will
continue to be assessed after the Final Payment Date.
- MONTHLY RIDER CHARGES -- These charges will vary based on the Riders
selected and by the sex, age, and underwriting classification of the
Insured.
The charge below applies only if you make a partial withdrawal:
- PARTIAL WITHDRAWAL TRANSACTION CHARGE -- For each partial withdrawal, we
deduct a transaction fee of 2% of the amount withdrawn, not to exceed $25
for each partial withdrawal.
7
<PAGE>
The charges below are designed to reimburse us for Policy administrative costs,
and apply under the following circumstances:
- CHARGE FOR OPTIONAL GUARANTEED DEATH BENEFIT RIDER -- A one time
administrative charge of $25 will be deducted from Policy Value when the
Rider is elected.
- TRANSFER CHARGE -- Currently, the first 12 transfers of Policy Value in a
Policy year are free. A current transfer charge of $10, never to exceed
$25, applies for each additional transfer in the same Policy year. This
charge is for the costs of processing the transfer.
- OTHER ADMINISTRATIVE CHARGES -- We reserve the right to charge for other
administrative costs we incur. While there are no current charges for
these costs, we may impose a charge for:
- Changing payment allocation instructions
- Changing the allocation of the Monthly Deduction among the various
sub-accounts
- Providing a projection of values
WHAT ARE THE EXPENSES AND FEES OF THE FUNDS?
In addition to the charges described above, certain fees and expenses are
deducted from the assets of the Underlying Funds. The levels of fees and
expenses vary among the Underlying Funds. The following table shows the expenses
of the Underlying Funds for 1999. Expenses of the Funds are not fixed or
specified under the Contract, and actual expenses may vary.
Underlying Fund Annual Expenses
(as a percentage of Underlying Fund average net assets, after expense
reimbursements)
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER VOLUNTARY 12-B-1 (AFTER APPLICABLE (AFTER WAIVERS/
UNDERLYING FUND WAIVERS) FEES REIMBURSEMENTS) REIMBURSEMENTS)
- --------------- ---------------- -------- ----------------- ---------------
<S> <C> <C> <C> <C>
AIM V.I. Value Fund....................... 0.61% 0.00% 0.15% 0.76%
AIM V.I. Capital Appreciation Fund........ 0.62% 0.00% 0.11% 0.73%
Alger American Balanced Portfolio......... 0.75% 0.00% 0.18% 0.93%
Alger American Growth Portfolio........... 0.75% 0.00% 0.04% 0.79%
Alger American Leveraged AllCap
Portfolio(4)............................ 0.85% 0.00% 0.08%(4) 0.93%
Alger American Small Capitalization
Portfolio............................... 0.85% 0.00% 0.05% 0.90%
AIT Money Market Fund (6)................. 0.24% 0.00% 0.05% 0.29%(6)
Dreyfus Capital Appreciation Portfolio.... 0.43% 0.00% 0.35% 0.78%
Dreyfus Quality Bond Portfolio............ 0.65% 0.00% 0.09% 0.74%
Dreyfus Socially Responsible Growth
Fund.................................... 0.75% 0.00% 0.04% 0.79%
Evergreen VA Equity Index Fund (1)(2)..... 0.00% 0.00% 0.30% 0.30%(1)
Evergreen VA Foundation Fund (1).......... 0.83% 0.00% 0.11% 0.94%
Evergreen VA Global Leaders Fund (1)...... 0.76% 0.00% 0.24% 1.00%
Evergreen VA Small Cap Value Fund (1)..... 0.59% 0.00% 0.41% 1.00%
Federated American Leaders Fund II........ 0.75% 0.00% 0.13% 0.88%
Federated High Income Bond Fund II........ 0.60% 0.00% 0.19% 0.79%
Federated Prime Money Fund II............. 0.50% 0.00% 0.23% 0.73%
Templeton International Fund - Class 2.... 0.77% 0.25% 0.08% 1.10%
Templeton Asset Allocation Fund - Class
2....................................... 0.73% 0.25% 0.01% 0.99%
MFS - Emerging Growth Series(3)........... 0.75% 0.00% 0.09%(3) 0.84%(3)
MFS - Growth with Income Series(3)........ 0.75% 0.00% 0.13%(3) 0.88%(3)
MFS - Utilities Series(3)................. 0.75% 0.00% 0.16%(3) 0.91%(3)
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
TOTAL FUND
MANAGEMENT FEE OTHER EXPENSES EXPENSES
(AFTER VOLUNTARY 12-B-1 (AFTER APPLICABLE (AFTER WAIVERS/
UNDERLYING FUND WAIVERS) FEES REIMBURSEMENTS) REIMBURSEMENTS)
- --------------- ---------------- -------- ----------------- ---------------
<S> <C> <C> <C> <C>
Oppenheimer Aggressive Growth Fund/VA..... 0.66% 0.00% 0.01% 0.67%
Oppenheimer Main Street Growth & Income
Fund/VA................................. 0.73% 0.00% 0.05% 0.78%
Oppenheimer Small Cap Growth Fund/VA(5)... 0.75% 0.00% 0.63% 1.38%
Oppenheimer Strategic Bond Fund/VA........ 0.74% 0.00% 0.04% 0.78%
</TABLE>
(1) Evergreen Investment Management has voluntarily agreed to limit aggregate
operating expenses (including investment advisory fees, but excluding
interest, brokerage commissions and extraordinary expenses) of the Evergreen
VA Equity Index Fund to 0.30% of average daily net assets. Without the
voluntarily limit, total expenses of the Evergreen VA Equity Index Fund for
1999 are estimated to be 0.82% of average daily assets. Evergreen Asset
Management Corp. has voluntarily agreed to limit aggregate operating
expenses (including investment advisory fees, but excluding interest,
brokerage commissions and extraordinary expenses) of the Evergreen VA
Foundation Fund, Evergreen Global Leaders Fund, and Evergreen VA Small Cap
Value Fund to 1.00% of average daily net assets. Without these voluntary
limitations, total expenses of the Funds during 1999, as a percentage of
average daily net assets, would have been 1.19% for Evergreen Global Leaders
Fund, and 1.36% for Evergreen VA Small Cap Value Fund. The total operating
expenses of the Evergreen VA Foundation Fund did not exceed the expense
limitation throughout 1999.
(2) The inception date of the Evergreen VA Equity Index Portfolio is 9/30/99.
Expenses have been estimated based upon current fund contracts.
(3) MFS - Emerging Growth Series and MFS - Growth with Income Series have an
expense offset arrangement which reduces the series' custodian fee based
the amount of cash maintained by the series with its custodian and dividend
disbursing agent. Each series may enter into other such arrangements and
directed brokerage arrangements, which would also have the effect of
reducing the series' expenses. "Other Expenses" do not take into account
these expense reductions, and are therefore higher than the actual expenses
of the series. Had these fee reductions been taken account, "Net Expenses"
should be lower for certain series and would equal: 0.83% for Emerging
Growth Series, 0.87% for Growth with Income Series, and 0.90% for Utilities
Series.
(4) Included in "Other Expenses" of Alger American Leveraged AllCap is 0.01% of
interest expense.
(5) Reflects an agreement by the investment advisor to voluntarily limit
aggregate operating expenses to 1.38% of average daily net assets of the
Oppenheimer Small Cap Growth Fund/VA.
(6) Until further notice Allmerica Financial Investment Management Services,
Inc. has declared a voluntary expense cap of 0.60% of average net assets
for the AIT Money Market Fund. The total operating expenses of the AIT Money
Market Fund did not exceed the expense limitation throughout 1999.
9
<PAGE>
Absent the voluntary limit on aggregate operating expenses, the actual
Management Fees, Other Expenses and Total Operating Expenses period were as
follows:
<TABLE>
<CAPTION>
TOTAL
MANAGEMENT 12-B-1 OPERATING
UNDERLYING FUND FEES FEES OTHER EXPENSES EXPENSES
- --------------- ---------- -------- -------------- ---------
<S> <C> <C> <C> <C>
AIM V.I. Value Fund............................. 0.61% 0.00% 0.15% 0.76%
AIM V.I. Capital Appreciation Fund.............. 0.62% 0.00% 0.11% 0.73%
Alger American Balanced Portfolio............... 0.75% 0.00% 0.18% 0.93%
Alger American Growth Portfolio................. 0.75% 0.00% 0.04% 0.79%
Alger American Leveraged AllCap Portfolio....... 0.85% 0.00% 0.08%(2) 0.93%
Alger American Small Capitalization Portfolio... 0.85% 0.00% 0.05% 0.90%
AIT Money Market Fund........................... 0.24% 0.00% 0.05% 0.29%(6)
Dreyfus Capital Appreciation Portfolio.......... 0.43% 0.00% 0.35% 0.78%
Dreyfus Quality Bond Portfolio.................. 0.65% 0.00% 0.09% 0.74%
Dreyfus Socially Responsible Growth Fund........ 0.75% 0.00% 0.04% 0.79%
Evergreen VA Equity Index Fund (1).............. 0.40% 0.00% 0.42%(1) 0.82%(1)
Evergreen VA Foundation Fund.................... 0.83% 0.00% 0.11% 0.94%
Evergreen VA Global Leaders Fund................ 0.95% 0.00% 0.24% 1.19%
Evergreen VA Small Cap Value Fund............... 0.95% 0.00% 0.41% 1.36%
Federated American Leaders Fund II.............. 0.75% 0.00% 0.13% 0.88%
Federated High Income Bond Fund II.............. 0.60% 0.00% 0.19% 0.79%
Federated Prime Money Fund II................... 0.50% 0.00% 0.23% 0.73%
Templeton International Fund - Class 2.......... 0.77% 0.25% 0.08% 1.35%
Templeton Asset Allocation Fund - Class 2....... 0.73% 0.25% 0.01% 1.24%
MFS - Emerging Growth Series(3)................. 0.75% 0.00% 0.09%(3) 0.84%(3)
MFS - Growth with Income Series(3).............. 0.75% 0.00% 0.13%(3) 0.88%(3)
MFS - Utilities Series(3)....................... 0.75% 0.00% 0.16%(3) 0.91%(3)
Oppenheimer Aggressive Growth Fund/VA........... 0.66% 0.00% 0.01% 0.67%
Oppenheimer Main Street Growth & Income
Fund/VA....................................... 0.73% 0.00% 0.05% 0.78%
Oppenheimer Small Cap Growth Fund/VA............ 0.75% 0.00% 1.45% 2.20%
Oppenheimer Strategic Bond Fund/VA.............. 0.74% 0.00% 0.04% 0.78%
</TABLE>
(1) The inception date of the Evergreen VA Equity Index Portfolio is 9/30/99.
Expenses have been estimated based upon current fund contracts.
(2) Included in "Other Expenses" of Alger American Leveraged AllCap is 0.01% of
interest expense.
(3) Each series has an expense offset arrangement which reduces the series'
custodian fee based the amount of cash maintained by the series with its
custodian and dividend disbursing agent. Each series may enter into other
such arrangements and directed brokerage arrangements, which would also have
the effect of reducing the series' expenses. "Other Expenses" do not take
into account these expense reductions, and are therefore higher than the
actual expenses of the series. Had these fee reductions been taken account,
"Net Expenses" should be lower for certain series and would equal: 0.83% for
MFS - Emerging Growth Series, 0.87% for MFS - Growth with Income Series, and
0.90% for MFS - Utilities Series.
The Underlying Fund information above was provided by the Underlying Funds and
was not independently verified by the Company.
10
<PAGE>
SUMMARY OF POLICY FEATURES
This Summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. If you are considering the purchase of this
product, you should read the remainder of this Prospectus carefully before
making a decision. It offers a more complete presentation of the topics
presented here, and will help you better understand the product. However, the
Policy, together with its attached application constitutes the entire agreement
between you and the Company.
There is no guaranteed minimum Policy Value. The value of a Policy will vary up
or down to reflect the investment experience of allocations to the Sub-Accounts
and the fixed rates of interest earned by allocations to the General Account.
The Policy Value will also be adjusted for other factors, including the amount
of charges imposed. The Policy Value may decrease to the point where the Policy
will lapse and provide no further death benefit without additional premium
payments, unless the optional Guaranteed Death Benefit Rider is in effect. This
Rider may not be available in all states.
WHAT IS THE POLICY'S OBJECTIVE?
The objective of the Policy is to give permanent life insurance protection and
help you build assets tax-deferred. Features available through the Policy
include:
- A Net Death Benefit that can protect your family
- Payment options that can guarantee an income for life
- A personalized investment portfolio
- Experienced professional investment advisers
- Tax deferral on earnings.
While the Policy is in force, it will provide:
- Life insurance coverage on the Insured
- Policy Value
- Surrender rights and partial withdrawal rights
- Loan privileges
- Optional insurance benefits available by Rider.
The Policy combines features and benefits of traditional life insurance with the
advantages of professional money management. However, unlike the fixed benefits
of ordinary life insurance, the Policy Value and the Death Benefit will increase
or decrease depending on investment results. Unlike traditional insurance
policies, the Policy has no fixed schedule for payments. Within limits, you may
make payments of any amount and frequency. While you may establish a schedule of
payments ("planned payments"), the Policy will not necessarily lapse if you fail
to make planned payments. Also, making planned payments will not guarantee that
the Policy will remain in force.
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<PAGE>
WHO ARE THE KEY PERSONS UNDER THE POLICY?
The Policy is a contract between you and us. Each Policy has a Policy Owner
(you), an Insured (you or another individual you select) and a beneficiary. As
Policy Owner, you make payments, choose investment allocations and select the
Insured and beneficiary. The Insured is the person covered under the Policy. The
beneficiary is the person who receives the Net Death Benefit when the Insured
dies.
WHAT HAPPENS WHEN THE INSURED DIES?
We will pay the Net Death Benefit to the beneficiary when the Insured dies while
the Policy is in effect. You may choose between three death benefit options.
Under Death Benefit Option 1 and Death Benefit Option 3, the death benefit is
the greater of (1) the Face Amount (the amount of insurance applied for) or (2)
the Guideline Minimum Death Benefit (the Guideline Minimum Death Benefit federal
tax law requires). Under Death Benefit Option 2, the death benefit is the
greater of (1) the sum of the Face Amount and Policy Value or (2) the Guideline
Minimum Death Benefit. For more information, see "Election of Death Benefit
Option" under THE POLICY.
The Net Death Benefit is the death benefit less any Outstanding Loan, partial
withdrawals, partial withdrawal transaction charge, and due and unpaid Monthly
Deductions. However, after the Final Payment Date, the Net Death Benefit is the
Policy Value less any Outstanding Loan. The beneficiary may receive the Net
Death Benefit in a lump sum or under a payment option we offer.
An optional Guaranteed Death Benefit Rider is available ONLY AT ISSUE OF THE
POLICY. (The Guaranteed Death Benefit Rider may not be available in all states,
and is not available if the Policy is issued on a simplified underwriting
basis). If this Rider is in effect, the Company:
- guarantees that your Policy will not lapse regardless of the investment
performance of the Variable Account; and
- provides a guaranteed Net Death Benefit.
In order to maintain the Guaranteed Death Benefit Rider, certain minimum premium
payment tests must be met on each policy anniversary and within 48 months
following the Date of Issue and/or the date of any increase in Face Amount, as
described below. In addition, a one-time administrative charge of $25 will be
deducted from Policy Value when the Rider is elected. Certain transactions,
including policy loans, partial withdrawals, underwriting reclassifications,
change in face amount, and changes in Death Benefit Options, can result in the
termination of the Rider. IF THIS RIDER IS TERMINATED, IT CANNOT BE REINSTATED.
FOR MORE INFORMATION, SEE "Guaranteed Death Benefit Rider."
CAN I EXAMINE THE POLICY?
Yes. You have the right to examine and cancel your Policy by returning it to us
or to one of our representatives on or before the 10 days after you receive the
Policy or longer when state law so requires. There may be a longer period in
certain jurisdictions; see the "Right to Examine" provision in your Contract.
If your Policy provides for a full refund of payments under its "Right to
Examine Policy" provision, the Company will mail a refund to you within seven
days. We may delay a refund of any payment made by check until the check has
cleared the bank.
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<PAGE>
If required by state law, your Policy will provide for a "full refund." Your
refund will be the GREATER of:
- Your entire payment OR
- The Policy Value PLUS deductions for taxes, charges or fees.
If your Policy does not provide for a full refund, you will receive:
- Amounts allocated to the Fixed Account PLUS
- The Policy Value in the Variable Account PLUS
- Any taxes, fees or other charges imposed on amounts in the Variable
Account.
After an increase in Face Amount, a right to cancel the increase also applies.
WHAT ARE MY INVESTMENT CHOICES?
Each Sub-Account invests exclusively in a corresponding Underlying Fund. In some
states, insurance regulations may restrict the availability of particular
Underlying Funds. The Policy also offers a Fixed Account that is part of the
general account of the Company. The Fixed Account is a guaranteed account
offering a minimum interest rate. This range of investment choices allows you to
allocate your money among the Sub-Accounts and the Fixed Account to meet your
investment needs.
If your Policy provides for a full refund under its "Right to Examine Policy"
provision as required in your state, we will allocate all sub-account
investments to the Money Market Fund until the fourth day after the expiration
of the "Right to Examine" provision of your policy. After this, we will allocate
all amounts as you have chosen.
You may allocate and transfer money among the following variable investment
options:
<TABLE>
<CAPTION>
<S> <C>
AIM VARIABLE INSURANCE FUNDS, INC. FEDERATED INSURANCE SERIES
AIM V.I. Value Fund Federated American Leaders Fund II
AIM V.I. Capital Appreciation Fund Federated High Income Bond Fund II
Federated Prime Money Fund II
THE ALGER AMERICAN FUND PORTFOLIOS MFS - VARIABLE INSURANCE TRUST-SM-
Alger American Balanced Portfolio MFS - Emerging Growth Series
Alger American Growth Portfolio MFS - Growth with Income Series
Alger American Leveraged AllCap Portfolio MFS - Utilities Series
Alger American Small Capitalization Portfolio
ALLMERICA INVESTMENT TRUST OPPENHEIMER VARIABLE ACCOUNT FUNDS
AIT Money Market Fund Oppenheimer Aggressive Growth Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
DREYFUS VARIABLE INVESTMENT FUND Oppenheimer Small Cap Growth/VA
Dreyfus Capital Appreciation Portfolio Oppenheimer Strategic Bond
Dreyfus Quality Bond Portfolio
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. TEMPLETON VARIABLE PRODUCTS SERIES FUND
Dreyfus Socially Responsible Growth Fund Templeton International Fund
Templeton Asset Allocation Fund
EVERGREEN VARIABLE ANNUITY TRUST
Evergreen VA Small Cap Value Fund
Evergreen VA Equity Index Fund
Evergreen VA Foundation Fund
Evergreen VA Global Leaders Fund
</TABLE>
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<PAGE>
The value of each Sub-Account will vary daily depending upon the performance of
the Underlying Fund in which it invests. Each Sub-Account reinvests dividends or
capital gains distributions received from an Underlying Fund in additional
shares of that Underlying Fund. There can be no assurance that the investment
objectives of the Underlying Funds can be achieved. For more information, see
DESCRIPTION OF THE COMPANY, SEPARATE ACCOUNT FUVUL, AND THE UNDERLYING FUNDS.
CAN I MAKE TRANSFERS AMONG THE FUNDS AND THE FIXED ACCOUNT?
Yes. The Policy permits you to transfer Policy Value among the available
Sub-Accounts and between the Sub-Accounts and the General Account of the
Company, subject to certain limitations described under THE POLICY -- "Transfer
Privilege." You will incur no current taxes on transfers while your money is in
the Policy.
HOW MUCH CAN I INVEST AND HOW OFTEN?
The Policy does not limit payments as to frequency and number. However, no
payment may be less than $100 without our consent. Additional payments may be
made at any time before the Final Payment Date. We reserve the right to obtain
evidence of insurability as a condition to accepting any premium that would
increase the death benefit by more than the amount of the payment. You may
choose a monthly automatic payment method of making payments. Under this method,
each month we will deduct payments from your checking account and apply them to
your Policy. The minimum automatic payment allowed is $50. For more information,
see THE CONTRACT -- "Payments".
WHAT IF I NEED MY MONEY?
You may borrow up to the loan value of your Policy. You may also make partial
withdrawals and surrender the Policy for its Surrender Value. There are two
types of loans that may be available to you:
- A non-preferred loan option is always available to you. The maximum total
loan amount is 90% of the Policy Value. The Company will charge interest
on the amount of the loan at a current annual rate of 4.8%. This current
rate of interest may change, but is guaranteed not to exceed 6%. However,
the Company will also credit interest on the Policy Value securing the
loan. The annual interest rate credited to the Policy Value securing a
non-preferred loan is 4.0%.
- A preferred loan option is automatically available to you unless you
request otherwise. The preferred loan option is available on that part of
an Outstanding Loan that is attributable to policy earnings. The term
"policy earnings" means that portion of the Policy Value that exceeds the
sum of the payments made less all partial withdrawals and partial
withdrawal transaction charges. The Company will charge interest on the
amount of the loan at a current annual rate of 4.00%. This current rate of
interest may change, but is guaranteed not to exceed 4.50%. The annual
interest rate credited to the Policy earnings securing a preferred loan is
4.0%.
We will allocate Policy loans among the sub-accounts and the Fixed Account
according to your instructions. If you do not make an allocation, we will make a
Pro-Rata Allocation. We will transfer the Policy Value in each sub-account equal
to the Policy loan to the Fixed Account.
You may surrender your Policy and receive its Surrender Value. After the first
Policy year, you may make partial withdrawals of $500 or more from Policy Value,
subject to a partial withdrawal transaction charge. Under Death Benefit Option 1
and Death Benefit Option 3, the Face Amount is reduced by each partial
withdrawal. We will not allow a partial withdrawal if it would reduce the Face
Amount below $40,000. A surrender or partial withdrawal may have tax
consequences. See "Taxation of the Policies."
A request for a preferred loan after the Final Payment Date, a partial
withdrawal after the Final Payment Date, or the foreclosure of an Outstanding
Loan will terminate a Guaranteed Death Benefit Rider. See "Guaranteed
14
<PAGE>
Death Benefit Rider." Policy loans may have tax consequences. There is some
uncertainty as to the tax treatment of a preferred loan, which may be treated as
a taxable withdrawal from the Policy. See FEDERAL TAX CONSIDERATIONS, "Policy
Loans."
CAN I MAKE FUTURE CHANGES UNDER MY POLICY?
Yes. There are several changes you can make after receiving your Policy, within
limits. You may:
- Cancel your Policy under its Right-to-Examine provision
- Transfer your ownership to someone else
- Change the beneficiary
- Change the allocation of payments, with no tax consequences under current
law
- Make transfers of Policy Value among the funds
- Adjust the death benefit by increasing or decreasing the Face Amount
- Change your choice of death benefit options between Death Benefit Option 1
and Death Benefit Option 2
- Add or remove optional insurance benefits provided by Rider
CAN I CONVERT MY POLICY INTO A FIXED POLICY?
Yes. You can convert your Policy without charge during the first 24 months after
the Date of Issue or after an increase in Face Amount. On conversion, we will
transfer the Policy Value in the Variable Account to the Fixed Account. We will
allocate all future payments to the Fixed Account, unless you instruct us
otherwise.
WHAT ARE THE LAPSE AND REINSTATEMENT PROVISIONS OF MY POLICY?
The Policy will not lapse if you fail to make payments unless:
- The Policy Value is insufficient to cover the next Monthly Deduction and
loan interest accrued; or
- Outstanding Loans exceed Policy Value.
There is a 62-day grace period in either situation.
If you make payments at least equal to minimum monthly payments, we guarantee
that your Policy will not lapse before the 49th monthly processing date from
Date of Issue or increase in Face Amount, within limits and excluding loan
foreclosure. If the Guaranteed Death Benefit Rider is in effect, the Policy will
not lapse regardless of the investment performance of the Variable Account
(excluding loan foreclosure). For more information, see "Guaranteed Death
Benefit Rider."
If the Insured has not died, you may reinstate your Policy within three years
after the grace period. The Insured must provide evidence of insurability
subject to our then current underwriting standards. In addition, you must either
repay or reinstate any Outstanding Loan and make payments sufficient to keep the
Policy in force for three months. See POLICY TERMINATION AND REINSTATEMENT.
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<PAGE>
HOW IS MY POLICY TAXED?
The Policy is given federal income tax treatment similar to a conventional fixed
benefit life insurance policy. On a withdrawal of Policy Value, Policy owners
currently are taxed only on the amount of the withdrawal that exceeds total
payments. Withdrawals greater than payments made are treated as ordinary income.
During the first 15 Policy years, however, an "interest first" rule applies to
distributions of cash required under Section 7702 of the Internal Revenue Code
("Code") because of a reduction in benefits under the Policy.
The Net Death Benefit under the Policy is excludable from the gross income of
the beneficiary. However, in some circumstances federal estate tax may apply to
the Net Death Benefit or the Policy Value.
A Policy may be considered a "modified endowment contract." This may occur if
total payments during the first seven Policy years (or within seven years of a
material change in the Policy) exceed the total net level payments payable, if
the Policy had provided paid-up future benefits after seven level payments. If
the Policy is considered a modified endowment contract, all distributions
(including Policy loans, partial withdrawals, surrenders and assignments) will
be taxed on an "income-first" basis. Also, a 10% penalty tax may be imposed on
that part of a distribution that is includible in income.
------------------------
This Summary is intended to provide only a very brief overview of the more
significant aspects of the Policy. The Prospectus and the Policy provide further
detail. The Policy and its attached application or enrollment form are the
entire agreement between you and the Company.
THE PURPOSE OF THE POLICY IS TO PROVIDE INSURANCE PROTECTION FOR THE
BENEFICIARY. IT MAY NOT BE ADVANTAGEOUS TO PURCHASE FLEXIBLE PREMIUM VARIABLE
LIFE INSURANCE AS A REPLACEMENT FOR YOUR CURRENT LIFE INSURANCE, OR IF YOU
ALREADY OWN A FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY.
NO CLAIM IS MADE THAT THE POLICY IS IN ANY WAY SIMILAR OR COMPARABLE TO A
SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
16
<PAGE>
DESCRIPTION OF THE COMPANY, THE VARIABLE ACCOUNT,
AND THE UNDERLYING FUNDS
THE COMPANY
The Company is a life insurance company organized under the laws of Delaware in
1974. As of December 31, 1999, the Company had over $17 billion in assets and
over $26 billion of life insurance in force. We are a wholly owned subsidiary of
First Allmerica Financial Life Insurance Company, formerly named State Mutual
Life Assurance Company of America ("First Allmerica"), which in turn is a
wholly-owned subsidiary of Allmerica Financial Corporation. First Allmerica was
organized under the laws of Massachusetts in 1844 and is the fifth oldest life
insurance company in America. Our Principal Office is 440 Lincoln Street,
Worcester, Massachusetts 01653, Telephone 1-800-628-6267. We are subject to the
laws of the state of Delaware, to regulation by the Commissioner of Insurance of
Delaware, and to other laws and regulations where we are licensed to operate.
The Company is a charter member of the Insurance Marketplace Standards
Association ("IMSA"). Companies that belong to IMSA subscribe to a rigorous set
of standards that cover the various aspects of sales and service for
individually sold life insurance and annuities. IMSA members have adopted
policies and procedures that demonstrate a commitment to honesty, fairness, and
integrity in all customer contacts involving sales and service of individual
life insurance and annuity products.
THE VARIABLE ACCOUNT
The Variable Account is a separate investment account that is currently
comprised of four sub-accounts. Each sub-account invests in a corresponding fund
of AIM Variable Insurance Funds, Inc., The Alger American Fund, Allmerica
Investment Trust, Dreyfus Variable Investment Fund, Dreyfus Socially Responsible
Growth Fund, Inc., Evergreen Variable Annuity Trust, Federated Insurance Series,
MFS Variable Insurance Trust, Oppenheimer Variable Account Funds, and Templeton
Variable Products Series Fund. The assets used to fund the variable part of the
Policies are set aside in sub-accounts and are separate from our general assets.
We administer and account for each sub-account as part of our general business.
However, income, capital gains and capital losses are allocated to each
sub-account without regard to any of our other income, capital gains or capital
losses. Under Delaware law, the assets of the Variable Account may not be
charged with any liabilities arising out of any other business of ours.
Our Board of Directors authorized the establishment of the Variable Account by
vote on June 13, 1996. The Variable Account meets the definition of "separate
account" under federal securities laws. It is registered with the Securities and
Exchange Commission ("SEC") as a unit investment trust under the Investment
Company Act of 1940 ("1940 Act"). This registration does not involve SEC
supervision of the management or investment practices or policies of the
Variable Account or of the Company. We reserve the right, subject to law, to
change the names of the Variable Account and the sub-accounts.
THE UNDERLYING FUNDS
Each Underlying Fund pays a management fee to an investment manager or adviser
for managing and providing services to the Underlying Fund. However, management
fee waivers and/or reimbursements may be in effect for certain or all of the
Underlying Funds. For specific information regarding the existence and effect of
any waiver/reimbursements see "WHAT ARE THE EXPENSES AND FEES OF THE FUNDS?"
under the SUMMARY OF FEES AND EXPENSES section. The prospectuses of the
Underlying Funds also contain information regarding fees for advisory services
and should be read in conjunction with this prospectus.
17
<PAGE>
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Variable Insurance Funds, Inc. ("AVIF") was organized as a Maryland
corporation on January 22, 1993 and changed to a Delaware business trust on
April 17, 2000. The investment adviser for the AIM V.I. Value Fund and AIM V.I.
Capital Appreciation Fund is A I M Advisors, Inc. ("AIM"). AIM was organized in
1976, and, together with its subsidiaries, manages or advises over 120
investment company portfolios encompassing a broad range of investment
objectives. AIM is located at 11 Greenway Plaza, Suite 100, Houston, TX 77046.
ALLMERICA INVESTMENT TRUST
Allmerica Investment Trust ("AIT") was established as a Massachusetts business
trust on October 11, 1984. The investment adviser for AIT is Allmerica Financial
Investment Management Services, Inc., which is a wholly-owned subsidiary of the
Company. Allmerica Asset Management, Inc., an affiliate of the Company, is the
subadviser for the Money Market Fund. Both located at 440 Lincoln Street,
Worcester, MA 01653.
THE ALGER AMERICAN FUND
The Alger American Fund ("Alger") was established as a Massachusetts business
trust on April 6, 1988. Fred Alger Management, Inc. is the investment manager of
Alger. Fred Alger Management, Inc. is the investment adviser for the Alger
American Balanced, Alger American Growth, Alger American Leveraged AllCap, and
Alger American Small Capitalization Portfolios. Fred Alger Management, Inc. is
located at 1 World Trade Center, Suite 9333, New York, NY 10048.
DREYFUS VARIABLE INVESTMENT FUND
The Dreyfus Variable Investment Fund is a Massachusetts business trust that
commenced operations May 1, 1998. The Dreyfus Corporation serves as the
investment adviser to the Dreyfus investment portfolios. Dreyfus is located at
144 Glenn Curtiss Boulevard, Uniondale, NY 11556.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. (the "Dreyfus Socially
Responsible Growth Fund") was incorporated under Maryland law on July 20, 1992,
commenced operations on October 7, 1993 and is registered with the SEC as an
open-end management investment company. The Dreyfus Corporation serves as the
investment adviser to the Dreyfus Socially Responsible Growth Fund and NCM
Capital Management Group, Inc. provides sub-investment advisory services.
Dreyfus is located at 144 Glenn Curtiss Boulevard, Uniondale, NY 11556.
EVERGREEN VARIABLE ANNUITY TRUST
The Evergreen Variable Annuity Trust (the "Evergreen Trust") is a Massachusetts
business trust that is registered with the SEC as an open-end management
investment company. Four of the six Series of the Evergreen Trust are available
under the Policies. The investment adviser to the Evergreen VA Equity Index Fund
is Evergreen Investment Management ("EIM"). EIM, also known as First Capital
Group, is a division of First Union National Bank of North Carolina, which in
turn is a subsidiary of First Union Corporation. The investment adviser to the
Evergreen VA Global Leaders Fund and Evergreen VA Small Cap Value Fund is
Evergreen Asset Management Corp. ("EAMC"), a wholly-owned subsidiary of FUNB.
Lieber & Company acts as sub-advisor to these and provides investment research,
information, investment recommendation advice and assistance to EAMC, and is
reimbursed by EAMC for the costs of providing such sub-advisory services. EAMC
is also the investment adviser to the Evergreen VA Foundation Fund. Evergreen is
located at 200 Berkeley Street, Boston, MA 02116.
FEDERATED INSURANCE SERIES
Federated Insurance Series ("FIS ") was established under the laws of the
Commonwealth of Massachusetts on September 15, 1993. FIS changed its name from
Insurance Management Series to Federated Insurance Series on November 14, 1995.
The Fund's investment adviser is Federated Investment Management Company
("Federated"). Federated, formerly known as Federated Advisers, changed its name
effective March 31, 1999. Federated is located at Federated Investors Tower,
1001 Liberty Avenue, Pittsburgh, PA 15222.
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<PAGE>
MFS-VARIABLE INSURANCE TRUST
MFS Variable Insurance Trust (the "MFS Trust") is a Massachusetts business trust
organized on February 1, 1994. The investment adviser of MFS Emerging Growth
Series and MFS Growth With Income Series is Massachusetts Financial Services
Company ("MFS"), America's oldest mutual fund organization. MFS and its
predecessor organizations have a history of money management dating from 1924.
MFS is located at 500 Boston Street, Boston, Massachusetts 02116.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Variable Account Funds ("Oppenheimer") was organized as a
Massachusetts business trust in 1984. The investment adviser for the Oppenheimer
Aggressive Growth Fund/VA and the Oppenheimer Main Street Growth & Income
Fund/VA is OppenheimerFunds, Inc. ("OppenheimerFunds"). OppenheimerFunds has
operated as an investment adviser since 1959. Oppenheimer is located at 6803 S.
Tucson Way, Englewood, Colorado 80112.
TEMPLETON VARIABLE PRODUCTS SERIES FUND
Templeton Variable Products Series Fund ("TVP") and the funds' investment
managers and their affiliates manage over $224 billion (as of December 31, 1999)
in assets. In 1992, Franklin joined forces with Templeton, a pioneer in
international investing. The Mutual Advisers organization became part of the
Franklin Templeton organization four years later. Templeton Investment Counsel,
Inc. ("TICI") is adviser to both Templeton Asset Allocation and Templeton
International Fund. Templeton Asset Allocation Fund's debt securities are
managed by a team of Templeton Global Bond Managers, a division ("Global Bond
Managers") of TICI. Templeton is located at 100 Fountain Parkway, St.
Petersburg, Florida 33716.
INVESTMENT OBJECTIVES AND POLICIES
A summary of investment objectives of the funds is set forth below. BEFORE
INVESTING, READ CAREFULLY THE PROSPECTUSES OF THE UNDERLYING FUNDS THAT
ACCOMPANY THIS PROSPECTUS. THEY CONTAIN MORE DETAILED INFORMATION ON THE
INVESTMENT OBJECTIVES, RESTRICTIONS, RISKS AND EXPENSES OF THE UNDERLYING
FUNDS.Statements of Additional Information for the funds are available on
request. The investment objectives of the funds may not be achieved. Policy
Value may be less than the aggregate payments made under the Policy.
AIM VARIABLE INSURANCE FUNDS, INC.:
AIM V.I. VALUE FUND -- seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by the fund's investment advisor to be
undervalued relative to the investment advisor's appraisal of the current or
projected earnings of the companies issuing the securities, or relative to
current market values of assets owned by the companies issuing the securities or
relative to the equity market generally. Income is a secondary objective.
AIM V.I. CAPITAL APPRECIATION FUND -- seeks capital appreciation through
investments in common stocks, with emphasis on medium-sized and smaller emerging
growth companies.
THE ALGER AMERICAN FUND PORTFOLIOS:
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO -- seeks long-term capital
appreciation. Under normal circumstances, the Portfolio invests in the equity
securities of companies of any size that demonstrate promising growth potential.
ALGER AMERICAN BALANCED PORTFOLIO -- seeks current income and long-term capital
appreciation. The Portfolio focuses on stocks of companies with growth potential
and fixed-income securities, with emphasis on income-producing securities which
appear to have some potential for capital appreciation.
19
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO -- seeks long-term capital appreciation. The
Portfolio focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO -- seeks long-term capital
appreciation. The Portfolio focuses on small, fast-growing companies that offer
innovative products, services or technologies to a rapidly expanding
marketplace.
ALLMERICA INVESTMENT TRUST:
AIT MONEY MARKET FUND -- seeks to obtain maximum current income consistent with
the preservation of capital and liquidity.
DREYFUS VARIABLE INVESTMENT FUND:
DREYFUS CAPITAL APPRECIATION PORTFOLIO -- seeks long-term capital growth
consistent with the preservation of capital; current income is a secondary goal.
The Portfolio invests in common stocks focusing on "blue chip" companies with
total market values of more than $5 billion at the time of purchase.
DREYFUS QUALITY BOND PORTFOLIO -- seeks to maximize current income as is
consistent with the preservation of capital and the maintenance of liquidity.
The Portfolio invests at least 80% of net assets in fixed-income securities
that, when purchased, are rated A or better or are the unrated equivalent as
determined by Dreyfus, and in securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.:
DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND -- seeks to provide capital growth,
with current income as a secondary goal. To pursue these goals, the fund invests
primarily in the common stock of companies that, in the opinion of the fund's
management, meet traditional investment standards and conduct their business in
a manner that contributes to the enhancement of the quality of life in America.
EVERGREEN VARIABLE ANNUITY TRUST:
EVERGREEN VA EQUITY INDEX FUND -- seeks investment results that achieve price
and yield performance similar to the Standard and Poor's 500 Composite Stock
Price Index. The Fund invests substantially all of its total assets in equity
securities that represent a composite of the S&P 500 Index.
EVERGREEN VA FOUNDATION FUND -- seeks, in order of priority, reasonable income,
conservation of capital and capital appreciation. The Fund invests principally
in income-producing common and preferred stocks, securities convertible into or
exchangeable for common stocks and fixed income securities.
EVERGREEN VA GLOBAL LEADERS FUND -- seeks to achieve capital appreciation by
investing primarily in a diversified portfolio of U.S. and non-U.S. equity
securities of companies located in the world's major industrialized countries.
The Fund's investment adviser will attempt to screen the largest companies in
the world's major industrialized countries and cause the Fund to invest, in the
opinion of the Fund's investment adviser, in the 100 best based on certain
qualitative and quantitative criteria.
EVERGREEN VA SMALL CAP VALUE FUND -- seeks to achieve a return consisting of
current income and capital appreciation. The Fund invests in common and
preferred stocks, securities convertible into or exchangeable for common stocks
and fixed income securities. In attempting to achieve its objective, the Fund
invests primarily in companies with total market capitalizations of less than $1
billion.
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FEDERATED INSURANCE SERIES:
FEDERATED AMERICAN LEADERS FUND II -- seeks long-term growth of capital and its
secondary objective is to provide income. The Fund pursues its investment
objectives by investing primarily in equity securities of large capitalization
companies that are in the top 25% of their industry sectors in terms of
revenues, are characterized by sound management and have the ability to finance
expected growth.
FEDERATED HIGH INCOME BOND FUND II -- seeks high current income by investing
primarily in a professionally managed, diversified portfolio of fixed income
securities. The Fund pursues its investment objective by investing in a
diversified portfolio of high yield, lower-rated corporate bonds.
FEDERATED PRIME MONEY FUND II -- seeks to provide current income consistent with
stability of principal and liquidity.
MFS - VARIABLE INSURANCE TRUST:
MFS -- EMERGING GROWTH SERIES -- seeks to provide long-term growth of capital by
investing primarily in common stocks and related securities (such as preferred
stocks, convertible securities and depositary receipts for those securities) of
emerging growth companies.
MFS -- GROWTH WITH INCOME SERIES -- seeks to provide reasonable current income
and long-term growth of capital and income by investing primarily in common
stocks and related securities (such as preferred stocks, convertible securities
and depositary receipts for those securities).
MFS -- UTILITIES SERIES -- seeks capital growth and current income (income above
that available from a portfolio invested entirely in equity securities) by
investing primarily in equity and debt securities of domestic and foreign
companies in the utilities industry.
OPPENHEIMER VARIABLE ACCOUNT FUNDS:
OPPENHEIMER AGGRESSIVE GROWTH FUND/VA -- seeks to achieve capital appreciation
by investing in "growth-type" companies. The Fund invests mainly in common
stocks.
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA -- seeks high total return,
which includes growth in the value of its shares as well as current income, from
equity and debt securities. The Fund may focus on small to medium capitalization
common stocks, bonds and convertible securities.
OPPENHEIMER SMALL CAP GROWTH FUND/VA -- seeks capital appreciation. The Fund
invests mainly in common stocks of companies with market capitalization less
than $1billion.
OPPENHEIMER STRATEGIC BOND FUND/VA -- seeks a high level of current income
principally derived from interest on debt securities. The Fund invests mainly in
three market sectors: debt securities of foreign governments and companies, U.S.
government securities, and lower-rated high yield securities of U.S. companies.
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TEMPLETON VARIABLE PRODUCTS SERIES FUND:
TEMPLETON INTERNATIONAL FUND -- seeks long-term capital growth. The Fund invests
primarily in stocks of companies located outside the United States, including in
emerging markets.
TEMPLETON ASSET ALLOCATION FUND -- seeks high total return. Under normal market
conditions, the Fund invests in equity securities of companies in any nation,
debt securities of companies and governments of any nation, and in money market
instruments.
* * *
If there is a material change in the investment policy of an Underlying Fund, we
will notify you of the change. If you have Policy Value allocated to that fund,
you may without charge reallocate the Policy Value to another fund or to the
Fixed Account. We must receive your written request within 60 days of the LATEST
of the:
- Effective date of the change in the investment policy OR
- Receipt of the notice of your right to transfer.
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THE POLICY
APPLYING FOR A POLICY
After receiving a completed application or enrollment form from a prospective
Policy owner, we will begin underwriting to decide the insurability of the
proposed Insured. We may require medical examinations and other information
before deciding insurability. We issue a Policy only after underwriting has been
completed. We may reject an application or enrollment form that does not meet
our underwriting guidelines.
Simplified underwriting may be available if the Face Amount applied for is
$250,000 or less. However, if a Policy is issued on the basis of simplified
underwriting, cost of Monthly Policy Charge rates are higher than they would be
if the Policy were issued using conventional underwriting methods. In addition,
if the Policy is issued on the basis of simplified underwriting, optional
benefit riders may not be available.
If a prospective Policy owner makes an initial payment of at least one minimum
monthly payment, we will provide fixed temporary insurance prior to issue. The
fixed temporary insurance will be the insurance applied for, up to a maximum of
$500,000, depending on age and underwriting class. This coverage will continue
for a maximum of 90 days from the date of the application or enrollment form or,
if required the completed medical exam. If death is by suicide, we will return
only the premium paid.
If no temporary insurance was in effect, on Policy delivery we will require a
sufficient payment to place the insurance in force. If you made payments before
the date of issue, we will allocate the payments to the Fixed Account. IF THE
POLICY IS NOT ISSUED AND ACCEPTED BY YOU, THE PAYMENTS WILL BE RETURNED TO YOU
WITHOUT INTEREST.
If the Policy is issued, we will allocate your Policy Value on issuance
according to your instructions. However, if your Policy provides for a full
refund of payments under its "Right to Examine Policy" provision as required in
your state (see THE POLICY -- "Free-Look Period"), we will initially allocate
your sub-account investments to the Money Market Fund. This allocation to the
Money Market Fund will be until the fourth day after the expiration of the
"Right to Examine" provision of your policy.
After this, we will allocate all amounts according to your investment choices.
FREE-LOOK PERIOD
The Policy provides for a free look period. You have the right to examine and
cancel your Policy by returning it to us or to one of our representatives on or
before the 10 days after you receive the Policy or longer when state law so
requires. There may be a longer period in certain jurisdictions. See the "Right
to Examine" provision in your Contract.
If your Policy provides for a full refund under its "Right to Examine Policy"
provision, the Company will mail a refund to you within seven days. We may delay
a refund of any payment made by check until the check has cleared your bank.
Where required by state law, however, your refund will be the GREATER of
- Your entire payment OR
- The Policy Value PLUS deductions under the Policy for taxes, charges or
fees
If your Policy does not provide for a full refund, you will receive
- Amounts allocated to the Fixed Account PLUS
- The Policy Value in the Variable Account PLUS
- All fees, charges and taxes which have been imposed on amounts in the
Variable Account.
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After an increase in Face Amount, we will mail or deliver a notice of a free
look for the increase. You will have the right to cancel the increase before the
10 days after you receive the Policy or longer when state law so requires. There
may be a longer period in certain jurisdictions; see the "Right to Examine"
provision in your Contract.
On canceling the increase, you will receive a credit to your Policy Value of the
charges deducted for the increase. Upon request, we will refund the amount of
the credit to you.
CONVERSION PRIVILEGE
Within 24 months of the Date of Issue or an increase in Face Amount, you can
convert your Policy into a Fixed Policy by transferring all Policy Value in the
sub-accounts to the Fixed Account. The conversion will take effect at the end of
the valuation period in which we receive, at our Principal Office, notice of the
conversion satisfactory to us. There is no charge for this conversion. We will
allocate all future payments to the Fixed Account, unless you instruct us
otherwise.
PAYMENTS
Payments are payable to the Company. Payments may be made by mail to our
Principal Office or through our authorized representative. All payments after
the initial payment are credited to the Variable Account or Fixed Account on the
date of receipt at the Principal Office.
You may establish a schedule of planned payments. If you do, we will bill you at
regular intervals. Making planned payments will not guarantee that the Policy
will remain in force. The Policy will not necessarily lapse if you fail to make
planned payments. You may make unscheduled payments before the Final Payment
Date or skip planned payments. If the Guaranteed Death Benefit Rider is in
effect, there are certain minimum payment requirements.
The Policy does not limit payments as to frequency and number. However, no
payment may be less than $100 without our consent. You may choose a monthly
automatic payment method of making payments. Under this method, each month we
will deduct payments from your checking account and apply them to your Policy.
The minimum automatic payment allowed is $50. Payments must be sufficient to
provide a positive Policy Value (less Outstanding Loans) at the end of each
Policy month or the Policy may lapse. See POLICY TERMINATION AND REINSTATEMENT.
During the first 48 Policy months following the Date of Issue or an increase in
Face Amount, a guarantee may apply to prevent the Policy from lapsing. The
guarantee will apply during this period if you make payments that, when reduced
by policy loans, partial withdrawals and partial withdrawal transaction charge,
equal or exceed the required minimum monthly payments. The required minimum
monthly payments are based on the number of months the Policy, increase in Face
Amount or policy change that causes a change in the minimum monthly payment has
been in force. MAKING MONTHLY PAYMENTS EQUAL TO THE MINIMUM MONTHLY PAYMENTS
DOES NOT GUARANTEE THAT THE POLICY WILL REMAIN IN FORCE, EXCEPT AS STATED IN
THIS PARAGRAPH.
Under Death Benefit Option 1 and Death Benefit Option 2, total payments may not
exceed the current maximum payment limits under federal tax law. These limits
will change with a change in Face Amount, underwriting reclassifications, the
addition or deletion of a Rider, or a change between Death Benefit Option 1 and
Death Benefit Option 2. Where total payments would exceed the current maximum
payment limits, the excess first will be applied to repay any Outstanding Loans.
If there are remaining excess payments, any such excess payments will be
returned to you. However, we will accept a payment needed to prevent Policy
lapse during a Policy year. See POLICY TERMINATION AND REINSTATEMENT.
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ALLOCATION OF PAYMENTS
In the application or enrollment form for your Policy, you decide the initial
allocation of the payment among the Fixed Account and the sub-accounts. You may
allocate payments to one or more of the sub-accounts. The minimum amount that
you may allocate to a sub-account is 1% of the payment. Allocation percentages
must be in whole numbers (for example, 33 1/3% may not be chosen) and must total
100%.
You may change the allocation of future payments by written request or telephone
request. You have the privilege to make telephone requests, unless you elected
not to have the privilege on the application or enrollment form. The policy of
the Company and its representatives and affiliates is that they will not be
responsible for losses resulting from acting on telephone requests reasonably
believed to be genuine. The Company will employ reasonable methods to confirm
that instructions communicated by telephone are genuine. Such procedures may
include, among others, requiring some form of personal identification prior to
acting upon instructions received by telephone. All telephone requests are
tape-recorded.
An allocation change will take effect on the date of receipt of the notice at
the Principal Office. No charge is currently imposed for changing payment
allocation instructions. We reserve the right to impose a charge in the future,
but guarantee that the charge will not exceed $25.
The Policy Value in the sub-accounts will vary with investment experience. You
bear this investment risk. Investment performance may also affect the death
benefit. Please review your allocations of payments and Policy Value as market
conditions and your financial planning needs change.
TRANSFER PRIVILEGE
Subject to our then current rules, you may transfer amounts among the
sub-accounts or between a sub-account and the Fixed Account. (You may not
transfer that portion of the Policy Value held in the Fixed Account that secures
a Policy loan.) We will make transfers at your written request or telephone
request, as described in THE POLICY -- "Allocation of Payments." Transfers are
effected at the value next computed after receipt of the transfer order.
Currently, the first 12 transfers in a Policy year are free. After that, we will
deduct a $10 transfer charge from amounts transferred in that Policy year. We
reserve the right to increase the charge, but we guarantee the charge will never
exceed $25. Any transfers made for a conversion privilege, Policy loan or
material change in investment policy or under an automatic transfer option will
not count toward the 12 free transfers.
The transfer privilege is subject to our consent. We reserve the right to impose
limits on transfers including, but not limited to, the:
- Minimum amount that may be transferred
- Minimum amount that may remain in a sub-account following a transfer from
that sub-account
- Minimum period between transfers involving the Fixed Account
- Maximum amounts that may be transferred from the Fixed Account
Transfers to and from the Fixed Account are currently permitted only if:
- the amount transferred from the Fixed Account in each transfer may not
exceed the lesser of $100,000 or 25% of the Policy Value in the Fixed
Account.
- You may make only one transfer involving the Fixed Account in each policy
quarter
These rules are subject to change by the Company.
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DOLLAR-COST AVERAGING OPTION AND AUTOMATIC REBALANCING OPTION
You may have automatic transfers of at least $100 a month made on a periodic
basis:
- from the Sub-Accounts which invest in the Money Market Fund of the Trust
and the Fixed Account, respectively, to one or more of the other
Sub-Accounts ("Dollar-Cost Averaging Option"), or
- to reallocate Policy Value among the Sub-Accounts ("Automatic Rebalancing
Option").
Automatic transfers may be made on a monthly, quarterly, semi-annual or annual
schedule. You may request the day of the month on which automatic transfers will
occur (the "transfer date). If you do not choose a transfer date, the transfer
date will be the 15th of the scheduled month. However, if the transfer date is
not a business day, the automatic transfer will be processed on the next
business day. Each automatic transfer is free, and will not reduce the remaining
number of transfers that are free in a Policy year.
DEATH BENEFIT
GUIDELINE MINIMUM DEATH BENEFIT. In order to qualify as "life insurance" under
the Federal tax laws, this Policy must provide a Guideline Minimum Death
Benefit. The Guideline Minimum Death Benefit will be determined as of the date
of death. If Death Benefit Option 1 or Death Benefit Option 2 is in effect, the
Guideline Minimum Death Benefit is obtained by multiplying the Policy Value by a
percentage factor for the Insured's attained age, as shown in the table in
Appendix A. If Death Benefit Option 3 is in effect, the Guideline Minimum Death
Benefit is obtained by multiplying the Policy Value by a percentage for the
Insured's attained age, sex, and underwriting class, as set forth in the Policy.
Guideline Minimum Death Benefit Table in Appendix A is used when Death Benefit
Option 1 or Death Benefit Option 2 is in effect. The Guideline Minimum Death
Benefit Table in Appendix A reflects the requirements of the "guideline
premium/guideline death benefit" test set forth in the Federal tax laws.
Guideline Minimum Death Benefit factors are set forth in the Policy when Death
Benefit Option 3 is in effect. These factors reflect the requirements of the
"cash value accumulation" test set forth in the Federal tax laws. The Guideline
Minimum Death Benefit factors will be adjusted to conform to any changes in the
tax laws. For more information, see ELECTION OF DEATH BENEFIT OPTIONS, below.
NET DEATH BENEFIT. If the Policy is in force on the Insured's death, we will,
with due proof of death, pay the Net Death Benefit to the named beneficiary. We
will normally pay the Net Death Benefit within seven days of receiving due proof
of the Insured's death, but we may delay payment of Net Death Benefits. See
OTHER POLICY PROVISIONS -- "Delay of Payments." The beneficiary may receive the
Net Death Benefit in a lump sum or under a payment option. See THE
POLICY --"Payment Options."
The Net Death Benefit depends on the current Face Amount and Death Benefit
Option that is in effect on the date of death. Before the Final Payment Date,
the Net Death Benefit is:
- The death benefit provided under Death Benefit Option 1, Death Benefit
Option 2, or Death Benefit Option 3, whichever is elected and in effect on
the date of death, PLUS
- Any other insurance on the Insured's life that is provided by Rider, MINUS
- Any Outstanding Loan, any partial withdrawals, partial withdrawal
transaction charge, and due and unpaid monthly charges through the Policy
month in which the Insured dies.
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After the Final Payment Date, if the Guaranteed Death Benefit Rider is not in
effect, the Net Death Benefit is:
- The Policy Value MINUS
- Any Outstanding Loan
Where permitted by state law, we will compute the Net Death Benefit on
- The date we receive due proof of the Insured's death under Death Benefit
Option 2 OR
- The date of death for Death Benefit Options 1 and 3.
If required by state law, we will compute the Net Death Benefit on the date of
death for Death Benefit Option 2 as well as for Death Benefit Options 1 and 3.
ELECTION OF DEATH BENEFIT OPTIONS
Federal tax law requires a Guideline Minimum Death Benefit in relation to Policy
Value for a Contract to qualify as life insurance. Under current Federal tax
law, either the Guideline Premium Test or the Cash Value Accumulation Test can
be used to determine if the Policy complies with the definition of "life
insurance" under the Code. At the time of application, you may elect either of
the tests. If you elect the Guideline Premium Test, you will have the choice of
electing Death Benefit Option 1 or Death Benefit Option 2. If you elect the Cash
Value Accumulation Test, Death Benefit Option 3 will apply. APPLICANTS FOR A
POLICY SHOULD CONSULT A QUALIFIED TAX ADVISER IN CHOOSING BETWEEN THE GUIDELINE
PREMIUM TEST AND THE CASH VALUE ACCUMULATION TEST AND IN CHOOSING A DEATH
BENEFIT OPTION.
GUIDELINE PREMIUM TEST AND CASH VALUE ACCUMULATION TEST -- There are two main
differences between the Guideline Premium Test and the Cash Value Accumulation
Test. First, the Guideline Premium Test limits the amount of premium that may be
paid into a Policy, while no such limits apply under the Cash Value Accumulation
Test. Second, the factors that determine the Guideline Minimum Death Benefit
relative to the Policy Value are different.
The Guideline Premium Test limits the amount of premiums payable under a Policy
to a certain amount for an Insured of a particular age, sex, and underwriting
class. Under the Guideline Premium Test, you may choose between Death Benefit
Option 1 or Death Benefit Option 2, as described below. After issuance of the
Contract, you may change the selection from Death Benefit Option 1 to Death
Benefit Option 2, or vice versa.
The Cash Value Accumulation Test requires that the Death Benefit must be
sufficient so that the cash Surrender Value does not at any time exceed the net
single premium required to fund the future benefits under the Contract. Under
the Cash Value Accumulation Test, required increases in the Guideline Minimum
Death Benefit (due to growth in Policy Value) will generally be greater than
under the Guideline Premium Test. If you choose the Cash Value Accumulation
Test, ONLY Death Benefit Option 3 is available. You may NOT switch between Death
Benefit Option 3 to Death Benefit Option 1 or to Death Benefit Option 2, or vice
versa.
DEATH BENEFIT OPTION 1 -- LEVEL DEATH BENEFIT WITH GUIDELINE PREMIUM TEST. Under
Option 1, the Death Benefit is equal to the greater of the Face Amount or the
Guideline Minimum Death Benefit, as set forth in Table A in Appendix A. The
Death Benefit will remain level unless the Guideline Minimum Death Benefit is
greater than the Face Amount. If the Guideline Minimum Death Benefit is greater
than the Face Amount, the Death Benefit will vary as the Policy Value varies.
Death Benefit Option 1 will offer the best opportunity for the Policy Value to
increase without increasing the Death Benefit as quickly as it might under the
other options. The Death Benefit will never go below the Face Amount.
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DEATH BENEFIT OPTION 2 -- ADJUSTABLE DEATH BENEFIT WITH GUIDELINE PREMIUM TEST.
Under Option 2, the Death Benefit is equal to the greater of (1) the Face Amount
plus the Policy Value or (2) the Guideline Minimum Death Benefit, as set forth
in Table A in Appendix A. The Death Benefit will vary as the Policy Value
changes, but will never be less than the Face Amount.
Death Benefit Option 2 will offer the best opportunity to have an increasing
Death Benefit as early as possible. The Death Benefit will increase whenever
there is an increase in the Policy Value, and will decrease whenever there is a
decrease in the Policy Value. The Death Benefit will never go below the Face
Amount.
DEATH BENEFIT OPTION 3 -- LEVEL DEATH BENEFIT WITH CASH VALUE ACCUMULATION TEST.
Under Option 3, the Death Benefit will equal the greater of (1) the Face Amount
or (2) the Policy Value multiplied by the applicable factor as set forth in the
Policy. The applicable factor depends upon the Underwriting Class, sex (unisex
if required by law), and then-attained age of the Insured. The factors decrease
slightly from year to year as the attained age of the Insured increases.
Death Benefit Option 3 will offer the best opportunity for an increasing death
benefit in later Policy years and/ or to fund the Policy at the "seven-pay"
limit for the full seven years. When the Policy Value multiplied by the
applicable death benefit factor exceeds the Face Amount, the Death Benefit will
increase whenever there is an increase in the Policy Value, and will decrease
whenever there is a decrease in the Policy Value. However, the Death Benefit
will never go below the Face Amount.
ALL DEATH BENEFIT OPTIONS MAY NOT BE AVAILABLE IN ALL STATES.
ILLUSTRATIONS
For the purposes of the following illustrations, assume that the Insured is
under the age of 40, and that there is no Outstanding Loan.
ILLUSTRATION OF DEATH BENEFIT OPTION 1 -- Under Option 1, a Policy with a
$100,000 Face Amount will have a death benefit of $100,000. However, because the
death benefit must be equal to or greater than 250% of Policy Value (from
Appendix A), if the Policy Value exceeds $40,000 the death benefit will exceed
the $100,000 Face Amount. In this example, each dollar of Policy Value above
$40,000 will increase the death benefit by $2.50.
For example, a Policy with a Policy Value of:
- $50,000 will have a Guideline Minimum Death Benefit of $125,000 (e.g.,
$50,000 X 2.50);
- $60,000 will produce a Guideline Minimum Death Benefit of $150,000 (e.g.,
$60,000 X 2.50)
- $75,000 will produce a Guideline Minimum Death Benefit of $187,500 (e.g.,
$75,000 X 2.50).
Similarly, if Policy Value exceeds $40,000, each dollar taken out of Policy
Value will reduce the death benefit by $2.50. If, for example, the Policy Value
is reduced from $60,000 to $50,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $150,000
to $125,000. However, the death benefit will never be less than the Face Amount
of the Policy.
The Guideline Minimum Death Benefit Factor becomes lower as the Insured's age
increases. If the Insured's age in the above example were, for example, 50
(rather than between zero and 40), the applicable percentage would be 185%. The
death benefit would be greater than $100,000 Face Amount when the Policy Value
exceeds $54,054 (rather than $40,000), and each dollar then added to or taken
from Policy Value would change the death benefit by $1.85.
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ILLUSTRATION OF DEATH BENEFIT OPTION 2 -- Under Option 2, assume that the
Insured is under the age of 40 and that there is no Outstanding Loan. The Face
Amount of the Policy is $100,000.
Under Death Benefit Option 2, a Policy with a Face Amount of $100,000 will
produce a death benefit of $100,000 plus Policy Value. For example, a Policy
with Policy Value of :
- $10,000 will produce a death benefit of $110,000 (e.g., $100,000 +
$10,000);
- $25,000 will produce a death benefit of $125,000 (e.g., $100,000 +
$25,000);
- $50,000 will produce a death benefit of $150,000 (e.g., $100,000 +
$50,000).
However, the Guideline Minimum Death Benefit must be at least 250% of the Policy
Value. Therefore, if the Policy Value is greater than $66,667, 250% of the
Policy Value will be Guideline Minimum Death Benefit. The Guideline Minimum
Death Benefit will be greater than the Face Amount plus Policy Value. In this
example, each dollar of Policy Value above $66,667 will increase the death
benefit by $2.50. For example, if the Policy Value is:
- $70,000, the Guideline Minimum Death Benefit will be $175,000 (e.g.,
$70,000 X 2.50);
- $80,000, the Guideline Minimum Death Benefit will be $200,000 (e.g.,
$80,000 X 2.50);
- $90,000, the Guideline Minimum Death Benefit will be $225,000 (e.g.,
$90,000 X 2.50).
Similarly, if Policy Value exceeds $66,667, each dollar taken out of Policy
Value will reduce the death benefit by $2.50. If, for example, the Policy Value
is reduced from $80,000 to $70,000 because of partial withdrawals, charges or
negative investment performance, the death benefit will be reduced from $200,000
to $175,000. If, however, the Policy Value TIMES
- the Guideline Minimum Death Benefit factor is LESS THAN
- The Face Amount PLUS Policy Value, THEN
- The death benefit will be the Face Amount PLUS Policy Value.
The Guideline Minimum Death Benefit factor becomes lower as the Insured's age
increases. If the Insured's age in the above example were 50, the death benefit
must be at least 185% of the Policy Value. The death benefit would be the sum of
the Policy Value plus $100,000 unless the Policy Value exceeded $117,647 (rather
than $66,667). Each dollar added to or subtracted from the Policy would change
the death benefit by $1.85.
ILLUSTRATION OF DEATH BENEFIT OPTION 3 -- In this illustration, assume that the
insured is a male, age 35, non-smoker and that there is no Outstanding Loan.
Under Death Benefit Option 3, a Policy with a Face Amount of $100,000 will have
a death benefit of $100,000. However, because the death benefit must be equal to
or greater than 437% of Policy Value (in policy year 1), if the Policy Value
exceeds $22,883 the death benefit will exceed the $100,000 face amount. In this
example, each dollar of Policy Value above $22,883 will increase the death
benefit by $4.37.
For example, a Policy with a Policy Value of:
- $50,000 will have a Death Benefit of $218,500 ($50,000 x 4.37);
- $60,000 will produce a Death Benefit of $262,200 ($60,000 x 4.37);
- $75,000 will produce a Death Benefit of $327,750 ($75,000 x 4.37).
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Similarly, if Policy Value exceeds $22,883, each dollar taken out of Policy
Value will reduce the death benefit by $4.37. If, for example, the Policy Value
is reduced from $60,000 to $50,000 because of partial withdrawals, charges, or
negative investment performance, the death benefit will be reduced from $262,200
to $218,500. If, however, the product of the Policy Value times the applicable
percentage is less than the face amount, the death benefit will equal the face
amount.
The applicable percentage becomes lower as the Insured's age increases. If the
Insured's age in the above example were, for example, 50 (rather than 35), the
applicable percentage would be 270% (in policy year 1). The death benefit would
not exceed the $100,000 face amount unless the Policy Value exceeded $37,037
(rather than $22,883), and each dollar then added to or taken from Policy Value
would change the death benefit by $2.70.
CHANGING BETWEEN DEATH BENEFIT OPTION 1 AND DEATH BENEFIT 2
You may change between Death Benefit Option 1 and Death Benefit Option 2 once
each Policy year by written request. (YOU MAY NOT CHANGE BETWEEN DEATH BENEFIT
OPTION 3 TO DEATH BENEFIT OPTION 1 OR TO DEATH BENEFIT OPTION 2, OR VICE VERSA).
Changing options may require evidence of insurability. The change takes effect
on the monthly processing date on or following the date of underwriting
approval. We do not impose a charge for changes in death benefit options.
CHANGE FROM DEATH BENEFIT OPTION 1 TO DEATH BENEFIT OPTION 2. If you change
Death Benefit Option 1 to Death Benefit Option 2, we will decrease the Face
Amount to equal:
- The death benefit MINUS
- The Policy Value on the date of the change
The change may not be made if the Face Amount would fall below $50,000. After
the change from Death Benefit Option 1 to Death Benefit Option 2, future Monthly
Policy Charges may be higher or lower than if no change in option had been made.
However, the Insurance Amount will always equal the Face Amount, unless the
Guideline Minimum Death Benefit applies.
CHANGE FROM DEATH BENEFIT OPTION 2 TO DEATH BENEFIT OPTION 1. If you change
Death Benefit Option 2 to Death Benefit Option 1, we will increase the Face
Amount by the Policy Value on the date of the change. The death benefit will be
the GREATER of:
- The new Face Amount or
- The Guideline Minimum Death Benefit under Death Benefit Option 1
After the change from Death Benefit Option 2 to Death Benefit Option 1, an
increase in Policy Value will reduce the Insurance Amount and the Monthly Policy
Charge. A decrease in Policy Value will increase the Insurance Amount and the
Monthly Policy Charge.
A change in death benefit option may result in total payments exceeding the then
current maximum payment limitation under federal tax law. Where total payments
would exceed the current maximum payment limits, the excess first will be
applied to repay any Outstanding Loans. If there are remaining excess payments,
any such excess payments will be returned to you. However, we will accept a
payment needed to prevent Policy lapse during a Policy year.
A change from Death Benefit Option 2 to Death Benefit Option 1 within five
policy years of the Final Payment Date will terminate a Guaranteed Death Benefit
Rider.
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GUARANTEED DEATH BENEFIT RIDER (NOT AVAILABLE IN ALL STATES)
An optional Guaranteed Death Benefit Rider is available only at issue of the
Policy. The Guaranteed Death benefit Rider is not available if the Policy is
issued on the basis of simplified underwriting. If this Rider is in effect, the
Company:
- guarantees that your Policy will not lapse regardless of the investment
performance of the Variable Account and
- provides a guaranteed Net Death Benefit.
In order to maintain the Guaranteed Death Benefit Rider, certain minimum premium
payment tests must be met on each Policy anniversary and within 48 months
following the Date of Issue and/or the date of any increase in Face Amount, as
described below. In addition, a one-time administrative charge of $25 will be
deducted from Policy Value when the Rider is elected. Certain transactions,
including policy loans, partial withdrawals, underwriting reclassifications,
change in face amount, and change in Death benefit Option, can result in the
termination of the Rider. If this Rider is terminated, it cannot be reinstated.
GUARANTEED DEATH BENEFIT TESTS.
While the Guaranteed Death Benefit Rider is in effect, the Policy will not lapse
if the following two tests are met:
1. Within 48 months following the Date of Issue of the Policy or of any
increase in the Face Amount, the sum of the premiums paid, less any
Outstanding Loans, partial withdrawals and partial withdrawal transaction
charges, must be greater than the minimum monthly payment multiplied by the
number of months which have elapsed since the relevant Date of Issue; and
2. On each Policy anniversary, (a) must exceed (b), where, since the Date of
Issue:
(a) is the sum of your premiums, less any withdrawals, partial withdrawal
transaction charges and Outstanding Loans, which is classified as a
preferred loan; and
(b) is the sum of the minimum Guaranteed Death Benefit premiums, as shown
on the specifications page of the Policy.
GUARANTEED DEATH BENEFIT.
If the Guaranteed Death Benefit Rider is in effect on the Final Premium Payment
Date, a guaranteed Death Benefit will be provided as long as the Rider is in
force. The Death Benefit will be the greater of:
- the Face Amount as of the Final Premium Payment Date; or
- the Policy Value as of the date due proof of death is received by the
Company.
TERMINATION OF THE GUARANTEED DEATH BENEFIT RIDER.
The Guaranteed Death Benefit Rider will end and may not be reinstated on the
first to occur of the following:
- foreclosure of an Outstanding Loan; or
- the date on which the sum of your payments less withdrawals and loans does
not meet or exceed the applicable Guaranteed Death Benefit test (above);
or
- any Policy change that results in a negative guideline level premium;
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- the effective date of a change from Death Benefit Option 2 to Death
Benefit Option 1, if such changes occur within 5 policy years of the Final
Payment Date; or
- a request for a partial withdrawal or preferred loan is made after the
Final Premium Payment Date.
It is possible that the Policy Value will not be sufficient to keep the Policy
in force on the first Monthly Payment Date following the date the Rider
terminates.
CHANGE IN FACE AMOUNT
You may increase or decrease the Face Amount by written request. An increase or
decrease in the Face Amount takes effect on the LATER of the:
- The monthly processing date on or next following date of receipt of your
written request or
- The date of approval of your written request, if evidence of insurability
is required
INCREASES -- You must submit with your written request for an increase
satisfactory evidence of insurability. The consent of the Insured is also
required whenever the Face Amount is increased. An increase in Face Amount may
not be less than $10,000. You may not increase the Face Amount after the Insured
reaches age 80. A written request for an increase must include a payment if the
Policy Value less debt is less than the sum of three minimum monthly payments
An increase in the Face Amount will increase the Insurance Amount and,
therefore, the Monthly Policy Charges.
After increasing the Face Amount, you will have the right, during a free-look
period, to have the increase canceled. See THE POLICY - "Free-Look Period." If
you exercise this right, we will credit to your Policy the charges deducted for
the increase, unless you request a refund of these charges.
DECREASES -- You may decrease the Face Amount by written request. The minimum
amount for a decrease in Face Amount is $10,000. The minimum Face Amount
required after a decrease is $50,000. If
- you have chosen the Guideline Premium Test and the Policy would not comply
with the maximum payment limitations under federal tax law; and
- If you have previously made payments in excess of the amount allowed for
the lower Face Amount, then the excess payments will first be used to
repay Outstanding Loans, if any. If there are any remaining excess
payments, we will pay any such excess to you. A return of Policy Value may
result in tax liability to you.
A decrease in the Face Amount will lower the insurance protection amount and,
therefore, the Monthly Policy Charge. In computing the Monthly Policy Charge, a
decrease in the Face Amount will reduce the Face Amount in the following order:
- the Face Amount provided by the most recent increase;
- the next most recent increases successively; and
- the initial Face Amount.
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POLICY VALUE
The Policy Value is the total value of your Policy. It is the SUM of:
- Your accumulation in the Fixed Account PLUS
- The value of your units in the sub-accounts There is no guaranteed minimum
Policy Value. Policy Value on any date depends on variables that cannot be
predetermined.
Your Policy Value is affected by the:
- Frequency and amount of your payments
- Interest credited in the Fixed Account
- Investment performance of your sub-accounts
- Partial withdrawals
- Loans, loan repayments and loan interest paid or credited
- Charges and deductions under the Policy
- Death Benefit Option
COMPUTING POLICY VALUE -- We compute the Policy Value on the Date of Issue and
on each Valuation Date. On the Date of Issue, the Policy Value is:
- Accumulations in the Fixed Account, MINUS
- The Monthly Deductions due
On each Valuation Date after the Date of Issue, the Policy Value is the SUM of:
- Accumulations in the Fixed Account PLUS
- The SUM of the PRODUCTS of:
- The number of units in each sub-account TIMES
- The value of a unit in each sub-account on the Valuation Date
THE UNIT -- We allocate each payment to the sub-accounts you selected. We credit
allocations to the sub-accounts as units. Units are credited separately for each
sub-account.
The number of units of each sub-account credited to the Policy is the QUOTIENT
of:
- That part of the payment allocated to the sub-account DIVIDED BY
- The dollar value of a unit on the Valuation Date the payment is received
at our Principal Office.
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The number of units will remain fixed unless changed by a split of unit value,
transfer, partial withdrawal or surrender. Also, each deduction of charges from
a sub-account will result in cancellation of units equal in value to the amount
deducted.
The dollar value of a unit of a sub-account varies from Valuation Date to
Valuation Date based on the investment experience of that sub-account. This
investment experience reflects the investment performance, expenses and charges
of the fund in which the sub-account invests. The value of each unit was set at
$1.00 on the first Valuation Date of each sub-account. The value of a unit on
any Valuation Date is the PRODUCT of:
- The dollar value of the unit on the preceding Valuation Date TIMES
- The net investment factor
NET INVESTMENT FACTOR -- The net investment factor measures the investment
performance of a sub-account during the valuation period just ended. The net
investment factor for each sub-account is 1.0000 PLUS the QUOTIENT of:
- The investment income of that sub-account for the valuation period,
adjusted for realized and unrealized capital gains and losses and for
taxes during the valuation period, DIVIDED BY
- The value of that sub-account's assets at the beginning of the valuation
period
The net investment factor may be greater or less than one.
PAYMENT OPTIONS
Upon your written request, the Company will pay the Surrender Value or all or
part of any payable Net Death Benefit under one or more of our then-available
payment options. If you do not make an election, we will pay the Surrender Value
or the Net Death Benefit in a single sum. A certificate will be provided to the
payee describing the payment option selected.
The amount applied under any one option for any one payee must be at least
$5,000. The periodic payment for any one payee must be at least $50. Subject to
the Policy Owner and beneficiary provisions, any option selection may be changed
before the Net Death Benefit becomes payable. If you make no selection, the
beneficiary may select an option when the Net Death Benefit becomes payable.
The amounts payable under a payment option are paid from the General Account.
These amounts are not based on the investment experience of the Variable
Account.
OPTIONAL INSURANCE BENEFITS
You may add optional insurance benefits to the Policy by Rider, as described in
APPENDIX B -- OPTIONAL INSURANCE BENEFITS. The cost of certain optional
insurance benefits becomes part of the Monthly Deduction.
SURRENDER
You may surrender the Policy and receive its Surrender Value. The Surrender
Value is:
- The Policy Value MINUS
- Any Outstanding Loan.
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We will compute the Surrender Value on the Valuation Date on which we receive
the Policy with a written request for surrender.
The Surrender Value may be paid in a lump sum or under a payment option then
offered by us. We will normally pay the Surrender Value within seven days
following our receipt of written request. We may delay benefit payments under
the circumstances described in OTHER POLICY PROVISIONS -- "Delay of Payments."
For important tax consequences of surrender, see FEDERAL TAX CONSIDERATIONS.
PARTIAL WITHDRAWAL
After the first Policy year, you may withdraw part of the Surrender Value of
your Policy on written request. Your written request must state the dollar
amount you wish to receive. You may allocate the amount withdrawn among the
sub-accounts and the Fixed Account. If you do not provide allocation
instructions, we will make a Pro-Rata Allocation. Each partial withdrawal must
be at least $500. Under both Level Death Benefit Options, the Face Amount is
reduced by the partial withdrawal. We will not allow a partial withdrawal if it
would reduce Death Benefit Option 1 and 3 Face Amount below $40,000.
On a partial withdrawal from a sub-account, we will cancel the number of units
equal in value to the amount withdrawn. The amount withdrawn will be the amount
you requested plus the partial withdrawal transaction charge. See CHARGES AND
DEDUCTIONS -- "Partial Withdrawal Transaction Charge." We will normally pay the
partial withdrawal within seven days following our receipt of written request.
We may delay payment as described in OTHER POLICY PROVISIONS -- "Delay of
Payments."
For important tax consequences of partial withdrawals, see FEDERAL TAX
CONSIDERATIONS.
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CHARGES AND DEDUCTIONS
Charges will be deducted in connection with the Policy to compensate the Company
for:
- Administering the Policy
- Providing the insurance benefits set forth in the Policy and any optional
insurance benefits added by Rider
- Payment of any applicable taxes
- Assuming certain risks in connection with the Policy
- Incurring expenses in distributing the Policy
MONTHLY CHARGES (THE MONTHLY DEDUCTION)
On each monthly processing date, we will deduct certain monthly charges (the
"Monthly Deduction") from Policy Value. You may allocate the Monthly Deduction
to any number of sub-accounts and to the unloaned Policy Value in the Fixed
Account. If you make no allocation, we will make a Pro-Rata Allocation. If the
accounts you chose do not have sufficient funds to cover the Monthly Deduction,
we will make a Pro-Rata Allocation.
The Monthly Deduction is comprised of the following:
- MONTHLY POLICY CHARGE -- The Monthly Policy Charge will be charged on each
monthly processing date until the Final Payment Date. The primary purpose
of the Monthly Policy Charge is to compensate us for providing life
insurance coverage for the Insured. In addition, a portion of this charge
compensates us for administrative, tax, and distribution expenses. The
Monthly Policy Charge is equal to a current rate per $1,000 times the
Insurance Amount (the "Monthly Policy Charge rate"). The current Monthly
Policy Charge rates are based on our expectations as to future mortality
experience. Any change in the current Monthly Policy Charge rates will
apply to all Insureds of the same age, sex and underwriting class whose
Policies have been in force for the same period.
The current Monthly Policy Charge rate may vary based on:
- Sex of the Insured (male, female, or blended unisex)
- Issue age and underwriting class of the Insured
- Issue date of the Policy or effective date of an increase or date of any
Rider.
For the initial Face Amount, the Monthly Policy Charge rate is based on the
issue age of the Insured and the Policy year. For an increase in Face Amount or
for a Rider, the Monthly Policy Charge rate is based on the age of the Insured
as of the effective date of the increase or Rider and the years since then. Our
Monthly Policy Charge rates are generally higher under a Policy that has been in
force for some period of time than they would be under an otherwise identical
Policy purchased more recently on the same insured person.
The underwriting class of an Insured will affect the Monthly Policy Charge
rates. We currently place Insureds into standard underwriting classes,
non-standard underwriting classes, and simplified underwriting classes. The
underwriting classes are also divided into two categories: smokers and
non-smokers. We compute the Monthly Policy Charge separately for the initial
Face Amount and for any increase in Face Amount. However,
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if the Insured's underwriting class improves on an increase, the current Monthly
Policy Charge rates for the better class will apply to the total Face Amount.
The current rates for the Monthly Policy Charge will not be greater than the
guaranteed rates set forth in the Policy, which in turn will never exceed the
Commissioners 1980 Standard Ordinary Mortality Tables (Mortality Table B for
unisex Policies) and the Insured's sex and age. The Tables used for this purpose
set forth different mortality estimates for males and females. For examples, see
APPENDIX C -- GUARANTEED MONTHLY POLICY CHARGE RATES. As indicated in the table
in APPENDIX C, the maximum Monthly Policy Charge for each $1000 of Insurance
Amount is $83.33 at age 99.
We deduct the Monthly Policy Charge on each monthly processing date starting
with the Date of Issue, but do not deduct the Monthly Policy Charge after the
Final Payment Date.
- MONTHLY MORTALITY AND EXPENSE RISK CHARGE -- This monthly charge is
currently equal to (and is guaranteed not to exceed) 1/12 of 0.75% of the
Policy Value in each sub-account for the first 10 Policy years, 1/12 of
0.50% for Policy Years 11 through 20, and 0.25% for Policy years 21 and
later. The charge is based on the Policy Value in the sub-accounts as of
the prior Monthly Processing Date. The charge will continue to be assessed
after the Final Payment Date.
This charge compensates us for assuming mortality and expense risks for variable
interests in the Policies. The mortality risk we assume is that Insureds may
live for a shorter time than anticipated. If this happens, we will pay more Net
Death Benefits than anticipated. The expense risk we assume is that the expenses
incurred in issuing and administering the Policies will exceed the expense
portion of the Monthly Policy Charge. If the charge for mortality and expense
risks is not sufficient to cover mortality experience and expenses, we will
absorb the losses. If the charge turns out to be higher than mortality and
expense risk expenses, the difference will be a profit to us. If the charge
provides us with a profit, the profit will be available for our use to pay
distribution, sales and other expenses.
- Monthly Rider Charges -- Rider Charges will vary depending upon the riders
selected, and by the sex, underwriting classification of the Insured.
COMPUTING MONTHLY POLICY CHARGES
Monthly Policy Charges can vary depending upon the Death Benefit Option you
select. Monthly Policy Charges will also be different for the initial Face
Amount, any increases in Face Amount, and for that part of the death benefit
subject to the Guideline Minimum Death Benefit.
DEATH BENEFIT OPTION 1 AND DEATH BENEFIT OPTION 3
INITIAL FACE AMOUNT. -- For the initial Face Amount under Death Benefit Option 1
and Death Benefit Option 3, the Monthly Policy Charge is the PRODUCT of:
- the current Monthly Policy Charge rate TIMES
- the DIFFERENCE between
- the initial Face Amount AND
- the Policy Value (MINUS any Rider charges) at the beginning of the
Policy month.
Under Death Benefit Option 1 and Death Benefit Option 3, the Monthly Policy
Charge decreases as the Policy Value increases (if the Guideline Minimum Death
Benefit is not in effect).
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INCREASES IN FACE AMOUNT. -- For each increase in Face Amount under Death
Benefit Option 1 or Death Benefit Option 3, the Monthly Policy Charge is the
PRODUCT of:
- the current Monthly Policy Charge rate for the increase TIMES
- the DIFFERENCE between
- the increase in Face Amount AND
- any Policy Value (MINUS any Rider charges) IN EXCESS OF than the
initial Face Amount at the beginning of the Policy month and not
allocated to a prior increase.
GUIDELINE MINIMUM DEATH BENEFIT. -- If the Guideline Minimum Death Benefit is in
effect, we will compute a Monthly Policy Charge for that part of the death
benefit subject to the Guideline Minimum Death Benefit that exceeds the current
death benefit not subject to the Guideline Minimum Death Benefit. Under Death
Benefit Option 1 or Death Benefit Option 3, this Monthly Policy Charge is the
PRODUCT of:
- the current Monthly Policy Charge rate for the initial Face Amount TIMES
- the DIFFERENCE between
- the Guideline Minimum Death Benefit AND
- the GREATER of the Face Amount OR the Policy Value.
We will adjust the Monthly Policy Charge for any decreases in Face Amount. See
THE POLICY -- "CHANGE IN FACE AMOUNT: DECREASES."
DEATH BENEFIT OPTION 2
INITIAL FACE AMOUNT. -- For the initial Face Amount under Death Benefit Option
2, the Monthly Policy Charge is the PRODUCT of:
- the current Monthly Policy Charge rate TIMES
- the initial Face Amount.
INCREASES IN FACE AMOUNT. -- For each increase in Face Amount under Death
Benefit Option 2, the Monthly Policy Charge is the PRODUCT of:
- the current Monthly Policy Charge rate for the increase TIMES
- the increase in Face Amount.
GUIDELINE MINIMUM DEATH BENEFIT. -- If the Guideline Minimum Death Benefit is in
effect, we will compute a Monthly Policy Charge for that part of the death
benefit subject to the Guideline Minimum Death Benefit that exceeds the current
death benefit not subject to the Guideline Minimum Death Benefit. Under Death
Benefit Option 2, this Monthly Policy Charge is the PRODUCT of:
- the current Monthly Policy Charge rate for the initial Face Amount TIMES
- the DIFFERENCE between
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- the Guideline Minimum Death Benefit AND
- the Face Amount PLUS the Policy Value.
We will adjust the Monthly Policy Charge for any decreases in Face Amount. See
THE POLICY -- "CHANGE IN FACE AMOUNT: DECREASES."
FUND EXPENSES
The value of the units of the sub-accounts will reflect the investment advisory
fee and other expenses of the funds whose shares the sub-accounts purchase. The
Prospectus and Statement of Additional Information of the Underlying Funds
contain more information concerning the fees and expenses.
No charges are currently made against the sub-accounts for federal or state
income taxes. Should income taxes be imposed, we may make deductions from the
sub-accounts to pay the taxes. See FEDERAL TAX CONSIDERATIONS.
PARTIAL WITHDRAWAL TRANSACTION CHARGE
For each partial withdrawal, we deduct a transaction fee of 2% of the amount
withdrawn, not to exceed $25. This fee is intended to reimburse us for the cost
of processing the withdrawal. The transaction fee applies to all partial
withdrawals.
TRANSFER CHARGES
Currently, the first 12 transfers in a Policy year are free. We reserve the
right to limit the number of free transfers in a Policy year to six. After that,
we will deduct a $10 transfer charge for amounts transferred in that Policy
year. We reserve the right to increase the charge, but it will never exceed $25.
This charge reimburses us for the administrative costs of processing the
transfer.
Each of the following transfers of Policy Value from the sub-accounts to the
Fixed Account is free and does not count as one of the 12 free transfers in a
Policy year:
- A conversion within the first 24 months from Date of Issue or increase
- A transfer to the Fixed Account to secure a loan
- A reallocation of Policy Value within 20 days of the Date of Issue
- Dollar-Cost Averaging Option and Automatic Rebalancing Option
OTHER ADMINISTRATIVE CHARGES
We reserve the right to charge for other administrative costs we incur. While
there are no current charges for these costs, we may impose a charge for:
- Changing payment allocation instructions
- Changing the allocation of Monthly Policy Charges among the various
sub-accounts and the Fixed Account
- Providing a projection of values
We do not currently charge for these costs. Any future charge is guaranteed not
to exceed $25 per transaction.
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POLICY LOANS
You may borrow money secured by your Policy Value at any time. There is no
minimum loan amount. The total amount you may borrow, including any Outstanding
Loan, is the loan value. The loan value is 90% of the Policy Value.
We will usually pay the loan within seven days after we receive the written
request. We may delay the payment of loans as stated in OTHER POLICY PROVISIONS
- -- "Delay of Payments."
We will allocate the loan among the sub-accounts and the Fixed Account according
to your instructions. If you do not make an allocation, we will make a Pro-Rata
Allocation. We will transfer Policy Value in each sub-account equal to the
Policy loan to the Fixed Account. We will not count this transfer as a transfer
subject to the transfer charge.
Policy Value equal to the Outstanding Loan will earn monthly interest in the
Fixed Account at an annual rate of 4.0%. NO OTHER INTEREST WILL BE CREDITED. The
loan interest rate charged by the Company accrues daily. The current annual
interest rate charged by the Company is 4.80%. The current annual rate of
interest charged on loans may change, but is guaranteed not to exceed 6.00%.
PREFERRED LOAN OPTION
The preferred loan option is automatically available to you, unless you request
otherwise. You may change a preferred loan to a non-preferred loan at any time
upon written request. A request for a preferred loan after the Final Payment
Date will terminate the optional Guaranteed Death Benefit Rider. Any part of the
Outstanding Loan that represents earnings under the Policy may be treated as a
preferred loan. There is some uncertainty as to the tax treatment of a preferred
loan, which may be treated as a taxable withdrawal from the Policy. You should
consult a qualified tax adviser (and see FEDERAL TAX CONSIDERATIONS).
Policy Value equal to the Outstanding Loan will earn monthly interest in the
Fixed Account at an annual rate of at least 4.0%. NO OTHER INTEREST WILL BE
CREDITED. The loan interest rate charged by the Company accrues daily. The
current annual loan interest rate charged by the Company for Preferred Loans is
4.00%. The current annual rate of interest charged on preferred loans may
change, but is guaranteed not to exceed 4.50%.
REPAYMENT OF OUTSTANDING LOAN
You may pay any loans before Policy lapse. We will allocate that part of the
Policy Value in the Fixed Account that secured a repaid loan to the sub-accounts
and Fixed Account according to your instructions. If you do not make a repayment
allocation, we will allocate Policy Value according to your most recent payment
allocation instructions. However, loan repayments allocated to the Variable
Account cannot exceed Policy Value previously transferred from the Variable
Account to secure the Outstanding Loan.
If the Outstanding Loan exceeds the next monthly deduction, the Policy will
terminate. We will mail a notice of termination to the last known address of you
and any assignee. If you do not make sufficient payment within 62 days after
this notice is mailed, the Policy will terminate with no value. See POLICY
TERMINATION AND REINSTATEMENT. The foreclosure of an Outstanding Loan will
terminate the optional Guaranteed Death Benefit Rider.
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EFFECT OF POLICY LOANS
Policy loans will permanently affect the Policy Value and Surrender Value, and
may permanently affect the death benefit. The effect could be favorable or
unfavorable, depending on whether the investment performance of the sub-accounts
is less than or greater than the interest credited to the Policy Value in the
Fixed Account that secures the loan.
We will deduct any Outstanding Loan from the proceeds payable when the Insured
dies or from surrender.
POLICY TERMINATION AND REINSTATEMENT
TERMINATION
Unless the Guaranteed Death Benefit Rider is in effect, the Policy will
terminate if:
- Policy Value is insufficient to cover the next Monthly Deduction plus loan
interest accrued OR
- Outstanding Loans exceed the Policy Value
If one of these situations occurs, the Policy will be in default. You will then
have a grace period of 62 days, measured from the date of default, to pay a
premium sufficient to prevent termination. On the date of default, we will send
a notice to you and to any assignee of record. The notice will state the premium
due and the date by which it must be paid.
Failure to pay a sufficient premium within the grace period will result in
Policy termination. If the Insured dies during the grace period, we will deduct
from the Net Death Benefit any monthly charges due and unpaid through the Policy
month in which the Insured dies and any other overdue charge.
During the first 48 Policy months following the Date of Issue or an increase in
the Face Amount, a guarantee may apply to prevent the Policy from terminating
because of insufficient Policy Value. This guarantee applies if, during this
period, you pay premiums that, when reduced by partial withdrawals and partial
withdrawal transaction charges, equal or exceed specified minimum monthly
payments. The specified minimum monthly payments are based on the number of
months the Policy, increase in Face Amount or policy change that causes a change
in the minimum monthly payment has been in force. A policy change that causes a
change in the minimum monthly payment is a change in the Face Amount,
underwriting reclassifications, or the addition or deletion of a Rider. Except
for the first 48 months after the Date of Issue or the effective date of an
increase, payments equal to the minimum monthly payment do not guarantee that
the Policy will remain in force.
If the optional Guaranteed Death Benefit Rider is in effect, the Policy will not
lapse regardless of the investment performance of the Variable Account. See
"Guaranteed Death Benefit Rider."
REINSTATEMENT
A terminated Policy may be reinstated within three years of the date of default
and before the Final Payment Date. The reinstatement takes effect on the monthly
processing date following the date you submit to us:
- Written application for reinstatement
- Evidence of insurability showing that the Insured is insurable according
to our underwriting rules and
- A payment that, after the deduction of the payment expense charge, is
large enough to cover the minimum amount payable
Policies which have been surrendered may not be reinstated.
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MINIMUM AMOUNT PAYABLE -- If reinstatement is requested when less than 48
Monthly Deductions have been paid since the Date of Issue or increase in the
Face Amount, you must pay for the lesser of three minimum monthly premiums and
three Monthly Deductions.
If you request reinstatement more than 48 Monthly Processing Dates from the Date
of Issue or increase in the Face Amount, you must pay three Monthly Deductions.
POLICY VALUE ON REINSTATEMENT -- The Policy Value on the date of reinstatement
is:
- The payment made to reinstate the Policy and interest earned from the date
the payment was received at our Principal Office PLUS
- The Policy Value less any Outstanding Loan on the date of default MINUS
- The Monthly Deductions due on the date of reinstatement
You may reinstate any Outstanding Loan.
OTHER POLICY PROVISIONS
POLICY OWNER
The Policy Owner is the Insured unless another Policy owner has been named in
the application or enrollment form. As Policy owner, you are entitled to
exercise all rights under your Policy while the Insured is alive, with the
consent of any irrevocable beneficiary. The consent of the Insured is required
whenever the Face Amount is increased.
BENEFICIARY
The beneficiary is the person or persons to whom the Net Death Benefit is
payable on the Insured's death. Unless otherwise stated in the Policy, the
beneficiary has no rights in the Policy before the Insured dies. While the
Insured is alive, you may change the beneficiary, unless you have declared the
beneficiary to be irrevocable. If no beneficiary is alive when the Insured dies,
the Policy owner (or the Policy owner's estate) will be the beneficiary. If more
than one beneficiary is alive when the Insured dies, we will pay each
beneficiary in equal shares, unless you have chosen otherwise. Where there is
more than one beneficiary, the interest of a beneficiary who dies before the
Insured will pass to surviving beneficiaries proportionally.
ASSIGNMENT
You may assign a Policy as collateral or make an absolute assignment. All Policy
rights will be transferred as to the assignee's interest. The consent of the
assignee may be required to make changes in payment allocations, make transfers
or to exercise other rights under the Policy. We are not bound by an assignment
or release thereof, unless it is in writing and recorded at our Principal
Office. When recorded, the assignment will take effect on the date the written
request was signed. Any rights the assignment creates will be subject to any
payments we made or actions we took before the assignment is recorded. We are
not responsible for determining the validity of any assignment or release.
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THE FOLLOWING POLICY PROVISIONS MAY VARY BY STATE.
LIMIT ON RIGHT TO CHALLENGE POLICY
We cannot challenge the validity of your Policy if the Insured was alive after
the Policy had been in force for two years from the Date of Issue. Also, we
cannot challenge the validity of any increase in the Face Amount if the Insured
was alive after the increase was in force for two years from the effective date
of the increase.
SUICIDE
The Net Death Benefit will not be paid if the Insured commits suicide, while
sane or insane, within two years from the Date of Issue. Instead, we will pay
the beneficiary all payments made for the Policy, without interest, less any
Outstanding Loan and partial withdrawals. If the Insured commits suicide, while
sane or insane, within two years from any increase in Face Amount, we will not
recognize the increase. We will pay to the beneficiary the Monthly Policy
Charges paid for the increase.
MISSTATEMENT OF AGE OR SEX
If the Insured's age or sex is not correctly stated in the Policy application or
enrollment form, we will adjust benefits under the Policy to reflect the correct
age and sex. The adjusted benefit will be the benefit that the most recent
Monthly Policy Charge would have purchased for the correct age and sex. We will
not reduce the death benefit to less than the Guideline Minimum Death Benefit.
For a unisex Policy, there is no adjusted benefit for misstatement of sex.
DELAY OF PAYMENTS
Amounts payable from the Variable Account for surrender, partial withdrawals,
Net Death Benefit, Policy loans and transfers may be postponed whenever:
- The New York Stock Exchange is closed other than customary weekend and
holiday closings
- The SEC restricts trading on the New York Stock Exchange
- The SEC determines an emergency exists, so that disposal of securities is
not reasonably practicable or it is not reasonably practicable to compute
the value of the Variable Account's net assets
We may delay paying any amounts derived from payments you made by check until
the check has cleared your bank.
We reserve the right to defer amounts payable from the Fixed Account. This delay
may not exceed six months.
FEDERAL TAX CONSIDERATIONS
The following summary of federal tax considerations is based on our
understanding of the present federal income tax laws as they are currently
interpreted. Legislation may be proposed which, if passed, could adversely and
possibly retroactively affect the taxation of the Policies. This summary is not
exhaustive, does not purport to cover all situations, and is not intended as tax
advice. We do not address tax provisions that may apply if the Policy owner is a
corporation or the trustee of an employee benefit plan. You should consult a
qualified tax adviser to apply the law to your circumstances.
43
<PAGE>
THE COMPANY AND THE VARIABLE ACCOUNT
The Company is taxed as a life insurance company under Subchapter L of the Code.
We file a consolidated tax return with our parent and affiliates. We do not
currently charge for any income tax on the earnings or realized capital gains in
the Variable Account. We do not currently charge for federal income taxes
respecting the Variable Account. A charge may apply in the future for any
federal income taxes we incur. The charge may become necessary, for example, if
there is a change in our tax status. Any charge would be designed to cover the
federal income taxes on the investment results of the Variable Account.
Under current laws, the Company may incur state and local taxes besides premium
taxes. These taxes are not currently significant. If there is a material change
in these taxes affecting the Variable Account, we may charge for taxes paid or
for tax reserves.
TAXATION OF THE POLICIES
We believe that the Policies described in this Prospectus are life insurance
contracts under Section 7702 of the Code. Section 7702 affects the taxation of
life insurance contracts and places limits on the relationship of the Policy
Value to the death benefit. So long as the Policies are life insurance
contracts, the Net Death Benefits of the Policies are excludable from the gross
income of the beneficiaries. Also, any increase in Policy Value is not taxable
until received by you or your designee (but see "Modified Endowment Policies").
Federal tax law requires that the investment of each sub-account funding the
Policies be adequately diversified according to Treasury regulations. Although
we do not have control over the investments of the funds, we believe that the
funds currently meet the Treasury's diversification requirements. We will
monitor continued compliance with these requirements.
The Treasury Department has announced that previous regulations on
diversification do not provide guidance concerning the extent to which Policy
owners may direct their investments to divisions of a separate investment
account. Regulations may provide guidance in the future. The Policies or our
administrative rules may be modified as necessary to prevent a Policy owner from
being considered the owner of the assets of the Variable Account.
A surrender, partial withdrawal, change in Death Benefit Option, change in the
Face Amount, lapse with Policy loan outstanding, or assignment of the Policy may
have tax consequences. Within the first fifteen Policy years, a distribution of
cash required under Section 7702 of the Code because of a reduction of benefits
under the Policy will be taxed to the Policy owner as ordinary income respecting
any investment earnings. Federal, state and local income, estate, inheritance
and other tax consequences of ownership or receipt of Policy proceeds depend on
the circumstances of each Insured, policy owner or beneficiary.
POLICY LOANS
We believe that non-preferred loans received under the Policy will be treated as
an indebtedness of the Policy Owner for federal income tax purposes. Under
current law, these loans will not constitute income for the Policy Owner while
the Policy is in force (but see "Modified Endowment Policies"). There is a risk,
however, that a preferred loan may be characterized by the Internal Revenue
Service ("IRS") as a withdrawal and taxed accordingly. At the present time, the
IRS has not issued any guidance on whether loans with the attributes of a
preferred loan should be treated differently than a non-preferred loan. This
lack of specific guidance makes the tax treatment of preferred loans uncertain.
In the event IRS guidelines are issued in the future, you may convert your
preferred loan to a non-preferred loan. However, it is possible that,
notwithstanding the conversion, some or all of the loan could be treated as a
taxable withdrawal from the Policy.
Section 264 of the Code restricts the deduction of interest on Policy loans.
Consumer interest paid on Policy loans under an individually owned Policy is not
tax deductible. Generally, no tax deduction for interest is
44
<PAGE>
allowed on Policy loans, if the Insured is an officer or employee of, or is
financially interested in, any business carried on by the taxpayer. There is an
exception to this rule which permits a deduction for interest on loans up to
$50,000 related to business-owned policies covering officers or 20-percent
owners, up to a maximum equal to the greater of (1) five individuals or (2) the
lesser of (a) 5% of the total number of officers and employees of the
corporation or (b) 20 individuals.
MODIFIED ENDOWMENT POLICIES
The Technical and Miscellaneous Revenue Act of 1988 ("1988 Act") adversely
affects the tax treatment of distributions under so-called "modified endowment
contracts." Under the 1988 Act, a Policy may be considered a "modified endowment
contract" if total payments during the first seven Policy years (or within seven
years of a material change in the Policy) EXCEED the total net level payments
payable had the Policy provided for paid-up future benefits after making seven
level annual payments. In addition, if benefits are reduced at anytime during
the life of the Policy, there may be adverse tax consequences. PLEASE CONSULT
YOUR TAX ADVISER.
If the Policy is considered a modified endowment contract, distributions
(including Policy loans, partial withdrawals, surrenders and assignments) will
be taxed on an "income-first" basis and includible in gross income to the extent
that the Surrender Value exceeds the policy owner's investment in the Policy.
Any other amounts will be treated as a return of capital up to the Policy
Owner's basis in the Policy. A 10% additional tax is imposed on that part of any
distribution that is includible in income, unless the distribution is:
- Made after the taxpayer becomes disabled,
- Made after the taxpayer attains age 59 1/2, or
- Part of a series of substantially equal periodic payments for the
taxpayer's life or life expectancy or joint life expectancies of the
taxpayer and beneficiary.
All modified endowment contracts issued by the same insurance company to the
same policy owner during any calendar year will be treated as a single modified
endowment contract in computing taxable distributions.
Currently, we review each Policy when payments are received to determine if the
payment will render the Policy a modified endowment contract. If a payment would
so render the Policy, we will notify you of the option of requesting a refund of
the excess payment. The refund process must be completed within 60 days after
the Policy anniversary or the Policy will be permanently classified as a
modified endowment contract.
VOTING RIGHTS
Where the law requires, we will vote fund shares that each sub-account holds
according to instructions received from Policy Owners with Policy Value in the
sub-account. If, under the 1940 Act or its rules, we may vote shares in our own
right, whether or not the shares relate to the Policies, we reserve the right to
do so.
We will provide each person having a voting interest in a fund with proxy
materials and voting instructions. We will vote shares held in each sub-account
for which no timely instructions are received in proportion to all instructions
received for the sub-account. We will also vote in the same proportion our
shares held in the Variable Account that does not relate to the Policies.
45
<PAGE>
We will compute the number of votes that a Policy owner has the right to
instruct on the record date established for the fund. This number is the
quotient of:
- Each Policy Owner's Policy Value in the sub-account divided by
- The net asset value of one share in the fund in which the assets of the
sub-account are invested
We may, when required by state insurance regulatory authorities, disregard
voting instructions if the instructions require that Fund shares be voted so as
(1) to cause to change in the sub-classification or investment objective of one
or more of the Funds, or (2) to approve or disapprove an investment advisory
contract for the Funds. In addition, we may disregard voting instructions that
are in favor of any change in the investment policies or in any investment
adviser or principal underwriter if the change has been initiated by Contract
Owners or the Trustees. Our disapproval of any such change must be reasonable
and, in the case of a change in investment policies or investment adviser, based
on a good faith determination that such change would be contrary to state law or
otherwise is inappropriate in light of the objectives and purposes of the Funds.
In the event we do disregard voting instructions, a summary of and the reasons
for that action will be included in the next periodic report to Contract Owners.
DIRECTORS AND PRINCIPAL OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AND POSITION WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------ ----------------------------------------------
<S> <C>
Bruce C. Anderson Director (since 1996), Vice President (since 1984)
Director and Assistant Secretary (since 1992) of First
Allmerica
Warren E. Barnes Vice President (since 1996) and Corporate
Vice President and Corporate Controller (since 1998) of First Allmerica
Controller
Robert E. Bruce Director and Chief Information Officer (since
Director and Chief Information Officer 1997) and Vice President (since 1995) of First
Allmerica; and Corporate Manager (1979 to 1995) of
Digital Equipment Corporation
Mary Eldridge Secretary (since 1999) of First Allmerica;
Secretary Secretary (since 1999) of Allmerica
Investments, Inc.; and Secretary (since 1999) of
Allmerica Financial Investment Management
Services, Inc., Attorney with First Allmerica
(since 1998), Employee of First Allmerica (since
1992)
John P. Kavanaugh Director and Chief Investment Officer (since 1996)
Director, Vice President and Chief and Vice President (since 1991) of First
Investment Officer Allmerica; and Vice President (since 1998) of
Allmerica Financial Investment Management
Services, Inc.
John F. Kelly Director (since 1996), Senior Vice President
Director Vice President and (since 1986), General Counsel (since 1981) and
General Counsel Assistant Secretary (since 1991) of First
Allmerica; Director (since 1985) of Allmerica
Investments, Inc.; and Director (since 1990) of
Allmerica Financial Investment Management
Services, Inc.
J. Barry May Director (since 1996) of First Allmerica; Director
Director and President (since 1996) of The Hanover
Insurance Company; and Vice President (1993 to
1996) of The Hanover Insurance Company
</TABLE>
46
<PAGE>
<TABLE>
<CAPTION>
NAME AND POSITION WITH COMPANY PRINCIPAL OCCUPATION(S) DURING PAST FIVE YEARS
- ------------------------------ ----------------------------------------------
<S> <C>
James R. McAuliffe Director (since 1996) of First Allmerica; Director
Director (since 1992), President (since 1994) and Chief
Executive Officer (since 1996) of Citizens
Insurance Company of America
John F. O'Brien Director, President and Chief Executive Officer
Director and Chairman of the Board (since 1989) of First Allmerica; Director (since
1989) of Allmerica Investments, Inc.; and Director
and Chairman of the Board (since 1990) of
Allmerica Financial Investment Management
Services, Inc.
Edward J. Parry, III Director and Chief Financial Officer (since 1996)
Director, Vice President, Chief and Vice President and Treasurer (since 1993) of
Financial Officer and Treasurer First Allmerica; Treasurer (since 1993) of
Allmerica Investments, Inc.; and Treasurer (since
1993) of Allmerica Financial Investment Management
Services, Inc.
Richard M. Reilly Director (since 1996) and Vice President (since
Director, President and Chief 1990) of First Allmerica; Director (since 1990) of
Executive Officer Allmerica Investments, Inc.; and Director and
President (since 1998) of Allmerica Financial
Investment Management Services, Inc.
Robert P. Restrepo, Jr. Director and Vice President (since 1998) of First
Director Allmerica; Chief Executive Officer (1996 to 1998)
of Travelers Property & Casualty; Senior Vice
President (1993 to 1996) of Aetna Life & Casualty
Company
Eric A. Simonsen Director (since 1996) and Vice President (since
Director and Vice President 1990) of First Allmerica; Director (since 1991) of
Allmerica Investments, Inc.; and Director (since
1991) of Allmerica Financial Investment Management
Services, Inc.
</TABLE>
DISTRIBUTION
Allmerica Investments, Inc., an indirect wholly owned subsidiary of First
Allmerica, acts as the principal underwriter and general distributor of the
Policies. Allmerica Investments, Inc. is registered with the SEC as a
broker-dealer and is a member of the National Association of Securities
Dealers, Inc. ("NASD"). First Union Securities, Inc. acts as the distributor and
wholesaler of the Policies. First Union Securities, Inc. is registered with the
SEC as a broker-dealer and is a member of the NASD.
The Company, Allmerica Investments, Inc, and First Union Securities, Inc. have
sales agreements with various broker-dealers and banks under which the Policies
will be sold by registered representatives of the broker-dealers or employees of
the banks. These registered representatives and employees must also be
authorized under applicable state regulations as life insurance agents to sell
variable life insurance. The broker-dealers are ordinarily required to be
registered with the SEC and must be members of the NASD.
Broker-dealers who sell the Policy receive commissions based on a commission
schedule. Commissions may be up to 8.50% for payments in Years 1-4, 4.0% in
Years 5-10, and 2% thereafter. From time-to-time alternative commission
schedules may be available, but the maximum value of any alternative amounts the
Company may pay as commissions on the Policies is expected to be equivalent over
time to the amounts described above. To the extent permitted by NASD rules,
overrides and promotional incentives or payments based on sales volumes, the
assumption of wholesaling functions or other sales-related criteria. Other
payments may be made for other services that do not directly involve the sale of
the Policies. These services
47
<PAGE>
may include the recruitment and training of personnel, production of promotional
literature, and similar services.
Commissions paid on the Policies, including other incentives or payments, are
not charged to Policy Owners or to the Variable Account.
REPORTS
We will maintain the records for the Variable Account. We will promptly send you
statements of transactions under your Policy, including:
- Payments
- Changes in Face Amount
- Changes in death benefit option
- Transfers among Sub-Accounts and the Fixed Account
- Partial withdrawals
- Increases in loan amount or loan repayments
- Lapse or termination for any reason
- Reinstatement
We will send an annual statement to you that will summarize all of the above
transactions and deductions of charges during the Policy year. It will also set
forth the status of the death benefit, Policy Value, Surrender Value, amounts in
the Sub-Accounts and Fixed Account, and any Policy loans. We will send you
reports containing financial statements and other information for the Variable
Account and the Evergreen Variable Annuity Trust.
LEGAL PROCEEDINGS
There are no pending legal proceedings involving the Variable Account or its
assets. The Company and Allmerica Investments, Inc. are not involved in any
litigation that is materially important to their total assets.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, subject to law, to make additions to, deletions from, or
substitutions for the shares that are held in the Sub-Accounts. We may redeem
the shares of a Fund and substitute shares of another registered open-end
management company, if:
- The shares of the fund are no longer available for investment or
- In our judgment further investment in the Fund would be improper based on
the purposes of the Variable Account or the affected Sub-Account
Where the 1940 Act or other law requires, we will not substitute any shares
respecting a Policy interest in a sub-account without notice to Policy Owners
and prior approval of the SEC and state insurance authorities. The Variable
Account may, as the law allows, purchase other securities for other policies or
allow a conversion between policies on a Policy Owner's request.
48
<PAGE>
We reserve the right to establish additional sub-accounts funded by a new fund
or by another investment company. Subject to law, we may, in our sole
discretion, establish new sub-accounts or eliminate one or more sub-accounts.
Shares of the Underlying Funds are issued to other separate accounts of the
Company and its affiliates that fund variable annuity contracts ("mixed
funding") and are also issued to other unaffiliated insurance companies ("shared
funding"). It is conceivable that in the future such mixed funding or shared
funding may be disadvantageous for variable life Policy Owners or variable
annuity Policy Owners. The Company and the Underlying Funds do not believe that
mixed and shared funding is currently disadvantageous to either variable life
insurance Policy Owners or variable annuity Policy Owners. The Company and the
Trustees will monitor events to identify any material conflicts among Policy
Owners because of mixed and shared funding. If the Trustees conclude that
separate funds should be established for variable life and variable annuity
separate accounts, we will bear the expenses.
We may change the Policy to reflect a substitution or other change and will
notify Policy Owners of the change. Subject to any approvals the law may
require, the Variable Account or any sub-accounts may be:
- Operated as a management company under the 1940 Act
- Deregistered under the 1940 Act if registration is no longer required
- Combined with other sub-accounts or our other separate accounts
FURTHER INFORMATION
We have filed a 1933 Act registration statement for this offering with the SEC.
Under SEC rules and regulations, we have omitted from this Prospectus part of
the registration statement and amendments. Statements contained in this
Prospectus are summaries of the Policy and other legal documents. The complete
documents and omitted information may be obtained from the SEC's Principal
Office in Washington, D.C., on payment of the SEC's prescribed fees.
MORE INFORMATION ABOUT THE FIXED ACCOUNT
This Prospectus serves as a disclosure document only for the aspects of the
Policy relating to the Variable Account. For complete details on the Fixed
Account, read the Policy itself. The Fixed Account and other interests in the
general account are not regulated under the 1933 Act or the 1940 Act because of
exemption and exclusionary provisions. The 1933 Act provisions on the accuracy
and completeness of statements made in prospectuses may apply to information on
the fixed part of the Policy and the Fixed Account. The SEC has not reviewed the
disclosures in this section of the Prospectus.
GENERAL DESCRIPTION
You may allocate part or all of your payments to accumulate at a fixed rate of
interest in the Fixed Account. The Fixed Account is a part of our general
account. The general account is made up of all of our general assets other than
those allocated to any separate account. Allocations to the Fixed Account become
part of our general account assets and are used to support insurance and annuity
obligations.
FIXED ACCOUNT INTEREST
We guarantee amounts allocated to the Fixed Account as to principal and a
minimum rate of interest. The minimum interest we will credit on amounts
allocated to the Fixed Account is 4.0% compounded annually. "Excess interest"
may or may not be credited at our sole discretion. We will guarantee initial
rates on amounts allocated to the Fixed Account, either as payments or
transfers, to the next Policy anniversary. At each Policy
49
<PAGE>
anniversary, we will credit the then current interest rate to money remaining in
the Fixed Account. We will guarantee this rate for one year. Thus, if a payment
has been allocated to the Fixed Account for less than one Policy year, the
interest rate credited to such payment may be greater or less than the interest
rate credited to payments that have been allocated to the Policy for more than
one Policy year.
Policy loans may also be made from the Policy Value in the Fixed Account. We
will credit that part of the Policy Value that is equal to any Outstanding Loan
with interest at an effective annual yield of at least 4.0%.
We may delay transfers, surrenders, partial withdrawals, Net Death Benefits and
Policy loans up to six months. However, if payment is delayed for 30 days or
more, we will pay interest at our then current interest rate. The rate applied
will be at least equal to the rate required by state law for deferment of
payments. Amounts from the Fixed Account used to make payments on policies that
we or our affiliates issue will not be delayed.
PARTIAL WITHDRAWALS AND TRANSFERS
If a partial withdrawal is made, a partial withdrawal transaction charge may be
imposed. We deduct partial withdrawals from Policy Value allocated to the Fixed
Account on a last-in/first-out basis. This means that the last payments
allocated to Fixed Account will be withdrawn first.
The first 12 transfers in a Policy year currently are free. After that, we may
deduct a $10 transfer charge for each transfer in that Policy year. The transfer
privilege is subject to our consent and to our then current rules.
INDEPENDENT ACCOUNTANTS
The financial statements of the Company as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999, included in this
Prospectus constituting part of this Registration Statement, have been so
included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of the firm as experts in auditing and
accounting.
The financial statements of the Company included herein should be considered
only as bearing on the ability of the Company to meet its obligations under the
Policy.
FINANCIAL STATEMENTS
Financial Statements for the Company and for the Variable Account are included
in this Prospectus, beginning immediately after the Appendices. The financial
statements of the Company should be considered only as bearing on our ability to
meet our obligations under the Policy. They should not be considered as bearing
on the investment performance of the assets held in the Variable Account.
50
<PAGE>
APPENDIX A
GUIDELINE MINIMUM DEATH BENEFIT FACTORS TABLE
(DEATH BENEFIT OPTION 1 AND DEATH BENEFIT OPTION 2)
------------------------------------------------
Under Death Benefit Option 1 and Death Benefit Option 2, the Guideline Minimum
Death Benefit is a percentage of the Policy Value as set forth below:
GUIDELINE MINIMUM DEATH BENEFIT FACTORS
<TABLE>
<CAPTION>
Percentage of
Attained Age Policy Value
- ------------ -------------
<S> <C>
40 and under.......................................... 250%
41.................................................... 243%
42.................................................... 236%
43.................................................... 229%
44.................................................... 222%
45.................................................... 215%
46.................................................... 209%
47.................................................... 203%
48.................................................... 197%
49.................................................... 191%
50.................................................... 185%
51.................................................... 178%
52.................................................... 171%
53.................................................... 164%
54.................................................... 157%
55.................................................... 150%
56.................................................... 146%
57.................................................... 142%
58.................................................... 138%
59.................................................... 134%
60.................................................... 130%
61.................................................... 128%
62.................................................... 126%
63.................................................... 124%
64.................................................... 122%
65.................................................... 120%
66.................................................... 119%
67.................................................... 118%
68.................................................... 117%
69.................................................... 116%
70.................................................... 115%
71.................................................... 113%
72.................................................... 111%
73.................................................... 109%
74.................................................... 107%
75 - 90............................................... 105%
91.................................................... 104%
92.................................................... 103%
93.................................................... 102%
94.................................................... 101%
95 and above.......................................... 100%
</TABLE>
A-1
<PAGE>
APPENDIX B
OPTIONAL INSURANCE BENEFITS
This Appendix provides only a summary of other insurance benefits that may be
available by Rider for an additional charge. The Riders are not available if the
Policy is issued on the basis of simplified underwriting. For more information,
contact your representative.
WAIVER OF PREMIUM RIDER
This Rider provides that, during periods of total disability continuing more
than four months, we will add to the Policy Value each month an amount you
selected or the amount needed to pay the Monthly Policy Charges, whichever is
greater. This amount will keep the Policy in force. This benefit is subject to
our maximum issue benefits. Its cost will change yearly.
OTHER INSURED RIDER
This Rider provides a term insurance benefit for up to five Insureds. At present
this benefit is only available for the spouse and children of the primary
Insured. The Rider includes a feature that allows the "other Insured" to convert
the coverage to a flexible premium adjustable life insurance policy.
GUARANTEED DEATH BENEFIT RIDER
This Rider, which is available only at issue, (a) guarantees that your Policy
will not lapse regardless of the Performance of the Variable Account and (b)
provides a guaranteed Net Death Benefit.
Certain Riders May Not Be Available in All States.
B-1
<PAGE>
APPENDIX C
GUARANTEED MONTHLY POLICY CHARGE RATES
The Monthly Policy Charge will be charged on each monthly processing date until
the Final Payment Date. The Monthly Policy Charge compensates us for the cost of
providing life insurance coverage for the Insured and for certain
administrative, tax and distribution expenses. The Monthly Policy Charge is
equal to a specified amount that varies with the sex (unisex rates where
required by state law), age, and underwriting class of the Insured and Death
Benefit Option selected, for each $1,000 of the Policy's Face Amount. For a
standard underwriting class, the rates for the Monthly Policy Charge will never
exceed the guaranteed rates set forth in the Policy, which in turn will not
exceed the Commissioners 1980 Standard Ordinary Mortality Tables (Mortality
Table B for unisex Policies) and the Insured's sex and age, as set forth below.
<TABLE>
<CAPTION>
Age Male Female Age Male Female
- --- --------- --------- --- --------- ---------
<S> <C> <C> <C> <C> <C>
0 0.349002 0.241153 34 0.166820 0.131762
1 0.089210 0.072529 35 0.176004 0.137604
2 0.082537 0.067525 36 0.186859 0.146785
3 0.081703 0.065857 37 0.200220 0.157637
4 0.079201 0.064189 38 0.215255 0.170159
5 0.075031 0.063355 39 0.232798 0.185189
6 0.071695 0.060854 40 0.252016 0.201891
7 0.066691 0.060020 41 0.274581 0.220267
8 0.063355 0.058352 42 0.297152 0.239482
9 0.061688 0.057518 43 0.323073 0.257865
10 0.060854 0.056684 44 0.349839 0.277089
11 0.064189 0.057518 45 0.379960 0.297152
12 0.070861 0.060020 46 0.410927 0.317220
13 0.082537 0.062521 47 0.444418 0.338128
14 0.095884 0.066691 48 0.479596 0.361551
15 0.110901 0.070861 49 0.518979 0.386655
16 0.125921 0.075031 50 0.560894 0.414276
17 0.139273 0.079201 51 0.610378 0.443581
18 0.148454 0.081703 52 0.665766 0.476245
19 0.155132 0.085040 53 0.728747 0.513950
20 0.158471 0.087542 54 0.800179 0.552509
21 0.159306 0.089210 55 0.876715 0.592762
22 0.157637 0.090879 56 0.960053 0.633033
23 0.155132 0.092547 57 1.046840 0.671642
24 0.151793 0.095050 58 1.139616 0.708588
25 0.147620 0.096718 59 1.239245 0.748070
26 0.144281 0.099221 60 1.349978 0.792613
27 0.142612 0.101724 61 1.473551 0.848112
28 0.141777 0.105061 62 1.613407 0.917954
29 0.142612 0.108398 63 1.772172 1.007228
30 0.144281 0.112570 64 1.949092 1.110929
31 0.148454 0.116742 65 2.143422 1.224040
32 0.152628 0.120914 66 2.350996 1.343212
33 0.159306 0.125086 67 2.572761 1.464235
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
Age Male Female Age Male Female
- --- --------- --------- --- --------- ---------
<S> <C> <C> <C> <C> <C>
68 2.808822 1.583722 84 12.513845 9.091985
69 3.065321 1.712709 85 13.737727 10.231576
70 3.353673 1.861440 86 15.021846 11.470894
71 3.681989 2.041944 87 16.356613 12.808171
72 4.060290 2.267226 88 17.737983 14.246630
73 4.496204 2.544475 89 19.171986 15.797873
74 4.983518 2.872449 90 20.677655 17.482656
75 5.513313 3.243922 91 22.287142 19.335047
76 6.076525 3.653355 92 24.063468 21.418993
77 6.665690 4.094284 93 26.119927 23.852378
78 7.275881 4.567162 94 28.812996 26.926360
79 7.923872 5.085703 95 32.817580 31.310116
80 8.635205 5.672859 96 39.642945 38.504787
81 9.430778 6.350514 97 53.066045 52.275714
82 10.338952 7.140527 98 83.330000 83.330000
83 11.373499 8.058585 99 83.330000 83.330000
</TABLE>
EXAMPLES
1. For a female Insured, age 35, under a Policy with a Face Amount of $100,000,
the maximum Monthly Policy Charge would be $13.76, as follows:
- The Face Amount of $100,000 divided by 1000 = 100
- From the table, the applicable factor is 0.137604
- 100 times the factor of 0.137604= $13.76
2. For a male Insured, age 47, under a Policy with a Face Amount of $150,000,
the maximum Monthly Policy Charge would be $66.63, as follows:
- The Face Amount of $150,000 divided by 1000 = 150
- From the table, the applicable factor is 0.44418
- 150 times the factor of 0.444418 = $66.63
C-2
<PAGE>
APPENDIX D
ILLUSTRATIONS OF DEATH BENEFIT, POLICY VALUES
AND ACCUMULATED PAYMENTS
The following tables illustrate the way in which the Policy's death benefit and
Policy Value could vary over an extended period of time. ON REQUEST, WE WILL
PROVIDE A COMPARABLE ILLUSTRATION BASED ON THE PROPOSED INSURED'S AGE, SEX, AND
UNDERWRITING CLASS, AND THE REQUESTED FACE AMOUNT, DEATH BENEFIT OPTION AND
RIDERS.
ASSUMPTIONS
The tables illustrate Policies issued both on a simplified and fully
underwritten basis to a male non-smoker, Age 30, under a standard Underwriting
Class, and to a male non-smoker, Age 45, under a standard Underwriting Class. In
each case, one table illustrates the guaranteed Monthly Policy Charge rates and
the other table illustrates the current Monthly Policy Charge rates as presently
in effect.
The tables assume that no Policy loans have been made, that there has not been
an increase or decrease in the initial Face Amount, that no partial withdrawals
have been made, and that no transfers above 12 have been made in any Policy year
(so that no transaction or transfer charges have been incurred).
The tables assumed that all premiums are allocated to and remain in the Variable
Account for the entire period shown. The tables are based on hypothetical gross
investment rates of return for the Underlying Fund (i.e., investment income and
capital gains and losses, realized or unrealized) equivalent to constant gross
(after tax) annual rates of 0%, 6%, and 12%. The second column of the tables
show the amount which would accumulate if an amount equal to the guideline level
premium were invested each year to earn interest (after taxes) at 5%, compounded
annually.
The Policy Values and Death Proceeds would be different from those shown if the
gross annual investment rates of return averaged 0%, 6%, and 12% over a period
of years, but fluctuated above or below such averages for individual Policy
years. The values also would be different depending on the allocation of the
Policy's total Policy Value among the Sub-Accounts of the Variable Account, if
the actual rates of return averaged 0%, 6% or 12%, but the rates of each
Underlying Fund varied above and below such averages.
DEDUCTIONS FOR CHARGES
The amounts shown in the tables take into account the Monthly Deduction from
Policy Value.
EXPENSES OF THE UNDERLYING FUNDS
The amounts shown in the tables also take into account the Underlying Fund
advisory fees and operating expenses, which are assumed to be at an annual rate
of 0.95% of the average daily net assets of the Underlying Funds. The actual
fees and expenses of each Underlying Fund vary, and with expense limitations
range from an annual rate of 0.29% to an annual rate of 1.38% of average daily
net assets. The fees and expenses associated with your Policy may be more or
less than 0.95% in the aggregate, depending upon how you make allocations of
Policy Value among the Sub-Accounts.
Evergreen Investment Management has voluntarily agreed to limit aggregate
operating expenses (including investment advisory fees, but excluding interest,
brokerage commissions and extraordinary expenses) of the Evergreen VA Equity
Index Fund to 0.30% of average daily net assets. Without the voluntarily limit,
total expenses of the Evergreen VA Equity Index Fund for 1999 are estimated to
be 0.82% of average daily assets. Evergreen Asset Management Corp. has
voluntarily agreed to limit aggregate operating expenses (including investment
advisory fees, but excluding interest, brokerage commissions and extraordinary
expenses) of the Evergreen VA Foundation Fund, Evergreen Global Leaders Fund,
and Evergreen VA Small Cap Value Fund to 1.00% of average daily net assets.
Without these voluntary limitations, total expenses of the Funds during 1999, as
a percentage of average daily net assets, would have been 1.19% for Evergreen
Global Leaders Fund,
D-1
<PAGE>
and 1.36% for Evergreen VA Small Cap Value Fund. Total operating expenses for
the Evergreen VA Foundation Fund did not exceed its expense limitations during
1999.
The investment adviser of the Oppenheimer Small Cap Growth Fund/VA has
voluntarily agreed to limit aggregate operating expenses of the Fund to 1.38% of
average daily net assets. Without the effect of the voluntary limitation, total
expenses of the Fund during 1999, as a percentage of average daily net assets,
would have been 2.20%.
NET ANNUAL RATES OF INVESTMENT
Applying the average Fund advisory fees and operating expenses of 0.95% of
average net assets, in the Current Cost of Insurance Charges tables the gross
annual rates of investment return of 0%, 6% and 12% would produce net annual
rates of -0.95%, 5.05% and 11.05%. In the Guaranteed Cost of Insurance Charges
tables, the gross annual rates of investment return of 0%, 6% and 12% would
produce net annual rates of -0.95%, 5.05%% and 11.05%, respectively.
The hypothetical returns shown in the tables do not reflect any charges for
income taxes against the Variable Account since no charges are currently made.
However, if in the future the charges are made, to produce illustrated death
benefits and values, the gross annual investment rates of return would have to
exceed 0%, 6% or 12% by a sufficient amount to cover the tax charges. The second
column of the tables shows the amount that would accumulate if the guideline
level premium were invested to earn interest (after taxes) at 5%, compounded
annually.
D-2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING
FACE AMOUNT = $100,000
MALE NON-SMOKER AGE 30
DEATH BENEFIT OPTION 2
BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,735 3,332 3,332 103,332 3,539 3,539 103,539
2 7,656 6,599 6,599 106,599 7,220 7,220 107,220
3 11,774 9,808 9,808 109,808 11,055 11,055 111,055
4 16,098 12,957 12,957 112,957 15,047 15,047 115,047
5 20,637 16,052 16,052 116,052 19,210 19,210 119,210
6 25,404 19,112 19,112 119,112 23,568 23,568 123,568
7 30,409 22,117 22,117 122,117 28,108 28,108 128,108
8 35,664 25,086 25,086 125,086 32,858 32,858 132,858
9 41,183 28,004 28,004 128,004 37,809 37,809 137,809
10 46,977 30,870 30,870 130,870 42,969 42,969 142,969
11 53,060 33,773 33,773 133,773 48,471 48,471 148,471
12 59,448 36,636 36,636 136,636 54,225 54,225 154,225
13 66,155 39,464 39,464 139,464 60,245 60,245 160,245
14 73,198 42,258 42,258 142,258 66,545 66,545 166,545
15 80,593 45,007 45,007 145,007 73,125 73,125 173,125
16 88,357 47,710 47,710 147,710 79,997 79,997 179,997
17 96,510 50,355 50,355 150,355 87,161 87,161 187,161
18 105,070 52,942 52,942 152,942 94,628 94,628 194,628
19 114,059 55,469 55,469 155,469 102,410 102,410 202,410
20 123,496 57,935 57,935 157,935 110,519 110,519 211,092
Age 60 248,139 80,558 80,558 180,558 217,535 217,535 317,535
Age 65 337,333 88,718 88,718 188,718 290,433 290,433 390,433
Age 70 451,169 93,726 93,726 193,726 379,459 379,459 479,459
Age 75 596,456 94,250 94,250 194,250 487,112 487,112 587,112
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 3,746 3,746 103,746
2 7,865 7,865 107,865
3 12,403 12,403 112,403
4 17,398 17,398 117,398
5 22,904 22,904 122,904
6 28,991 28,991 128,991
7 35,697 35,697 135,697
8 43,105 43,105 143,105
9 51,270 51,270 151,270
10 60,267 60,267 160,267
11 70,357 70,357 175,892
12 81,494 81,494 198,029
13 93,790 93,790 221,345
14 107,371 107,371 245,880
15 122,356 122,356 271,631
16 138,889 138,889 298,612
17 157,107 157,107 328,355
18 177,182 177,182 359,680
19 199,299 199,299 392,620
20 223,668 223,668 427,206
Age 60 672,744 672,744 901,476
Age 65 1,133,827 1,133,827 1,383,269
Age 70 1,891,545 1,891,545 2,194,192
Age 75 3,141,178 3,141,178 3,361,060
</TABLE>
(1) Assumes a $3,557 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING
FACE AMOUNT = $100,000
MALE NON-SMOKER AGE 30
DEATH BENEFIT OPTION 2
BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 3,735 3,328 3,328 103,328 3,534 3,534 103,534
2 7,656 6,594 6,594 106,594 7,214 7,214 107,214
3 11,774 9,800 9,800 109,800 11,046 11,046 111,046
4 16,098 12,944 12,944 112,944 15,033 15,033 115,033
5 20,637 16,026 16,026 116,026 19,180 19,180 119,180
6 25,404 19,044 19,044 119,044 23,494 23,494 123,494
7 30,409 21,999 21,999 121,999 27,978 27,978 127,978
8 35,664 24,888 24,888 124,888 32,638 32,638 132,638
9 41,183 27,710 27,710 127,710 37,478 37,478 137,478
10 46,977 30,464 30,464 130,464 42,502 42,502 142,502
11 53,060 33,230 33,230 133,230 47,836 47,836 147,836
12 59,448 35,930 35,930 135,930 53,384 53,384 153,384
13 66,155 38,564 38,564 138,564 59,156 59,156 159,156
14 73,198 41,130 41,130 141,130 65,157 65,157 165,157
15 80,593 43,626 43,626 143,626 71,396 71,396 171,396
16 88,357 46,050 46,050 146,050 77,881 77,881 177,881
17 96,510 48,402 48,402 148,402 84,622 84,622 184,622
18 105,070 50,681 50,681 150,681 91,627 91,627 191,627
19 114,059 52,885 52,885 152,885 98,906 98,906 198,906
20 123,496 55,010 55,010 155,010 106,466 106,466 206,466
Age 60 248,139 72,245 72,245 172,245 203,608 203,608 303,608
Age 65 337,333 75,662 75,662 175,662 266,812 266,812 366,812
Age 70 451,169 73,300 73,300 173,300 340,242 340,242 440,242
Age 75 596,456 62,162 62,162 162,162 422,787 422,787 522,787
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 3,741 3,741 103,741
2 7,859 7,859 107,859
3 12,392 12,392 112,392
4 17,382 17,382 117,382
5 22,871 22,871 122,871
6 28,911 28,911 128,911
7 35,554 35,554 135,554
8 42,860 42,860 142,860
9 50,894 50,894 150,894
10 59,727 59,727 159,727
11 69,609 69,609 174,024
12 80,470 80,470 195,543
13 92,404 92,404 218,072
14 105,510 105,510 241,618
15 119,905 119,905 266,190
16 135,715 135,715 291,787
17 153,073 153,073 319,922
18 172,131 172,131 349,426
19 193,057 193,057 380,322
20 216,033 216,033 412,623
Age 60 632,371 632,371 847,378
Age 65 1,052,728 1,052,728 1,284,328
Age 70 1,732,062 1,732,062 2,009,192
Age 75 2,838,547 2,838,547 3,037,245
</TABLE>
(1) Assumes a $3,557 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-4
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING
FACE AMOUNT = $100,000
MALE NON-SMOKER AGE 45
DEATH BENEFIT OPTION 1
BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,132 1,571 1,571 100,000 1,678 1,678 100,000
2 4,370 3,070 3,070 100,000 3,382 3,382 100,000
3 6,720 4,516 4,516 100,000 5,132 5,132 100,000
4 9,187 5,952 5,952 100,000 6,973 6,973 100,000
5 11,778 7,336 7,336 100,000 8,867 8,867 100,000
6 14,498 8,685 8,685 100,000 10,834 10,834 100,000
7 17,355 9,976 9,976 100,000 12,852 12,852 100,000
8 20,354 11,276 11,276 100,000 14,994 14,994 100,000
9 23,503 12,551 12,551 100,000 17,229 17,229 100,000
10 26,810 13,791 13,791 100,000 19,554 19,554 100,000
11 30,282 15,043 15,043 100,000 22,037 22,037 100,000
12 33,927 16,281 16,281 100,000 24,645 24,645 100,000
13 37,755 17,517 17,517 100,000 27,397 27,397 100,000
14 41,774 18,763 18,763 100,000 30,310 30,310 100,000
15 45,995 19,967 19,967 100,000 33,345 33,345 100,000
16 50,426 21,124 21,124 100,000 36,509 36,509 100,000
17 55,079 22,214 22,214 100,000 39,791 39,791 100,000
18 59,964 23,232 23,232 100,000 43,199 43,199 100,000
19 65,094 24,176 24,176 100,000 46,742 46,742 100,000
20 70,480 25,043 25,043 100,000 50,430 50,430 100,000
Age 60 45,995 19,967 19,967 100,000 33,345 33,345 100,000
Age 65 70,480 25,043 25,043 100,000 50,430 50,430 100,000
Age 70 101,730 28,365 28,365 100,000 72,404 72,404 100,000
Age 75 141,614 28,681 28,681 100,000 101,393 101,393 108,491
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
--------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- --------
<S> <C> <C> <C>
1 1,786 1,786 100,000
2 3,708 3,708 100,000
3 5,801 5,801 100,000
4 8,126 8,126 100,000
5 10,667 10,667 100,000
6 13,464 13,464 100,000
7 16,521 16,521 100,000
8 19,936 19,936 100,000
9 23,712 23,712 100,000
10 27,880 27,880 100,000
11 32,575 32,575 100,000
12 37,793 37,793 100,000
13 43,603 43,603 100,000
14 50,079 50,079 100,000
15 57,260 57,260 100,000
16 65,229 65,229 100,000
17 74,074 74,074 100,000
18 83,895 83,895 105,708
19 94,729 94,729 117,464
20 106,670 106,670 130,138
Age 60 57,260 57,260 100,000
Age 65 106,670 106,670 130,138
Age 70 189,506 189,506 219,827
Age 75 326,114 326,114 348,942
</TABLE>
(1) Assumes a $2,030 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-5
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING
FACE AMOUNT = $100,000
MALE NON-SMOKER AGE 45
DEATH BENEFIT OPTION 1
BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,132 1,553 1,553 100,000 1,660 1,660 100,000
2 4,370 3,051 3,051 100,000 3,362 3,362 100,000
3 6,720 4,494 4,494 100,000 5,106 5,106 100,000
4 9,187 5,879 5,879 100,000 6,894 6,894 100,000
5 11,778 7,206 7,206 100,000 8,725 8,725 100,000
6 14,498 8,473 8,473 100,000 10,600 10,600 100,000
7 17,355 9,674 9,674 100,000 12,515 12,515 100,000
8 20,354 10,804 10,804 100,000 14,468 14,468 100,000
9 23,503 11,859 11,859 100,000 16,456 16,456 100,000
10 26,810 12,831 12,831 100,000 18,475 18,475 100,000
11 30,282 13,752 13,752 100,000 20,577 20,577 100,000
12 33,927 14,586 14,586 100,000 22,718 22,718 100,000
13 37,755 15,329 15,329 100,000 24,902 24,902 100,000
14 41,774 15,978 15,978 100,000 27,129 27,129 100,000
15 45,995 16,529 16,529 100,000 29,402 29,402 100,000
16 50,426 16,970 16,970 100,000 31,720 31,720 100,000
17 55,079 17,291 17,291 100,000 34,081 34,081 100,000
18 59,964 17,476 17,476 100,000 36,482 36,482 100,000
19 65,094 17,507 17,507 100,000 38,921 38,921 100,000
20 70,480 17,364 17,364 100,000 41,395 41,395 100,000
Age 60 45,995 16,529 16,529 100,000 29,402 29,402 100,000
Age 65 70,480 17,364 17,364 100,000 41,395 41,395 100,000
Age 70 101,730 13,603 13,603 100,000 55,203 55,203 100,000
Age 75 141,614 724 724 100,000 71,626 71,626 100,000
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
--------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- --------
<S> <C> <C> <C>
1 1,767 1,767 100,000
2 3,686 3,686 100,000
3 5,772 5,772 100,000
4 8,041 8,041 100,000
5 10,513 10,513 100,000
6 13,208 13,208 100,000
7 16,146 16,146 100,000
8 19,350 19,350 100,000
9 22,849 22,849 100,000
10 26,671 26,671 100,000
11 30,934 30,934 100,000
12 35,625 35,625 100,000
13 40,800 40,800 100,000
14 46,526 46,526 100,000
15 52,877 52,877 100,000
16 59,940 59,940 100,000
17 67,815 67,815 100,000
18 76,624 76,624 100,000
19 86,461 86,461 107,212
20 97,282 97,282 118,684
Age 60 52,877 52,877 100,000
Age 65 97,282 97,282 118,684
Age 70 171,537 171,537 198,983
Age 75 292,463 292,463 312,935
</TABLE>
(1) Assumes a $2,030 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-6
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING
FACE AMOUNT = $100,000
MALE NON-SMOKER AGE 45
DEATH BENEFIT OPTION 3
BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,132 1,571 1,571 100,000 1,678 1,678 100,000
2 4,370 3,070 3,070 100,000 3,382 3,382 100,000
3 6,720 4,516 4,516 100,000 5,132 5,132 100,000
4 9,187 5,952 5,952 100,000 6,973 6,973 100,000
5 11,778 7,336 7,336 100,000 8,867 8,867 100,000
6 14,498 8,685 8,685 100,000 10,834 10,834 100,000
7 17,355 9,976 9,976 100,000 12,852 12,852 100,000
8 20,354 11,276 11,276 100,000 14,994 14,994 100,000
9 23,503 12,551 12,551 100,000 17,229 17,229 100,000
10 26,810 13,791 13,791 100,000 19,554 19,554 100,000
11 30,282 15,043 15,043 100,000 22,037 22,037 100,000
12 33,927 16,281 16,281 100,000 24,645 24,645 100,000
13 37,755 17,517 17,517 100,000 27,397 27,397 100,000
14 41,774 18,763 18,763 100,000 30,310 30,310 100,000
15 45,995 19,967 19,967 100,000 33,345 33,345 100,000
16 50,426 21,124 21,124 100,000 36,509 36,509 100,000
17 55,079 22,214 22,214 100,000 39,791 39,791 100,000
18 59,964 23,232 23,232 100,000 43,199 43,199 100,000
19 65,094 24,176 24,176 100,000 46,742 46,742 100,000
20 70,480 25,043 25,043 100,000 50,430 50,430 100,000
Age 60 45,995 19,967 19,967 100,000 33,345 33,345 100,000
Age 65 70,480 25,043 25,043 100,000 50,430 50,430 100,000
Age 70 101,730 28,365 28,365 100,000 72,223 72,223 109,854
Age 75 141,614 28,681 28,681 100,000 98,226 98,226 135,532
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 1,786 1,786 100,000
2 3,708 3,708 100,000
3 5,801 5,801 100,000
4 8,126 8,126 100,000
5 10,667 10,667 100,000
6 13,464 13,464 100,000
7 16,521 16,521 100,000
8 19,936 19,936 100,000
9 23,712 23,712 100,000
10 27,880 27,880 100,000
11 32,575 32,575 100,000
12 37,793 37,793 100,000
13 43,603 43,603 100,000
14 50,079 50,079 100,000
15 57,227 57,227 110,204
16 65,072 65,072 122,112
17 73,664 73,664 134,763
18 83,071 83,071 148,220
19 93,367 93,367 162,559
20 104,633 104,633 177,862
Age 60 57,227 57,227 110,204
Age 65 104,633 104,633 177,862
Age 70 180,968 180,968 275,260
Age 75 300,888 300,888 415,165
</TABLE>
(1) Assumes a $2,030 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-7
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
SIMPLIFIED UNDERWRITING
FACE AMOUNT = $100,000
MALE NON-SMOKER AGE 45
DEATH BENEFIT OPTION 3
BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 2,132 1,553 1,553 100,000 1,660 1,660 100,000
2 4,370 3,051 3,051 100,000 3,362 3,362 100,000
3 6,720 4,494 4,494 100,000 5,106 5,106 100,000
4 9,187 5,879 5,879 100,000 6,894 6,894 100,000
5 11,778 7,206 7,206 100,000 8,725 8,725 100,000
6 14,498 8,473 8,473 100,000 10,600 10,600 100,000
7 17,355 9,674 9,674 100,000 12,515 12,515 100,000
8 20,354 10,804 10,804 100,000 14,468 14,468 100,000
9 23,503 11,859 11,859 100,000 16,456 16,456 100,000
10 26,810 12,831 12,831 100,000 18,475 18,475 100,000
11 30,282 13,752 13,752 100,000 20,577 20,577 100,000
12 33,927 14,586 14,586 100,000 22,718 22,718 100,000
13 37,755 15,329 15,329 100,000 24,902 24,902 100,000
14 41,774 15,978 15,978 100,000 27,129 27,129 100,000
15 45,995 16,529 16,529 100,000 29,402 29,402 100,000
16 50,426 16,970 16,970 100,000 31,720 31,720 100,000
17 55,079 17,291 17,291 100,000 34,081 34,081 100,000
18 59,964 17,476 17,476 100,000 36,482 36,482 100,000
19 65,094 17,507 17,507 100,000 38,921 38,921 100,000
20 70,480 17,364 17,364 100,000 41,395 41,395 100,000
Age 60 45,995 16,529 16,529 100,000 29,402 29,402 100,000
Age 65 70,480 17,364 17,364 100,000 41,395 41,395 100,000
Age 70 101,730 13,603 13,603 100,000 55,203 55,203 100,000
Age 75 141,614 724 724 100,000 71,626 71,626 100,000
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 1,767 1,767 100,000
2 3,686 3,686 100,000
3 5,772 5,772 100,000
4 8,041 8,041 100,000
5 10,513 10,513 100,000
6 13,208 13,208 100,000
7 16,146 16,146 100,000
8 19,350 19,350 100,000
9 22,849 22,849 100,000
10 26,671 26,671 100,000
11 30,934 30,934 100,000
12 35,625 35,625 100,000
13 40,800 40,800 100,000
14 46,526 46,526 100,000
15 52,875 52,875 101,824
16 59,816 59,816 112,249
17 67,345 67,345 123,203
18 75,505 75,505 134,721
19 84,338 84,338 146,838
20 93,888 93,888 159,597
Age 60 52,875 52,875 101,824
Age 65 93,888 93,888 159,597
Age 70 156,193 156,193 237,576
Age 75 247,412 247,412 341,379
</TABLE>
(1) Assumes a $13,160 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-8
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING
FACE AMOUNT = $300,000
MALE NON-SMOKER AGE 30
DEATH BENEFIT OPTION 2
BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- ---------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 11,205 10,194 10,194 310,194 10,820 10,820 310,820
2 22,969 20,237 20,237 320,237 22,124 22,124 322,124
3 35,322 30,131 30,131 330,131 33,933 33,933 333,933
4 48,293 39,865 39,865 339,865 46,253 46,253 346,253
5 61,912 49,424 49,424 349,424 59,088 59,088 359,088
6 76,212 58,807 58,807 358,807 72,456 72,456 372,456
7 91,228 68,010 68,010 368,010 86,372 86,372 386,372
8 106,993 77,064 77,064 377,064 100,889 100,889 400,889
9 123,548 85,944 85,944 385,944 116,004 116,004 416,004
10 140,930 94,646 94,646 394,646 131,735 131,735 431,735
11 159,181 103,432 103,432 403,432 148,479 148,479 448,479
12 178,344 112,066 112,066 412,066 165,955 165,955 465,955
13 198,466 120,557 120,557 420,557 184,205 184,205 484,205
14 219,594 128,908 128,908 428,908 203,262 203,262 503,262
15 241,778 137,124 137,124 437,124 223,167 223,167 523,167
16 265,072 145,204 145,204 445,204 243,955 243,955 543,955
17 289,530 153,110 153,110 453,110 265,625 265,625 565,625
18 315,211 160,840 160,840 460,840 288,214 288,214 588,214
19 342,176 168,391 168,391 468,391 311,756 311,756 614,159
20 370,489 175,762 175,762 475,762 336,287 336,287 642,308
Age 60 744,417 243,405 243,405 543,405 660,141 660,141 960,141
Age 65 1,011,998 267,778 267,778 567,778 880,812 880,812 1,180,812
Age 70 1,353,507 282,707 282,707 582,707 1,150,397 1,150,397 1,450,397
Age 75 1,789,368 284,175 284,175 584,175 1,476,508 1,476,508 1,776,508
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
----------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ----------
<S> <C> <C> <C>
1 11,447 11,447 311,447
2 24,087 24,087 324,087
3 38,043 38,043 338,043
4 53,433 53,433 353,433
5 70,387 70,387 370,387
6 89,058 89,058 389,058
7 109,617 109,617 409,617
8 132,286 132,286 432,286
9 157,251 157,251 457,251
10 184,738 184,738 484,738
11 215,532 215,532 538,829
12 249,489 249,489 606,259
13 286,945 286,945 677,190
14 328,263 328,263 751,721
15 373,850 373,850 829,947
16 424,148 424,148 911,918
17 479,573 479,573 1,002,307
18 540,645 540,645 1,097,509
19 607,931 607,931 1,197,624
20 682,066 682,066 1,302,747
Age 60 2,048,314 2,048,314 2,744,741
Age 65 3,451,075 3,451,075 4,210,312
Age 70 5,756,312 5,756,312 6,677,321
Age 75 9,558,074 9,558,074 10,227,139
</TABLE>
(1) Assumes a $10,671 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-9
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING
FACE AMOUNT = $300,000
MALE NON-SMOKER AGE 30
DEATH BENEFIT OPTION 2
BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- ---------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1 11,205 9,983 9,983 309,983 10,603 10,603 310,603
2 22,969 19,783 19,783 319,783 21,643 21,643 321,643
3 35,322 29,400 29,400 329,400 33,137 33,137 333,137
4 48,293 38,832 38,832 338,832 45,098 45,098 345,098
5 61,912 48,077 48,077 348,077 57,541 57,541 357,541
6 76,212 57,133 57,133 357,133 70,482 70,482 370,482
7 91,228 65,996 65,996 365,996 83,934 83,934 383,934
8 106,993 74,664 74,664 374,664 97,913 97,913 397,913
9 123,548 83,131 83,131 383,131 112,433 112,433 412,433
10 140,930 91,391 91,391 391,391 127,507 127,507 427,507
11 159,181 99,691 99,691 399,691 143,509 143,509 443,509
12 178,344 107,790 107,790 407,790 160,152 160,152 460,152
13 198,466 115,693 115,693 415,693 177,467 177,467 477,467
14 219,594 123,389 123,389 423,389 195,470 195,470 495,470
15 241,778 130,877 130,877 430,877 214,188 214,188 514,188
16 265,072 138,150 138,150 438,150 233,644 233,644 533,644
17 289,530 145,207 145,207 445,207 253,866 253,866 553,866
18 315,211 152,044 152,044 452,044 274,882 274,882 574,882
19 342,176 158,654 158,654 458,654 296,717 296,717 596,717
20 370,489 165,029 165,029 465,029 319,397 319,397 619,397
Age 60 744,417 216,734 216,734 516,734 610,823 610,823 910,823
Age 65 1,011,998 226,986 226,986 526,986 800,437 800,437 1,100,437
Age 70 1,353,507 219,900 219,900 519,900 1,020,725 1,020,725 1,320,725
Age 75 1,789,368 186,487 186,487 486,487 1,268,360 1,268,360 1,568,360
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 11,223 11,223 311,223
2 23,578 23,578 323,578
3 37,177 37,177 337,177
4 52,145 52,145 352,145
5 68,613 68,613 368,613
6 86,732 86,732 386,732
7 106,661 106,661 406,661
8 128,580 128,580 428,580
9 152,682 152,682 452,682
10 179,182 179,182 479,182
11 208,828 208,828 522,071
12 241,411 241,411 586,629
13 277,211 277,211 654,217
14 316,530 316,530 724,853
15 359,716 359,716 798,569
16 407,144 407,144 875,360
17 459,218 459,218 959,766
18 516,394 516,394 1,048,280
19 579,170 579,170 1,140,966
20 648,100 648,100 1,237,871
Age 60 1,897,116 1,897,116 2,542,135
Age 65 3,158,186 3,158,186 3,852,986
Age 70 5,196,191 5,196,191 6,027,582
Age 75 8,515,647 8,515,647 9,111,742
</TABLE>
(1) Assumes a $10,671 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-10
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING
FACE AMOUNT = $300,000
MALE NON-SMOKER AGE 45
DEATH BENEFIT OPTION 1
BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% GROSS HYPOTHETICAL 6% GROSS
PAID PLUS INVESTMENT RETURN INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,398 5,448 5,448 300,000 5,794 5,794 300,000
2 13,115 10,658 10,658 300,000 11,686 11,686 300,000
3 20,169 15,848 15,848 300,000 17,901 17,901 300,000
4 27,575 20,851 20,851 300,000 24,283 24,283 300,000
5 35,351 25,694 25,694 300,000 30,866 30,866 300,000
6 43,516 30,393 30,393 300,000 37,672 37,672 300,000
7 52,090 34,958 34,958 300,000 44,722 44,722 300,000
8 61,092 39,390 39,390 300,000 52,029 52,029 300,000
9 70,544 43,679 43,679 300,000 59,593 59,593 300,000
10 80,469 47,796 47,796 300,000 67,401 67,401 300,000
11 90,890 51,877 51,877 300,000 75,659 75,659 300,000
12 101,832 55,806 55,806 300,000 84,231 84,231 300,000
13 113,321 59,606 59,606 300,000 93,155 93,155 300,000
14 125,385 63,286 63,286 300,000 102,463 102,463 300,000
15 138,052 66,844 66,844 300,000 112,176 112,176 300,000
16 151,352 70,265 70,265 300,000 122,308 122,308 300,000
17 165,318 73,489 73,489 300,000 132,841 132,841 300,000
18 179,981 76,506 76,506 300,000 143,801 143,801 300,000
19 195,378 79,309 79,309 300,000 155,221 155,221 300,000
20 211,544 81,886 81,886 300,000 167,136 167,136 300,000
Age 60 138,052 66,844 66,844 300,000 112,176 112,176 300,000
Age 65 211,544 81,886 81,886 300,000 167,136 167,136 300,000
Age 70 305,341 91,943 91,943 300,000 238,736 238,736 300,000
Age 75 425,052 93,280 93,280 300,000 332,547 332,547 355,825
<CAPTION>
HYPOTHETICAL 12% GROSS
INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 6,140 6,140 300,000
2 12,756 12,756 300,000
3 20,124 20,124 300,000
4 28,149 28,149 300,000
5 36,927 36,927 300,000
6 46,554 46,554 300,000
7 57,131 57,131 300,000
8 68,762 68,762 300,000
9 81,552 81,552 300,000
10 95,605 95,605 300,000
11 111,347 111,347 300,000
12 128,741 128,741 300,000
13 148,002 148,002 300,000
14 169,355 169,355 300,000
15 193,051 193,051 300,000
16 219,363 219,363 300,000
17 248,557 248,557 318,154
18 280,753 280,753 353,749
19 316,236 316,236 392,133
20 355,346 355,346 433,522
Age 60 193,051 193,051 300,000
Age 65 355,346 355,346 433,522
Age 70 626,731 626,731 727,008
Age 75 1,074,282 1,074,282 1,149,482
</TABLE>
(1) Assumes a $6,093 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-11
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING
FACE AMOUNT = $300,000
MALE NON-SMOKER AGE 45
DEATH BENEFIT OPTION 1
BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,398 4,662 4,662 300,000 4,983 4,983 300,000
2 13,115 9,159 9,159 300,000 10,092 10,092 300,000
3 20,169 13,489 13,489 300,000 15,329 15,329 300,000
4 27,575 17,648 17,648 300,000 20,696 20,696 300,000
5 35,351 21,632 21,632 300,000 26,193 26,193 300,000
6 43,516 25,435 25,435 300,000 31,821 31,821 300,000
7 52,090 29,042 29,042 300,000 37,572 37,572 300,000
8 61,092 32,436 32,436 300,000 43,434 43,434 300,000
9 70,544 35,602 35,602 300,000 49,401 49,401 300,000
10 80,469 38,521 38,521 300,000 55,464 55,464 300,000
11 90,890 41,288 41,288 300,000 61,776 61,776 300,000
12 101,832 43,792 43,792 300,000 68,206 68,206 300,000
13 113,321 46,025 46,025 300,000 74,762 74,762 300,000
14 125,385 47,976 47,976 300,000 81,450 81,450 300,000
15 138,052 49,631 49,631 300,000 88,277 88,277 300,000
16 151,352 50,958 50,958 300,000 95,238 95,238 300,000
17 165,318 51,922 51,922 300,000 102,328 102,328 300,000
18 179,981 52,481 52,481 300,000 109,542 109,542 300,000
19 195,378 52,576 52,576 300,000 116,867 116,867 300,000
20 211,544 52,152 52,152 300,000 124,301 124,301 300,000
Age 60 138,052 49,631 49,631 300,000 88,277 88,277 300,000
Age 65 211,544 52,152 52,152 300,000 124,301 124,301 300,000
Age 70 305,341 40,890 40,890 300,000 165,799 165,799 300,000
Age 75 425,052 2,287 2,287 300,000 215,205 215,205 300,000
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 5,304 5,304 300,000
2 11,064 11,064 300,000
3 17,326 17,326 300,000
4 24,140 24,140 300,000
5 31,559 31,559 300,000
6 39,650 39,650 300,000
7 48,470 48,470 300,000
8 58,091 58,091 300,000
9 68,593 68,593 300,000
10 80,069 80,069 300,000
11 92,868 92,868 300,000
12 106,951 106,951 300,000
13 122,491 122,491 300,000
14 139,681 139,681 300,000
15 158,751 158,751 300,000
16 179,957 179,957 300,000
17 203,603 203,603 300,000
18 230,053 230,053 300,000
19 259,588 259,588 321,889
20 292,075 292,075 356,332
Age 60 158,751 158,751 300,000
Age 65 292,075 292,075 356,332
Age 70 515,003 515,003 597,403
Age 75 878,045 878,045 939,508
</TABLE>
(1) Assumes a $6,093 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-12
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING
FACE AMOUNT = $300,000
MALE NON-SMOKER AGE 45
DEATH BENEFIT OPTION 3
BASED ON CURRENT MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% HYPOTHETICAL 6%
PAID PLUS GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,398 5,448 5,448 300,000 5,794 5,794 300,000
2 13,115 10,658 10,658 300,000 11,686 11,686 300,000
3 20,169 15,848 15,848 300,000 17,901 17,901 300,000
4 27,575 20,851 20,851 300,000 24,283 24,283 300,000
5 35,351 25,694 25,694 300,000 30,866 30,866 300,000
6 43,516 30,393 30,393 300,000 37,672 37,672 300,000
7 52,090 34,958 34,958 300,000 44,722 44,722 300,000
8 61,092 39,390 39,390 300,000 52,029 52,029 300,000
9 70,544 43,679 43,679 300,000 59,593 59,593 300,000
10 80,469 47,796 47,796 300,000 67,401 67,401 300,000
11 90,890 51,877 51,877 300,000 75,659 75,659 300,000
12 101,832 55,806 55,806 300,000 84,231 84,231 300,000
13 113,321 59,606 59,606 300,000 93,155 93,155 300,000
14 125,385 63,286 63,286 300,000 102,463 102,463 300,000
15 138,052 66,844 66,844 300,000 112,176 112,176 300,000
16 151,352 70,265 70,265 300,000 122,308 122,308 300,000
17 165,318 73,489 73,489 300,000 132,841 132,841 300,000
18 179,981 76,506 76,506 300,000 143,801 143,801 300,000
19 195,378 79,309 79,309 300,000 155,221 155,221 300,000
20 211,544 81,886 81,886 300,000 167,136 167,136 300,000
Age 60 138,052 66,844 66,844 300,000 112,176 112,176 300,000
Age 65 211,544 81,886 81,886 300,000 167,136 167,136 300,000
Age 70 305,341 91,943 91,943 300,000 236,665 236,665 359,968
Age 75 425,052 93,280 93,280 300,000 318,744 318,744 439,791
<CAPTION>
HYPOTHETICAL 12%
GROSS INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 6,140 6,140 300,000
2 12,756 12,756 300,000
3 20,124 20,124 300,000
4 28,149 28,149 300,000
5 36,927 36,927 300,000
6 46,554 46,554 300,000
7 57,131 57,131 300,000
8 68,762 68,762 300,000
9 81,552 81,552 300,000
10 95,605 95,605 300,000
11 111,347 111,347 300,000
12 128,741 128,741 300,000
13 148,002 148,002 300,478
14 169,238 169,238 334,558
15 192,551 192,551 370,787
16 218,134 218,134 409,328
17 246,153 246,153 450,300
18 276,828 276,828 493,916
19 310,402 310,402 540,414
20 347,137 347,137 590,065
Age 60 192,551 192,551 370,787
Age 65 347,137 347,137 590,065
Age 70 596,104 596,104 906,672
Age 75 987,149 987,149 1,362,032
</TABLE>
(1) Assumes a $6,093 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-13
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
FULL UNDERWRITING
FACE AMOUNT = $300,000
MALE NON-SMOKER AGE 45
DEATH BENEFIT OPTION 3
BASED ON GUARANTEED MONTHLY INSURANCE
CHARGES WITHOUT RIDERS
<TABLE>
<CAPTION>
PREMIUMS HYPOTHETICAL 0% GROSS HYPOTHETICAL 6% GROSS
PAID PLUS INVESTMENT RETURN INVESTMENT RETURN
INTEREST -------------------------------- --------------------------------
POLICY AT 5% SURRENDER POLICY DEATH SURRENDER POLICY DEATH
YEAR PER YEAR (1) VALUE VALUE (2) BENEFIT VALUE VALUE (2) BENEFIT
- --------------------- ------------ --------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1 6,398 4,662 4,662 300,000 4,983 4,983 300,000
2 13,115 9,159 9,159 300,000 10,092 10,092 300,000
3 20,169 13,489 13,489 300,000 15,329 15,329 300,000
4 27,575 17,648 17,648 300,000 20,696 20,696 300,000
5 35,351 21,632 21,632 300,000 26,193 26,193 300,000
6 43,516 25,435 25,435 300,000 31,821 31,821 300,000
7 52,090 29,042 29,042 300,000 37,572 37,572 300,000
8 61,092 32,436 32,436 300,000 43,434 43,434 300,000
9 70,544 35,602 35,602 300,000 49,401 49,401 300,000
10 80,469 38,521 38,521 300,000 55,464 55,464 300,000
11 90,890 41,288 41,288 300,000 61,776 61,776 300,000
12 101,832 43,792 43,792 300,000 68,206 68,206 300,000
13 113,321 46,025 46,025 300,000 74,762 74,762 300,000
14 125,385 47,976 47,976 300,000 81,450 81,450 300,000
15 138,052 49,631 49,631 300,000 88,277 88,277 300,000
16 151,352 50,958 50,958 300,000 95,238 95,238 300,000
17 165,318 51,922 51,922 300,000 102,328 102,328 300,000
18 179,981 52,481 52,481 300,000 109,542 109,542 300,000
19 195,378 52,576 52,576 300,000 116,867 116,867 300,000
20 211,544 52,152 52,152 300,000 124,301 124,301 300,000
Age 60 138,052 49,631 49,631 300,000 88,277 88,277 300,000
Age 65 211,544 52,152 52,152 300,000 124,301 124,301 300,000
Age 70 305,341 40,890 40,890 300,000 165,799 165,799 300,000
Age 75 425,052 2,287 2,287 300,000 215,205 215,205 300,000
<CAPTION>
HYPOTHETICAL 12% GROSS
INVESTMENT RETURN
---------------------------------
POLICY SURRENDER POLICY DEATH
YEAR VALUE VALUE (2) BENEFIT
- --------------------- --------- --------- ---------
<S> <C> <C> <C>
1 5,304 5,304 300,000
2 11,064 11,064 300,000
3 17,326 17,326 300,000
4 24,140 24,140 300,000
5 31,559 31,559 300,000
6 39,650 39,650 300,000
7 48,470 48,470 300,000
8 58,091 58,091 300,000
9 68,593 68,593 300,000
10 80,069 80,069 300,000
11 92,868 92,868 300,000
12 106,951 106,951 300,000
13 122,491 122,491 300,000
14 139,681 139,681 300,000
15 158,745 158,745 305,689
16 179,581 179,581 336,982
17 202,184 202,184 369,865
18 226,682 226,682 404,445
19 253,197 253,197 440,819
20 281,866 281,866 479,118
Age 60 158,745 158,745 305,689
Age 65 281,866 281,866 479,118
Age 70 468,911 468,911 713,213
Age 75 742,761 742,761 1,024,835
</TABLE>
(1) Assumes a $6,093 payment is made at the beginning of each Policy Year.
Values will be different if payments are made with a different frequency or
in different amounts.
(2) Assumes that no Policy loan has been made. Excessive loans or withdrawals
may cause this Policy to lapse because of insufficient Policy Value.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN ARE ILLUSTRATIVE ONLY, AND SHOULD
NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN.
ACTUAL INVESTMENT RESULTS MAY BE MORE OR LESS THAN THOSE SHOWN, AND WILL DEPEND
ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS BY A POLICYOWNER,
AND THE DIFFERENT INVESTMENT RATES OF RETURN FOR THE UNDERLYING FUNDS. THE
SURRENDER VALUE OF UNITS, POLICY VALUE, AND DEATH BENEFIT FOR A POLICY WOULD BE
DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF INVESTMENT RETURN AVERAGED 0%,
6%, AND 12% OVER A PERIOD OF YEARS, BUT FLUCTUATED ABOVE AND BELOW THOSE
AVERAGES FOR INDIVIDUAL POLICY YEARS, OR IF ANY PREMIUMS WERE ALLOCATED OR
POLICY VALUE TRANSFERRED TO THE FIXED ACCOUNT. NO REPRESENTATIONS CAN BE MADE
THAT THESE HYPOTHETICAL INVESTMENT RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
D-14
<PAGE>
ALLMERICA FINANCIAL
LIFE INSURANCE AND
ANNUITY COMPANY
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholder of
Allmerica Financial Life Insurance and Annuity Company
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, comprehensive income, shareholder's equity
and cash flows present fairly, in all material respects, the financial position
of Allmerica Financial Life Insurance and Annuity Company (the "Company") at
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with accounting principles generally accepted in the United States.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
Boston, Massachusetts
February 1, 2000
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ---- ---- ----
<S> <C> <C> <C>
REVENUES
Premiums................................... $ 0.5 $ 0.5 $ 22.8
Universal life and investment product
policy fees.............................. 328.1 267.4 212.2
Net investment income...................... 150.2 151.3 164.2
Net realized investment (losses) gains..... (8.7) 20.0 2.9
Other income............................... 36.9 0.6 1.4
------ ------ ------
Total revenues......................... 507.0 439.8 403.5
------ ------ ------
BENEFITS, LOSSES AND EXPENSES
Policy benefits, claims and losses......... 173.6 153.9 187.8
Policy acquisition expenses................ 49.8 64.6 2.8
Sales practice litigation.................. -- 21.0 --
Loss from cession of disability income
business................................. -- -- 53.9
Other operating expenses................... 151.3 104.1 101.3
------ ------ ------
Total benefits, losses and expenses.... 374.7 343.6 345.8
------ ------ ------
Income before federal income taxes............. 132.3 96.2 57.7
------ ------ ------
FEDERAL INCOME TAX EXPENSE
Current.................................... 15.5 22.1 13.9
Deferred................................... 30.5 11.8 7.1
------ ------ ------
Total federal income tax expense....... 46.0 33.9 21.0
------ ------ ------
Net income..................................... $ 86.3 $ 62.3 $ 36.7
====== ====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-1
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS, EXCEPT PER SHARE DATA) 1999 1998
------------------------------------ --------- ---------
<S> <C> <C>
ASSETS
Investments:
Fixed maturities at fair value (amortized cost of
$1,354.2 and $1,284.6)............................ $ 1,324.6 $ 1,330.4
Equity securities at fair value (cost of $25.2 and
$27.4)............................................ 32.6 31.8
Mortgage loans...................................... 223.7 230.0
Policy loans........................................ 166.8 151.5
Real estate and other long-term investments......... 25.1 23.6
--------- ---------
Total investments............................... 1,772.8 1,767.3
--------- ---------
Cash and cash equivalents............................. 132.9 217.9
Accrued investment income............................. 36.0 33.5
Deferred policy acquisition costs..................... 1,156.4 950.5
Reinsurance receivable on paid and unpaid losses,
benefits and unearned premiums...................... 287.2 308.0
Other assets.......................................... 64.8 46.9
Separate account assets............................... 14,527.9 11,020.4
--------- ---------
Total assets.................................... $17,978.0 $14,344.5
========= =========
LIABILITIES
Policy liabilities and accruals:
Future policy benefits.............................. $ 2,274.7 $ 2,284.8
Outstanding claims and losses....................... 13.7 17.9
Unearned premiums................................... 2.6 2.7
Contractholder deposit funds and other policy
liabilities....................................... 44.3 38.1
--------- ---------
Total policy liabilities and accruals........... 2,335.3 2,343.5
--------- ---------
Expenses and taxes payable............................ 216.8 146.2
Reinsurance premiums payable.......................... 17.9 45.7
Deferred federal income taxes......................... 94.8 78.8
Separate account liabilities.......................... 14,527.9 11,020.4
--------- ---------
Total liabilities............................... 17,192.7 13,634.6
--------- ---------
Contingencies (Note 12)
SHAREHOLDER'S EQUITY
Common stock, $1,000 par value, 10,000 shares
authorized, 2,526 and 2,524 shares, issued and
outstanding......................................... 2.5 2.5
Additional paid-in capital............................ 423.7 407.9
Accumulated other comprehensive (loss) income......... (2.6) 24.1
Retained earnings..................................... 361.7 275.4
--------- ---------
Total shareholder's equity...................... 785.3 709.9
--------- ---------
Total liabilities and shareholder's equity...... $17,978.0 $14,344.5
========= =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED STATEMENTS OF SHAREHOLDER'S EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------- ------- -------
<S> <C> <C> <C>
COMMON STOCK................................... $ 2.5 $ 2.5 $ 2.5
------ ------ ------
ADDITIONAL PAID-IN CAPITAL
Balance at beginning of period............. 407.9 386.9 346.3
Issuance of common stock................... 15.8 21.0 40.6
------ ------ ------
Balance at end of period................... 423.7 407.9 386.9
------ ------ ------
ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME
Net unrealized (depreciation) appreciation
on investments:
Balance at beginning of period............. 24.1 38.5 20.5
(Depreciation) appreciation during the
period:
Net (depreciation) appreciation on
available-for-sale securities........ (41.1) (23.4) 27.0
Benefit (provision) for deferred
federal income taxes................. 14.4 9.0 (9.0)
------ ------ ------
(26.7) (14.4) 18.0
------ ------ ------
Balance at end of period................... (2.6) 24.1 38.5
------ ------ ------
RETAINED EARNINGS
Balance at beginning of period............. 275.4 213.1 176.4
Net income................................. 86.3 62.3 36.7
------ ------ ------
Balance at end of period................... 361.7 275.4 213.1
------ ------ ------
Total shareholder's equity............. $785.3 $709.9 $641.0
====== ====== ======
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------ ------ ------
<S> <C> <C> <C>
Net income.................................. $ 86.3 $ 62.3 $36.7
Other comprehensive (loss) income:
Net (depreciation) appreciation on
available-for-sale securities......... (41.1) (23.4) 27.0
Benefit (provision) for deferred federal
income taxes.......................... 14.4 9.0 (9.0)
------ ------ -----
Other comprehensive (loss) income... (26.7) (14.4) 18.0
------ ------ -----
Comprehensive income.................... $ 59.6 $ 47.9 $54.7
====== ====== =====
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-4
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
------------- ------- ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.............................. $ 86.3 $ 62.3 $ 36.7
Adjustments to reconcile net income to
net cash used in operating activities:
Net realized losses/(gains)......... 8.7 (20.0) (2.9)
Net amortization and depreciation... (2.3) (7.1) --
Sales practice litigation expense... -- 21.0 --
Loss from cession of disability
income business................... -- -- 53.9
Deferred federal income taxes....... 30.5 11.8 7.1
Payment related to cession of
disability income business........ -- -- (207.0)
Change in deferred acquisition
costs............................. (169.7) (177.8) (181.3)
Change in reinsurance premiums
payable........................... (31.5) 40.8 3.9
Change in accrued investment
income............................ (2.5) 0.7 3.5
Change in policy liabilities and
accruals, net..................... (8.4) 193.1 (72.4)
Change in reinsurance receivable.... 20.7 (56.9) 22.1
Change in expenses and taxes
payable........................... 64.1 55.4 0.2
Other, net.......................... (14.8) (28.5) (7.1)
------- ------- -------
Net cash (used in) provided by
operating activities.......... (18.9) 94.8 (343.3)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposals and maturities
of available-for-sale fixed
maturities............................ 330.9 187.0 909.7
Proceeds from disposals of equity
securities............................ 30.9 53.3 2.4
Proceeds from disposals of other
investments........................... 0.8 22.7 23.7
Proceeds from mortgages matured or
collected............................. 30.5 60.1 62.9
Purchase of available-for-sale fixed
maturities............................ (415.5) (136.0) (579.7)
Purchase of equity securities........... (20.2) (30.6) (3.2)
Purchase of other investments........... (44.1) (22.7) (9.0)
Purchase of mortgages................... -- (58.9) (70.4)
Other investing activities, net......... 2.0 (3.9) --
------- ------- -------
Net cash (used in) provided by
investing activities.............. (84.7) 71.0 336.4
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Contribution from subsidiaries.......... 14.6 -- --
Proceeds from issuance of stock and
capital paid in....................... 4.0 21.0 19.2
------- ------- -------
Net cash provided by financing
activities........................ 18.6 21.0 19.2
------- ------- -------
Net change in cash and cash equivalents..... (85.0) 186.8 12.3
Cash and cash equivalents, beginning of
period..................................... 217.9 31.1 18.8
------- ------- -------
Cash and cash equivalents, end of period.... $ 132.9 $ 217.9 $ 31.1
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid........................... $ -- $ -- $ --
Income taxes paid....................... $ 4.4 $ 36.2 $ 5.4
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-5
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. BASIS OF PRESENTATION AND PRINCIPLES OF CONSOLIDATION
Allmerica Financial Life Insurance and Annuity Company ("AFLIAC" or the
"Company") is organized as a stock life insurance company, and is a wholly-owned
subsidiary of First Allmerica Financial Life Insurance Company ("FAFLIC") which
is a wholly-owned subsidiary of Allmerica Financial Corporation ("AFC"). As
noted below, the consolidated accounts of AFLIAC include the accounts of certain
wholly-owned non-insurance subsidiaries (principally brokerage and investment
advisory subsidiaries).
Prior to July 1, 1999, AFLIAC was a wholly-owned subsidiary of SMA Financial
Corporation ("SMAFCO"), which was a wholly-owned subsidiary of FAFLIC. Effective
July 1, 1999 and in connection with AFC's restructuring activities, SMAFCO was
renamed Allmerica Asset Management , Inc. ("AAM") and contributed it's ownership
of AFLIAC to FAFLIC. AAM also contributed Allmerica Investments, Inc., Allmerica
Investment Management Company, Inc., Allmerica Financial Investment Management
Services, Inc., and Allmerica Financial Services Insurance Agency, Inc., to
AFLIAC in exchange for one share of AFLIAC common stock. The equity of these
four companies on July 1, 1999 was $11.8 million. For the six months ended
December 31, 1999, the subsidiaries of AFLIAC had total revenue of $35.5 million
and total benefits, losses and expenses of $24.4 million. All significant
intercompany accounts and transactions have been eliminated.
In addition, effective November 1, 1999, the Company's consolidated financial
statements include five wholly-owned insurance agencies. These agencies are
Allmerica Investments Insurance Agency Inc. of Alabama, Allmerica Investments
Insurance Agency of Florida Inc., Allmerica Investment Insurance Agency Inc. of
Georgia, Allmerica Investment Insurance Agency Inc. of Kentucky, and Allmerica
Investments Insurance Agency Inc. of Mississippi.
The consolidated financial statements of AFLIAC include the accounts of Somerset
Square, Inc., a wholly-owned non-insurance company, which was transferred from
SMAFCO effective November 30, 1997 and dissolved as a subsidiary effective
November 30, 1998. Its results of operations are included for eleven months of
1998 and for the month of December, 1997.
The statutory stockholder's equity of the Company is being maintained at a
minimum level of 5% of general account assets by FAFLIC in accordance with a
policy established by vote of FAFLIC's Board of Directors.
The preparation of financial statements in conformity with generally accepted
accounting principles requires the Company to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amount of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
B. VALUATION OF INVESTMENTS
In accordance with the provisions of Statement of Financial Accounting Standards
No. 115 ("Statement No. 115"), "Accounting for Certain Investments in Debt and
Equity Securities," the Company is required to classify its investments into one
of three categories: held-to-maturity, available-for-sale or trading. The
Company determines the appropriate classification of debt securities at the time
of purchase and re-evaluates such designation as of each balance sheet date.
F-6
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Debt securities and marketable equity securities are classified as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses, net of tax, reported in a separate
component of shareholder's equity. The amortized cost of debt securities is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in investment income.
Mortgage loans on real estate are stated at unpaid principal balances, net of
unamortized discounts and reserves. Reserves on mortgage loans are based on
losses expected by the Company to be realized on transfers of mortgage loans to
real estate (upon foreclosure), on the disposition or settlement of mortgage
loans and on mortgage loans which the Company believes may not be collectible in
full. In establishing reserves, the Company considers, among other things, the
estimated fair value of the underlying collateral.
Fixed maturities and mortgage loans that are delinquent are placed on
non-accrual status, and thereafter interest income is recognized only when cash
payments are received.
Policy loans are carried principally at unpaid principal balances.
During 1997, the Company adopted a plan to dispose of all real estate assets. As
of December 31, 1999, there was one property remaining in the Company's real
estate portfolio, which is being actively marketed. This asset is carried at the
estimated fair value less costs of disposal. Depreciation is not recorded on
this asset while it is held for disposal.
Realized investment gains and losses, other than those related to separate
accounts for which the Company does not bear the investment risk, are reported
as a component of revenues based upon specific identification of the investment
assets sold. When an other than temporary impairment of the value of a specific
investment or a group of investments is determined, a realized investment loss
is recorded. Changes in the valuation allowance for mortgage loans are included
in realized investment gains or losses.
C. FINANCIAL INSTRUMENTS
In the normal course of business, the Company enters into transactions involving
various types of financial instruments, including debt, investments such as
fixed maturities, mortgage loans and equity securities and investment and loan
commitments. These instruments involve credit risk and also may be subject to
risk of loss due to interest rate fluctuation. The Company evaluates and
monitors each financial instrument individually and, when appropriate, obtains
collateral or other security to minimize losses.
D. CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, amounts due from banks and
highly liquid debt instruments purchased with an original maturity of three
months or less.
E. DEFERRED POLICY ACQUISITION COSTS
Acquisition costs consist of commissions, underwriting costs and other costs,
which vary with, and are primarily related to, the production of revenues.
Acquisition costs related to universal life products, variable annuities and
contractholder deposit funds are deferred and amortized in proportion to total
estimated gross profits from investment yields, mortality, surrender charges and
expense margins over the expected life of the contracts. This amortization is
reviewed annually and adjusted retrospectively when the Company revises its
estimate of current or future gross profits to be realized from this group of
products, including realized and unrealized gains and losses from investments.
Acquisition costs related to fixed annuities and other life insurance products
are deferred and amortized, generally in proportion to the ratio of annual
revenue to the
F-7
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
estimated total revenues over the contract periods based upon the same
assumptions used in estimating the liability for future policy benefits.
Deferred acquisition costs for each product are reviewed to determine if they
are recoverable from future income, including investment income. If such costs
are determined to be unrecoverable, they are expensed at the time of
determination. Although realization of deferred policy acquisition costs is not
assured, the Company believes it is more likely than not that all of these costs
will be realized. The amount of deferred policy acquisition costs considered
realizable, however, could be reduced in the near term if the estimates of gross
profits or total revenues discussed above are reduced. The amount of
amortization of deferred policy acquisition costs could be revised in the near
term if any of the estimates discussed above are revised.
F. SEPARATE ACCOUNTS
Separate account assets and liabilities represent segregated funds administered
and invested by the Company for the benefit of variable annuity and variable
life insurance contractholders. Assets consist principally of bonds, common
stocks, mutual funds, and short-term obligations at market value. The investment
income, gains and losses of these accounts generally accrue to the
contractholders and, therefore, are not included in the Company's net income.
Appreciation and depreciation of the Company's interest in the separate
accounts, including undistributed net investment income, is reflected in
shareholder's equity or net investment income.
G. POLICY LIABILITIES AND ACCRUALS
Future policy benefits are liabilities for life, disability income and annuity
products. Such liabilities are established in amounts adequate to meet the
estimated future obligations of policies in force. The liabilities associated
with traditional life insurance products are computed using the net level
premium method for individual life and annuity policies, and are based upon
estimates as to future investment yield, mortality and withdrawals that include
provisions for adverse deviation. Future policy benefits for individual life
insurance and annuity policies are computed using interest rates ranging from
3.0% to 6.0% for life insurance and 3 1/2% to 9 1/2% for annuities. Mortality,
morbidity and withdrawal assumptions for all policies are based on the Company's
own experience and industry standards. Liabilities for universal life, variable
universal life and variable annuities include deposits received from customers
and investment earnings on their fund balances, less administrative charges.
Universal life fund balances are also assessed mortality and surrender charges.
Liabilities for variable annuities include a reserve for benefit claims in
excess of a guaranteed minimum fund value.
Individual disability income benefit liabilities for active lives are estimated
using the net level premium method, and assumptions as to future morbidity and
interest which provide a margin for adverse deviation. Benefit liabilities for
disabled lives are estimated using the present value of benefits method and
experience assumptions as to claim terminations, expenses and interest.
Liabilities for outstanding claims and losses are estimates of payments to be
made for reported claims and estimates of claims incurred but not reported for
individual life and disability income policies. These estimates are continually
reviewed and adjusted as necessary; such adjustments are reflected in current
operations.
Contractholder deposit funds and other policy liabilities include
investment-related products and consist of deposits received from customers and
investment earnings on their fund balances.
F-8
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
All policy liabilities and accruals are based on the various estimates discussed
above. Although the adequacy of these amounts cannot be assured, the Company
believes that it is more likely than not that policy liabilities and accruals
will be sufficient to meet future obligations of policies in force. The amount
of liabilities and accruals, however, could be revised in the near term if the
estimates discussed above are revised.
H. PREMIUM AND FEE REVENUE AND RELATED EXPENSES
Premiums for individual life insurance and individual and group annuity
products, excluding universal life and investment-related products, are
considered revenue when due. Individual disability income insurance premiums are
recognized as revenue over the related contract periods. The unexpired portion
of these premiums is recorded as unearned premiums. Benefits, losses and related
expenses are matched with premiums, resulting in their recognition over the
lives of the contracts. This matching is accomplished through the provision for
future benefits, estimated and unpaid losses and amortization of deferred policy
acquisition costs. Revenues for investment-related products consist of net
investment income and contract charges assessed against the fund values. Related
benefit expenses include annuity benefit claims in excess of a guaranteed
minimum fund value, and net investment income credited to the fund values after
deduction for investment and risk charges. Revenues for universal life and group
variable universal life products consist of net investment income, with
mortality, administration and surrender charges assessed against the fund
values. Related benefit expenses include universal life benefit claims in excess
of fund values and net investment income credited to universal life fund values.
Certain policy charges that represent compensation for services to be provided
in future periods are deferred and amortized over the period benefited using the
same assumptions used to amortize capitalized acquisition costs.
I. FEDERAL INCOME TAXES
AFC and its domestic subsidiaries (including certain non-insurance operations)
file a consolidated United States federal income tax return. Entities included
within the consolidated group are segregated into either a life insurance or
non-life insurance company subgroup. The consolidation of these subgroups is
subject to certain statutory restrictions on the percentage of eligible non-life
tax losses that can be applied to offset life insurance company taxable income.
The Board of Directors has delegated to AFC management, the development and
maintenance of appropriate federal income tax allocation policies and
procedures, which are subject to written agreement between the companies. The
Federal income tax for all subsidiaries in the consolidated return of AFC is
calculated on a separate return basis. Any current tax liability is paid to AFC.
Tax benefits resulting from taxable operating losses or credits of AFC's
subsidiaries are not reimbursed to the subsidiary until such losses or credits
can be utilized by the subsidiary on a separate return basis.
Deferred income taxes are generally recognized when assets and liabilities have
different values for financial statement and tax reporting purposes, and for
other temporary taxable and deductible differences as defined by Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes"
("Statement No. 109"). These differences result primarily from policy reserves,
policy acquisition expenses, and unrealized appreciation or depreciation on
investments.
J. OTHER INCOME AND OTHER OPERATING EXPENSES
Other income and other operating expenses for the year ended December 31, 1999
include investment management and brokerage income and sub-advisory expenses
arising from the activities of the non-insurance subsidiaries that were
transferred to AFLIAC during 1999, as more fully described in Note 1A.
F-9
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
K. NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement No. 133"), which establishes
accounting and reporting standards for derivative instruments. Statement No. 133
requires that an entity recognize all derivatives as either assets or
liabilities at fair value in the statement of financial position, and
establishes special accounting for the following three types of hedges; fair
value hedges, cash flow hedges, and hedges of foreign currency exposures of net
investments in foreign operations. This statement is effective for fiscal
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY (an indirect wholly-owned
subsidiary of Allmerica Financial Corporation) years beginning after June 15,
2000. The Company is currently assessing the impact of adoption of Statement No.
133.
In March 1998, the American Institute of Certified Public Accountants ("AICPA")
issued Statement of Position 98-1, "Accounting for the Cost of Computer Software
Developed or Obtained for Internal Use" ("SoP 98-1"). SoP 98-1 requires that
certain costs incurred in developing internal-use computer software be
capitalized and provides guidance for determining whether computer software is
to be considered for internal use. This statement is effective for fiscal years
beginning after December 15, 1998. In the second quarter of 1998, the Company
adopted SoP 98-1 effective January 1, 1998, resulting in an increase in pre-tax
income of $9.8 million through December 31, 1998. The adoption of SOP 98-1 did
not have a material effect on the results of operations or financial position
for the three months ended March 31, 1998.
In December 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 97-3, "Accounting by Insurance and Other
Enterprises for Insurance-Related Assessments" ("SoP 97-3"). SoP 97-3 provides
guidance when a liability should be recognized for guaranty fund and other
assessments and how to measure the liability. This statement allows for the
discounting of the liability if the amount and timing of the cash payments are
fixed and determinable. In addition, it provides criteria for when an asset may
be recognized for a portion or all of the assessment liability or paid
assessment that can be recovered through premium tax offsets or policy
surcharges. This statement is effective for fiscal years beginning after
December 15, 1998. The adoption of this statement had no effect on the results
of operations or financial position of the Company.
In June 1997, the FASB issued Statement No. 131, "Disclosures About Segments of
an Enterprise and Related Information" ("Statement No. 131"). This statement
establishes standards for the way that public enterprises report information
about operating segments in annual financial statements and requires that
selected information about those operating segments be reported in interim
financial statements. This statement supersedes Statement No. 14, "Financial
Reporting for Segments of a Business Enterprise". Statement No. 131 requires
that all public enterprises report financial and descriptive information about
their reportable operating segments. Operating segments are defined as
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. This statement
is effective for fiscal years beginning after December 15, 1997. AFLIAC consists
of one segment, Allmerica Financial Services, which underwrites and distributes
variable annuities and variable universal life insurance via retail channels.
In June 1997, the FASB also issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement No. 130"). Statement No. 130 establishes standards for the
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. All items that are required to be
recognized under accounting standards as components of comprehensive income are
to be reported in a financial statement that is displayed with the same
prominence as other financial statements. This statement stipulates that
comprehensive income reflect the change in equity of an enterprise during a
period from transactions and
F-10
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
other events and circumstances from non-owner sources. This statement is
effective for fiscal years beginning after December 15, 1997. The Company
adopted Statement No. 130 for the first quarter of 1998, which resulted
primarily in reporting unrealized gains and losses on investments in debt and
equity securities in comprehensive income.
L. RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform to the current year
presentation.
2. SIGNIFICANT TRANSACTIONS
During 1999, AFLIAC's parent contributed $11.8 million of additional paid-in
capital to the Company in the form of four subsidiaries as disclosed in Note 1A
above. These subsidiaries consisted of assets of $22.0 million, of which $14.6
million was cash and cash equivalents, and liabilities of $10.2 million. During
1999, 1998 and 1997, SMAFCO contributed $4.0 million, $21.0 million, and $40.6
million respectively, of additional paid-in capital to the Company. The nature
of the 1997 contribution was $19.2 million in cash and $21.4 million in other
assets including Somerset Square, Inc.
Effective January 1, 1998, the Company entered into an agreement with a highly
rated reinsurer to reinsure the mortality risk on the universal life and
variable universal life blocks of business. The agreement did not have a
material effect on the results of operations or financial position of the
Company.
On April 14, 1997, the Company entered into an agreement in principle to cede
substantially all of the Company's individual disability income line of business
under a 100% coinsurance agreement with a highly rated reinsurer. The
coinsurance agreement became effective October 1, 1997. The transaction has
resulted in the recognition of a $53.9 million pre-tax loss in the first quarter
of 1997.
(1) Amortized cost for fixed maturities and cost for equity securities.
3. INVESTMENTS
A. SUMMARY OF INVESTMENTS
The Company accounts for its investments, all of which are classified as
available-for-sale, in accordance with the provisions of Statement No. 115.
The amortized cost and fair value of available-for-sale fixed maturities and
equity securities were as follows:
<TABLE>
<CAPTION>
1999
-------------------------------------------
GROSS GROSS
DECEMBER 31, AMORTIZED UNREALIZED UNREALIZED FAIR
(IN MILLIONS) COST (1) GAINS LOSSES VALUE
- ------------- --------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and U.S.
government and agency securities....... $ 5.2 $ 0.2 $-- $ 5.4
States and political subdivisions....... 12.4 0.1 -- 12.5
Foreign governments..................... 38.6 0.9 0.6 38.9
Corporate fixed maturities.............. 1,180.0 10.3 38.9 1,151.4
Mortgage-backed securities.............. 118.0 1.1 2.7 116.4
-------- ----- ----- --------
Total fixed maturities.................. $1,354.2 $12.6 $42.2 $1,324.6
======== ===== ===== ========
Equity securities....................... $ 25.2 $ 7.4 $-- $ 32.6
======== ===== ===== ========
</TABLE>
(1) Amortized cost for fixed maturities and cost for equity securities.
F-11
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
1998
----------------------------------------
<S> <C> <C> <C> <C>
GROSS GROSS
DECEMBER 31, AMORTIZED UNREALIZED UNREALIZED FAIR
(IN MILLIONS) COST (1) GAINS LOSSES VALUE
- ---------------------------------------- -------- ----- ----- --------
U.S. Treasury securities and U.S.
government and agency securities....... $ 5.8 $ 0.8 $-- $ 6.6
States and political subdivisions....... 2.7 0.2 -- 2.9
Foreign governments..................... 48.8 1.6 1.5 48.9
Corporate fixed maturities.............. 1,096.0 58.0 17.7 1,136.3
Mortgage-backed securities.............. 131.3 5.8 1.4 135.7
-------- ----- ----- --------
Total fixed maturities.................. $1,284.6 $66.4 $20.6 $1,330.4
======== ===== ===== ========
Equity securities....................... $ 27.4 $ 8.9 $ 4.5 $ 31.8
======== ===== ===== ========
</TABLE>
(1) Amortized cost for fixed maturities and cost for equity securities.
In connection with AFLIAC's voluntary withdrawal of its license in New York,
AFLIAC agreed with the New York Department of Insurance to maintain, through a
custodial account in New York, a security deposit, the market value of which
will at all times equal 102% of all outstanding liabilities of AFLIAC for New
York policyholders, claimants and creditors. At December 31, 1999, the amortized
cost and market value of these assets on deposit in New York were
$196.4 million and $193.0 million, respectively. At December 31, 1998, the
amortized cost and market value of assets on deposit were $268.5 million and
$284.1 million, respectively. In addition, fixed maturities, excluding those
securities on deposit in New York, with an amortized cost of $4.1 million and
$4.2 million were on deposit with various state and governmental authorities at
December 31, 1999 and 1998, respectively.
There were no contractual fixed maturity investment commitments at December 31,
1999.
The amortized cost and fair value by maturity periods for fixed maturities are
shown below. Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties, or the Company may have the right to put or sell the
obligations back to the issuers. Mortgage backed securities are included in the
category representing their ultimate maturity.
<TABLE>
<CAPTION>
1999
-------------------
DECEMBER 31, AMORTIZED FAIR
(IN MILLIONS) COST VALUE
- ------------- --------- --------
<S> <C> <C>
Due in one year or less..................................... $ 54.5 $ 54.8
Due after one year through five years....................... 349.1 347.2
Due after five years through ten years...................... 652.9 637.1
Due after ten years......................................... 297.7 285.5
-------- --------
Total....................................................... $1,354.2 $1,324.6
======== ========
</TABLE>
F-12
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Unrealized gains and losses on available-for-sale and other securities, are
summarized as follows:
<TABLE>
<CAPTION>
EQUITY
FOR THE YEARS ENDED DECEMBER 31, FIXED SECURITIES
(IN MILLIONS) MATURITIES AND OTHER (1) TOTAL
- ------------- ---------- ------------- ------
<S> <C> <C> <C>
1999
Net appreciation, beginning of year......................... $ 16.2 $ 7.9 $ 24.1
------ ------ ------
Net depreciation on available-for-sale securities........... (75.3) (0.2) (75.5)
Net appreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ 34.4 -- 34.4
Benefit from deferred federal income taxes.................. 14.3 0.1 14.4
------ ------ ------
(26.6) (0.1) (26.7)
------ ------ ------
Net (depreciation) appreciation, end of year................ $(10.4) $ 7.8 $ (2.6)
====== ====== ======
1998
Net appreciation, beginning of year......................... $ 22.1 $ 16.4 $ 38.5
------ ------ ------
Net depreciation on available-for-sale securities........... (16.2) (14.3) (30.5)
Net appreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ 7.1 -- 7.1
Benefit from deferred federal income taxes.................. 3.2 5.8 9.0
------ ------ ------
(5.9) (8.5) (14.4)
------ ------ ------
Net appreciation, end of year............................... $ 16.2 $ 7.9 $ 24.1
====== ====== ======
1997
Net appreciation, beginning of year......................... $ 12.7 $ 7.8 $ 20.5
------ ------ ------
Net appreciation on available-for-sale securities........... 24.3 12.5 36.8
Net depreciation from the effect on deferred policy
acquisition costs and on policy liabilities................ (9.8) -- (9.8)
Provision for deferred federal income taxes................. (5.1) (3.9) (9.0)
------ ------ ------
9.4 8.6 18.0
------ ------ ------
Net appreciation, end of year............................... $ 22.1 $ 16.4 $ 38.5
====== ====== ======
</TABLE>
(1) Includes net (depreciation) appreciation on other investments of $(3.1)
million, $0.9 million, and $1.3 million in 1999, 1998, and 1997,
respectively.
B. MORTGAGE LOANS AND REAL ESTATE
AFLIAC's mortgage loans are diversified by property type and location. The real
estate investment was obtained by an affiliate through foreclosure. Mortgage
loans are collateralized by the related properties and generally are no more
than 75% of the property's value at the time the original loan is made.
The carrying values of mortgage loans and the real estate investment net of
applicable reserves were $234.6 million and $244.5 million at December 31, 1999
and 1998, respectively. Reserves for mortgage loans were $2.4 million and
$3.3 million at December 31, 1999 and 1998, respectively.
F-13
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
During 1997, the Company committed to a plan to dispose of all real estate
assets. At December 31, 1999, there was one property remaining in the Company's
real estate portfolio which is being actively marketed. Depreciation is not
recorded on this asset while it is held for disposal.
There were no non-cash investing activities, including real estate acquired
through foreclosure of mortgage loans, in 1999, 1998 and 1997.
There were no material contractual commitments to extend credit under commercial
mortgage loan agreements at December 31, 1999.
Mortgage loans and real estate investments comprised the following property
types and geographic regions:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1999 1998
- ------------- ------ ------
<S> <C> <C>
Property type:
Office building........................................... $136.1 $129.2
Residential............................................... 18.5 18.9
Retail.................................................... 28.3 37.4
Industrial/warehouse...................................... 51.1 59.2
Other..................................................... 3.0 3.1
Valuation allowances...................................... (2.4) (3.3)
------ ------
Total....................................................... $234.6 $244.5
====== ======
Geographic region:
South Atlantic............................................ $ 60.7 $ 55.5
Pacific................................................... 76.2 80.0
East North Central........................................ 35.9 41.4
Middle Atlantic........................................... 20.1 22.5
New England............................................... 29.9 26.9
West South Central........................................ 1.9 6.7
Other..................................................... 12.3 14.8
Valuation allowances...................................... (2.4) (3.3)
------ ------
Total....................................................... $234.6 $244.5
====== ======
</TABLE>
At December 31, 1999, scheduled mortgage loan maturities were as follows:
2000 -- $40.8 million; 2001 -- $6.3 million; 2002 -- $11.2 million; 2003 --
$0.5 million; 2004 -- $23.7 million; and $141.2 million thereafter. Actual
maturities could differ from contractual maturities because borrowers may have
the right to prepay obligations with or without prepayment penalties and loans
may be refinanced. During 1999, the Company did not refinance any mortgage loans
based on terms which differed from those granted to new borrowers.
F-14
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C. INVESTMENT VALUATION ALLOWANCES
Investment valuation allowances which have been deducted in arriving at
investment carrying values as presented in the consolidated balance sheets and
changes thereto are shown below.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31, BALANCE AT BALANCE AT
(IN MILLIONS) JANUARY 1 PROVISIONS WRITE-OFFS DECEMBER 31
- ------------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
1999
Mortgage loans.............................................. $ 3.3 $(0.8) $0.1 $2.4
===== ===== ==== ====
1998
Mortgage loans.............................................. $ 9.4 $(4.5) $1.6 $3.3
===== ===== ==== ====
1997
Mortgage loans.............................................. $ 9.5 $ 1.1 $1.2 $9.4
Real estate................................................. 1.7 3.7 5.4 --
----- ----- ---- ----
Total................................................... $11.2 $ 4.8 $6.6 $9.4
===== ===== ==== ====
</TABLE>
Provisions on mortgages during 1999 and 1998 reflect the release of redundant
specific reserves. Write-offs of $5.4 million to the investment valuation
allowance related to real estate in 1997 primarily reflect write downs to the
estimated fair value less costs to sell pursuant to the aforementioned 1997 plan
of disposal.
The carrying value of impaired loans was $11.4 million and $15.3 million, with
related reserves of $0.7 million and $1.5 million as of December 31, 1999 and
1998, respectively. All impaired loans were reserved for as of December 31, 1999
and 1998.
The average carrying value of impaired loans was $14.3 million, $17.0 million
and $19.8 million, with related interest income while such loans were impaired
of $1.5 million, $2.0 million and $2.2 million as of December 31, 1999, 1998 and
1997, respectively.
D. OTHER
At December 31, 1999 and 1998, AFLIAC had no concentration of investments in a
single investee exceeding 10% of shareholder's equity.
4. INVESTMENT INCOME AND GAINS AND LOSSES
A. NET INVESTMENT INCOME
The components of net investment income were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------
<S> <C> <C> <C>
Fixed maturities............................................ $107.2 $107.7 $130.0
Mortgage loans.............................................. 19.0 25.5 20.4
Equity securities........................................... 0.4 0.3 1.3
Policy loans................................................ 12.4 11.7 10.8
Real estate and other long-term investments................. 4.0 4.8 4.9
Short-term investments...................................... 9.5 4.2 1.4
------ ------ ------
Gross investment income................................. 152.5 154.2 168.8
Less investment expenses.................................... (2.3) (2.9) (4.6)
------ ------ ------
Net investment income................................... $150.2 $151.3 $164.2
====== ====== ======
</TABLE>
F-15
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
At December 31, 1999, the Company had fixed maturities with a carrying value of
$0.8 million on non-accrual status. There were no mortgage loans on non-accrual
status at December 31, 1999. There were no mortgage loans or fixed maturities on
non-accrual status at December 31, 1998. The effect of non-accruals, compared
with amounts that would have been recognized in accordance with the original
terms of the investments, was a reduction in net income of $1.2 million in 1999,
and had no impact in 1998 and 1997.
The payment terms of mortgage loans may from time to time be restructured or
modified. The investment in restructured mortgage loans, based on amortized
cost, amounted to $12.2 million, $12.6 million and $21.1 million at December 31,
1999, 1998 and 1997, respectively. Interest income on restructured mortgage
loans that would have been recorded in accordance with the original terms of
such loans amounted to $0.9 million, $1.4 million and $1.9 million in 1999,
1998, and 1997, respectively. Actual interest income on these loans included in
net investment income aggregated $1.1 million, $1.8 million and $2.1 million in
1999, 1998 and 1997, respectively.
There were no fixed maturities or mortgage loans which were non-income producing
for the year ended December 31, 1999.
Included in other long-term investments is income from limited partnerships of
$0.9 million and $0.7 million in 1999 and 1998, respectively. There was no
income from limited partnerships included in other long-term investments in
1997.
B. NET REALIZED INVESTMENT GAINS AND LOSSES
Realized (losses) gains on investments were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ----- -----
<S> <C> <C> <C>
Fixed maturities............................................ $(18.8) $(6.1) $ 3.0
Mortgage loans.............................................. 0.8 8.0 (1.1)
Equity securities........................................... 8.5 15.7 0.5
Real estate and other....................................... 0.8 2.4 0.5
------ ----- -----
Net realized investment (losses) gains...................... $ (8.7) $20.0 $ 2.9
====== ===== =====
</TABLE>
The proceeds from voluntary sales of available-for-sale securities and the gross
realized gains and gross realized losses on those sales were as follows:
<TABLE>
<CAPTION>
PROCEEDS FROM
FOR THE YEARS ENDED DECEMBER 31, VOLUNTARY GROSS GROSS
(IN MILLIONS) SALES GAINS LOSSES
- ------------- ------------- ----- ------
<S> <C> <C> <C>
1999
Fixed maturities............................................ $162.3 $ 2.7 $4.3
Equity securities........................................... $ 30.4 $10.1 $1.6
1998
Fixed maturities............................................ $ 60.0 $ 2.0 $2.0
Equity securities........................................... $ 52.6 $17.5 $0.9
1997
Fixed maturities............................................ $702.9 $11.4 $5.0
Equity securities........................................... $ 1.3 $ 0.5 $--
</TABLE>
F-16
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
C. OTHER COMPREHENSIVE INCOME RECONCILIATION
The following table provides a reconciliation of gross unrealized (losses) gains
to the net balance shown in the consolidated statements of comprehensive income:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ -----
<S> <C> <C> <C>
Unrealized (losses) gains on securities:
Unrealized holding (losses) gains arising during period (net
of taxes of $(18.0) million, $(5.6) million and
$10.2 million in 1999, 1998 and 1997, respectively)........ $(33.4) $ (8.2) $20.3
Less: reclassification adjustment for (losses) gains
included in net income (net of taxes of $(3.6) million,
$3.4 million and $1.2 million in 1999, 1998 and 1997,
respectively).............................................. (6.7) 6.2 2.3
------ ------ -----
Other comprehensive (loss) income........................... $(26.7) $(14.4) $18.0
====== ====== =====
</TABLE>
5. FAIR VALUE DISCLOSURES OF FINANCIAL INSTRUMENTS
Statement No. 107, "Disclosures about Fair Value of Financial Instruments,"
requires disclosure of fair value information about certain financial
instruments (insurance contracts, real estate, goodwill and taxes are excluded)
for which it is practicable to estimate such values, whether or not these
instruments are included in the balance sheet. The fair values presented for
certain financial instruments are estimates which, in many cases, may differ
significantly from the amounts which could be realized upon immediate
liquidation. In cases where market prices are not available, estimates of fair
value are based on discounted cash flow analyses which utilize current interest
rates for similar financial instruments which have comparable terms and credit
quality.
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
CASH AND CASH EQUIVALENTS
For these short-term investments, the carrying amount approximates fair value.
FIXED MATURITIES
Fair values are based on quoted market prices, if available. If a quoted market
price is not available, fair values are estimated using independent pricing
sources or internally developed pricing models using discounted cash flow
analyses.
EQUITY SECURITIES
Fair values are based on quoted market prices, if available. If a quoted market
price is not available, fair values are estimated using independent pricing
sources or internally developed pricing models.
F-17
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MORTGAGE LOANS
Fair values are estimated by discounting the future contractual cash flows using
the current rates at which similar loans would be made to borrowers with similar
credit ratings. The fair value of below investment grade mortgage loans are
limited to the lesser of the present value of the cash flows or book value.
POLICY LOANS
The carrying amount reported in the balance sheet approximates fair value since
policy loans have no defined maturity dates and are inseparable from the
insurance contracts.
FIXED ANNUITY AND OTHER CONTRACTS (WITHOUT MORTALITY FEATURES)
Fair values for the Company's liabilities under individual fixed annuity
contracts are estimated based on current surrender values, supplemental
contracts without life contingencies reflect current fund balances, and other
individual contract funds represent the present value of future policy benefits.
The estimated fair values of the financial instruments were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------ ------------------
DECEMBER 31, CARRYING FAIR CARRYING FAIR
(IN MILLIONS) VALUE VALUE VALUE VALUE
- ------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
FINANCIAL ASSETS
Cash and cash equivalents................................. $ 132.9 $ 132.9 $ 217.9 $ 217.9
Fixed maturities.......................................... 1,324.6 1,324.6 1,330.4 1,330.4
Equity securities......................................... 32.6 32.6 31.8 31.8
Mortgage loans............................................ 223.7 222.8 230.0 241.9
Policy loans.............................................. 166.8 166.8 151.5 151.5
-------- -------- -------- --------
$1,880.6 $1,879.7 $1,961.6 $1,973.5
======== ======== ======== ========
FINANCIAL LIABILITIES
Individual fixed annuity contracts........................ $1,048.0 $1,014.9 $1,069.4 $1,034.6
Supplemental contracts without life contingencies......... 25.0 25.0 21.0 21.0
Other individual contract deposit funds................... 19.3 19.3 17.0 17.0
-------- -------- -------- --------
$1,092.3 $1,059.2 $1,107.4 $1,072.6
======== ======== ======== ========
</TABLE>
F-18
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. FEDERAL INCOME TAXES
Provisions for federal income taxes have been calculated in accordance with the
provisions of Statement No. 109. A summary of the federal income tax expense in
the consolidated statement of income is shown below:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ----- ----- -----
<S> <C> <C> <C>
Federal income tax expense
Current................................................... $15.5 $22.1 $13.9
Deferred.................................................. 30.5 11.8 7.1
----- ----- -----
Total....................................................... $46.0 $33.9 $21.0
===== ===== =====
</TABLE>
The provision for federal income taxes does not materially differ from the
amount of federal income tax determined by applying the appropriate U.S.
statutory income tax rate to income before federal income taxes.
The deferred income tax (asset) liability represents the tax effects of
temporary differences:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN MILLIONS) 1999 1998
- ------------- ------- -------
<S> <C> <C>
Deferred tax (assets) liabilities
Policy reserves........................................... $(233.7) $(205.1)
Deferred acquisition costs................................ 339.7 278.8
Investments, net.......................................... (4.0) 12.5
Litigation reserves....................................... (4.3) (7.4)
Bad debt reserve.......................................... -- (0.4)
Other, net................................................ (2.9) 0.4
------- -------
Deferred tax liability, net................................. $ 94.8 $ 78.8
======= =======
</TABLE>
Gross deferred income tax liabilities totaled $360.4 million and $291.7 million
at December 31, 1999 and 1998, respectively. Gross deferred income tax assets
totaled $265.6 million and $212.9 million at December 31, 1999 and 1998,
respectively.
The Company believes, based on its recent earnings history and its future
expectations, that the Company's taxable income in future years will be
sufficient to realize all deferred tax assets. In determining the adequacy of
future income, the Company considered the future reversal of its existing
temporary differences and available tax planning strategies that could be
implemented, if necessary.
The Company's federal income tax returns are routinely audited by the Internal
Revenue Service ("IRS"), and provisions are routinely made in the financial
statements in anticipation of the results of these audits. The IRS has examined
the FAFLIC/AFLIAC consolidated group's federal income tax returns through 1994.
The Company has appealed certain adjustments proposed by the IRS with respect
federal income tax returns for 1992, 1993, and 1994 for the FAFLIC/AFLIAC
consolidated group. Also, certain adjustments proposed by the IRS with respect
to FAFLIC/AFLIAC's federal income tax returns for 1982 and 1983 remain
unresolved. If upheld, these adjustments would result in additional payments;
however, the Company will vigorously defend its position with respect to these
adjustments. In the Company's opinion, adequate tax liabilities have
F-19
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
been established for all years. However, the amount of these tax liabilities
could be revised in the near term if estimates of the Company's ultimate
liability are revised.
7. RELATED PARTY TRANSACTIONS
The Company has no employees of its own, but has agreements under which FAFLIC
provides management, space and other services, including accounting, electronic
data processing, human resources, legal and other staff functions. Charges for
these services are based on full cost including all direct and indirect overhead
costs, and amounted to $173.9 million, $145.4 million and $124.1 million in
1999, 1998 and 1997 respectively. The net amounts payable to FAFLIC and
affiliates for accrued expenses and various other liabilities and receivables
were $48.6 million and $16.4 million at December 31, 1999 and 1998,
respectively.
8. DIVIDEND RESTRICTIONS
Delaware has enacted laws governing the payment of dividends to stockholders by
insurers. These laws affect the dividend paying ability of the Company.
Pursuant to Delaware's statute, the maximum amount of dividends and other
distributions that an insurer may pay in any twelve month period, without the
prior approval of the Delaware Commissioner of Insurance, is limited to the
greater of (i) 10% of its policyholders' surplus as of the preceding December 31
or (ii) the individual company's statutory net gain from operations for the
preceding calendar year (if such insurer is a life company) or its net income
(not including realized capital gains) for the preceding calendar year (if such
insurer is not a life company). Any dividends to be paid by an insurer, whether
or not in excess of the aforementioned threshold, from a source other than
statutory earned surplus would also require the prior approval of the Delaware
Commissioner of Insurance.
No dividends were declared by the Company during 1999, 1998 or 1997. During
2000, AFLIAC could pay dividends of $34.3 million to FAFLIC without prior
approval.
9. REINSURANCE
In the normal course of business, the Company seeks to reduce the loss that may
arise from events that cause unfavorable underwriting results by reinsuring
certain levels of risk in various areas of exposure with other insurance
enterprises or reinsurers. Reinsurance transactions are accounted for in
accordance with the provisions of Statement No. 113, "Accounting and Reporting
for Reinsurance of Short-Duration and Long-Duration Contracts" ("Statement
No. 113").
The Company reinsures 100% of its traditional individual life and certain blocks
of its universal life business, substantially all of its disability income
business, and effective January 1, 1998, the mortality risk on the variable
universal life and remaining universal life blocks of business in-force at
December 31, 1997.
Amounts recoverable from reinsurers are estimated in a manner consistent with
the claim liability associated with the reinsured policy. Reinsurance contracts
do not relieve the Company from its obligations to policyholders. Failure of
reinsurers to honor their obligations could result in losses to the Company;
consequently, allowances are established for amounts deemed uncollectible. The
Company determines the appropriate amount of reinsurance based on evaluation of
the risks accepted and analyses prepared by consultants and reinsurers and on
market conditions (including the availability and pricing of reinsurance). The
Company also believes that the terms of its reinsurance contracts are consistent
with industry practice in that they contain
F-20
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
standard terms with respect to lines of business covered, limit and retention,
arbitration and occurrence. Based on its review of its reinsurers' financial
statements and reputations in the reinsurance marketplace, the Company believes
that its reinsurers are financially sound.
Amounts recoverable from reinsurers at December 31, 1999 and 1998 for the
disability income business were $241.5 million and $230.8 million, respectively,
traditional life were $9.7 million and $11.4 million, respectively, and
universal and variable universal life were $36.0 million and $65.8 million,
respectively.
The effects of reinsurance were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------
<S> <C> <C> <C>
Insurance premiums:
Direct.................................................... $ 41.3 $ 45.5 $ 48.8
Assumed................................................... -- -- 2.6
Ceded..................................................... (40.8) (45.0) (28.6)
------ ------ ------
Net premiums................................................ $ 0.5 $ 0.5 $ 22.8
====== ====== ======
Insurance and other individual policy benefits, claims and
losses:
Direct.................................................... $210.6 $204.0 $226.0
Assumed................................................... -- -- 4.2
Ceded..................................................... (37.0) (50.1) (42.4)
------ ------ ------
Net policy benefits, claims and losses...................... $173.6 $153.9 $187.8
====== ====== ======
</TABLE>
10. DEFERRED POLICY ACQUISITION COSTS
The following reflects the changes to the deferred policy acquisition cost
asset:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
(IN MILLIONS) 1999 1998 1997
- ------------- -------- ------ ------
<S> <C> <C> <C>
Balance at beginning of year................................ $ 950.5 $765.3 $632.7
Acquisition expenses deferred............................. 219.5 242.4 184.2
Amortized to expense during the year...................... (49.8) (64.6) (53.1)
Adjustment to equity during the year...................... 36.2 7.4 (10.2)
Adjustment for cession of disability income insurance..... -- -- (38.6)
Adjustment for revision of universal life and variable
universal life insurance mortality assumptions.......... -- -- 50.3
-------- ------ ------
Balance at end of year...................................... $1,156.4 $950.5 $765.3
======== ====== ======
</TABLE>
On October 1, 1997, the Company revised the mortality assumptions for universal
life and variable universal life product lines. These revisions resulted in a
$50.3 million recapitalization of deferred policy acquisition costs.
11. LIABILITIES FOR INDIVIDUAL DISABILITY INCOME BENEFITS
The Company regularly updates its estimates of liabilities for future policy
benefits and outstanding claims and losses as new information becomes available
and further events occur which may impact the resolution of
F-21
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
unsettled claims. Changes in prior estimates are recorded in results of
operations in the year such changes are determined to be needed.
The liability for future policy benefits and outstanding claims and losses
related to the Company's disability income business was $240.7 million and
$233.3 million at December 31, 1999 and 1998. Due to the reinsurance agreement
whereby the Company has ceded substantially all of its disability income
business to a highly rated reinsurer, the Company believes that no material
adverse development of losses will occur. However, the amount of the liabilities
could be revised in the near term if the estimates used in determining the
liability are revised.
12. CONTINGENCIES
REGULATORY AND INDUSTRY DEVELOPMENTS
Unfavorable economic conditions may contribute to an increase in the number of
insurance companies that are under regulatory supervision. This may result in an
increase in mandatory assessments by state guaranty funds, or voluntary payments
by solvent insurance companies to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments, which are subject to statutory
limits, can be partially recovered through a reduction in future premium taxes
in some states. The Company is not able to reasonably estimate the potential
effect on it of any such future assessments or voluntary payments.
LITIGATION
In July 1997, a lawsuit on behalf of a putative class was instituted in
Louisiana against AFC and certain of its subsidiaries including AFLIAC, by
individual plaintiffs alleging fraud, unfair or deceptive acts, breach of
contract, misrepresentation, and related claims in the sale of life insurance
policies. In October 1997, plaintiffs voluntarily dismissed the Louisiana suit
and filed a substantially similar action in Federal District Court in Worcester,
Massachusetts. In early November 1998, AFC and the plaintiffs entered into a
settlement agreement. The court granted preliminary approval of the settlement
on December 4, 1998. On May 19, 1999, the Court issued an order certifying the
class for settlement purposes and granting final approval of the settlement
agreement. AFLIAC recognized a $21.0 million pre-tax expense during the third
quarter of 1998 related to this litigation. Although the Company believes that
this expense reflects appropriate recognition of its obligation under the
settlement, this estimate assumes the availability of insurance coverage for
certain claims, and the estimate may be revised based on the amount of
reimbursement actually tendered by AFC's insurance carriers, and based on
changes in the Company's estimate of the ultimate cost of the benefits to be
provided to members of the class.
The Company has been named a defendant in various legal proceedings arising in
the normal course of business. In the Company's opinion, based on the advice of
legal counsel, the ultimate resolution of these proceedings will not have a
material effect on the Company's consolidated financial statements. However,
liabilities related to these proceedings could be established in the near term
if estimates of the ultimate resolution of these proceedings are revised.
YEAR 2000
The Year 2000 issue resulted from computer programs being written using two
digits rather than four to define the applicable year. Computer programs that
have date-sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices or engage
in similar normal business activities.
F-22
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
(AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF ALLMERICA FINANCIAL CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Although the Company does not believe that there is a material contingency
associated with the Year 2000 issue, there can be no assurance that exposure for
material contingencies will not arise.
13. STATUTORY FINANCIAL INFORMATION
The Company is required to file annual statements with state regulatory
authorities prepared on an accounting basis prescribed or permitted by such
authorities (statutory basis). Statutory surplus differs from shareholder's
equity reported in accordance with generally accepted accounting principles
primarily because policy acquisition costs are expensed when incurred,
investment reserves are based on different assumptions, life insurance reserves
are based on different assumptions and income tax expense reflects only taxes
paid or currently payable. In 1999, 49 out of 50 states have adopted the
National Association of Insurance Commissioners proposed Codification, which
provides for uniform statutory accounting principles. These principles are
effective January 1, 2001. The Company is currently assessing the impact that
the adoption of Codification will have on its statutory results of operations
and financial position. Statutory net income and surplus are as follows:
<TABLE>
<CAPTION>
(IN MILLIONS) 1999 1998 1997
- ------------- ------ ------ ------
<S> <C> <C> <C>
Statutory net income........................................ $ 5.0 $ (8.2) $ 31.5
Statutory shareholder's surplus............................. $342.7 $312.2 $309.7
</TABLE>
F-23
<PAGE>
PART II
UNDERTAKING TO FILE REPORTS
Subject to the terms and conditions of Section 15(d) of the Securities Exchange
Act of 1934, the undersigned Registrant hereby undertakes to file with the
Securities and Exchange Commission ("SEC") such supplementary and periodic
information, documents, and reports as may be prescribed by any rule or
regulation of the SEC heretofore or hereafter duly adopted pursuant to authority
conferred in that section.
RULE 484 UNDERTAKING
Article VIII of Registrant's Bylaws provides: Each Director and each Officer of
the Corporation, whether or not in office, (and his executors or
administrators), shall be indemnified or reimbursed by the Corporation against
all expenses actually and necessarily incurred by him in the defense or
reasonable settlement of any action, suit, or proceeding in which he is made a
party by reason of his being or having been a Director or Officer of the
Corporation, including any sums paid in settlement or to discharge judgment,
except in relation to matters as to which he shall be finally adjudged in such
action, suit, or proceeding to be liable for negligence or misconduct in the
performance of his duties as such Director or Officer; and the foregoing right
of indemnification or reimbursement shall not affect any other rights to which
he may be entitled under the Articles of Incorporation, any statute, bylaw,
agreement, vote of stockholders, or otherwise.
Insofar as indemnification for liability arising under the 1933 Act may be
permitted to Directors, Officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the SEC such indemnification is against public
Policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a Director, Officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such Director, Officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public Policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
REPRESENTATIONS PURSUANT TO SECTION 26(E) OF THE INVESTMENT COMPANY ACT OF 1940
The Company hereby represents that the aggregate fees and charges under the
Policy are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by the Company.
<PAGE>
CONTENTS OF THE REGISTRATION STATEMENT
This registration statement amendment comprises the following papers and
documents:
The facing sheet
Cross-reference to items required by Form N-8B-2
The prospectus consisting of ___ pages
The undertaking to file reports
The undertaking pursuant to Rule 484 under the 1933 Act
Representations pursuant to Section 26(e) of the 1940 Act.
The signatures
Written consents of the following persons:
1. Actuarial Consent
2. Opinion of Counsel
3. Consent of Independent Accountants
The following exhibits:
1. Exhibit 1 (Exhibits required by paragraph A of the instructions to Form
N-8B-2)
(1) Certified copy of Resolutions of the Board of Directors of the Company
dated June 13, 1996 authorizing the establishment of the Separate
Account FUVUL was previously filed on December 17, 1999 in
Registrant's Initial Registration Statement of Separate Account FUVUL,
and is incorporated by reference herein.
(2) Not Applicable.
(3) (a) Underwriting and Administrative Services Agreement between the
Company and Allmerica Investments, Inc. was previously filed
on April 16, 1998 in Post-Effective Amendment No. 12
(Registration Statement No. 33-57792), and is incorporated by
reference herein.
(b) Selling Group Agreement with Schedule of Commissions is filed
herewith.
(c) Schedule of Commissions is filed herewith in Exhibit 1(3)(c).
(4) First Union Policy (Form 1036-99) is filed herewith.
(5) (a) Waiver of Payment Rider;
(b) Other Insured Rider; and
(c) Guaranteed Death Benefit Rider were previously filed on December
17, 1999 in the Registrant's Initial Registration Statement of
Separate Account FUVUL, and are incorporated by reference herein.
(6) Articles of Incorporation and Bylaws, as amended of the Company,
effective as of October 1, 1995 were previously filed on September 29,
1995 in Post-Effective Amendment No. 5 Registration Statement No.
33-57792), and are incorporated by reference herein.
(7) Not Applicable.
(8) (a) Form of Evergreen Participation Agreement
<PAGE>
(b) Form of First Union Distribution Agreement
(c) Form of AIT Participation Agreement
(d) Federated Participation Agreement
(e) Form of Franklin Templeton Participation Agreement
(f) Form of Dreyfus Participation Agreement
(g) AIM Participation Agreement
(h) Alger Participation Agreement
(i) MFS Participation Agreement
(j) Oppenheimer Participation Agreement are filed herewith.
(9) (a) BFDS Agreements for lockbox and mailroom services were previously
filed on April 16, 1998 in Post-Effective Amendment No. 12
(Registration Statement No. 33-7792), and are incorporated by
reference herein.
(b) Directors' Power of Attorney is filed herewith.
(10) Application is filed herewith.
2. Policy and Policy riders were included in Exhibit 1 (5) above.
3. Opinion of Counsel is filed herewith.
4. Not Applicable.
5. Not Applicable.
6. Actuarial Consent is filed herewith.
7. Procedures Memorandum dated May, 1993 pursuant to Rule 6e-3(T)(b)(12)(iii)
under the 1940 Act, which includes conversion procedures pursuant to Rule
6e-3(T)(b)(13)(v)(B), was previously filed on December 17, 1999 in the
Registrant's Initial Registration Statement of Separate Account FUVUL, and
is incorporated by reference herein.
8. Consent of Independent Accountants is filed herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940 the Registrant has duly caused this Pre-Effective Amendment
No.1 to be signed on its behalf by the undersigned, thereto duly authorized, in
the City of Worcester, and Commonwealth of Massachusetts, on the 17th day of
March, 2000.
SEPARATE ACCOUNT FUVUL
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
BY: /s/ MARY ELDRIDGE
---------------------
Mary Eldridge, Secretary
Pursuant to the requirements of the Securities Act of 1933, this Pre-Effective
Amendment has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
/s/ Warren E. Barnes Vice President and Corporate Controller March 17, 2000
- ---------------------------
Warren E. Barnes
Edward J. Parry III* Director, Vice President, Chief Financial
- --------------------------- Officer and Treasurer
Richard M. Reilly* Director, President and Chief Executive
- --------------------------- Officer
John F. O'Brien* Director and Chairman of the Board
- ---------------------------
Bruce C. Anderson* Director
- ---------------------------
Robert E. Bruce Director and Chief Information Officer
- ---------------------------
John P. Kavanaugh* Director, Vice President and
- --------------------------- Chief Investment Officer
John F. Kelly* Director, Vice President and General Counsel
- ---------------------------
J. Barry May* Director
- ---------------------------
James R. McAuliffe* Director
- ---------------------------
Robert P. Restrepo, Jr.* Director
- ---------------------------
Eric A. Simonsen* Director and Vice President
- ---------------------------
*Sheila B. St. Hilaire, by signing her name hereto, does hereby sign this
document on behalf of each of the above-named Directors and Officers of the
Registrant pursuant to the Power of Attorney dated February 1, 2000 duly
executed by such persons.
/s/ Sheila B. St. Hilaire
- ---------------------------
Sheila B. St. Hilaire, Attorney-in-Fact
</TABLE>
<PAGE>
FORM S-6 EXHIBIT TABLE
Exhibit 1(3)(b) Form of Selling Group Agreement with Commission Schedule
Exhibit 1(3)(c) Schedule of Commissions -- included in Exhibit 1(3)(b),
below.
Exhibit 1(4) First Union Policy (Form 1036-99)
Exhibit 1(8)(a) Form of Evergreen Participation Agreement
Exhibit 1(8)(b) Form of First Union Distribution Agreement
Exhibit 1(8)(c) Form of AIT Participation Agreement
Exhibit 1(8)(d) Federated Participation Agreement
Exhibit 1(8)(e) Form of Franklin Templeton Participation Agreement
Exhibit 1(8)(f) Form of Dreyfus Participation Agreement
Exhibit 1(8)(g) AIM Participation Agreement
Exhibit 1(8)(h) Alger Participation Agreement
Exhibit 1(8)(i) MFS Participation Agreement
Exhibit 1(8)(j) Oppenheimer Participation Agreement
Exhibit 1(9)(b) Directors' Power of Attorney
Exhibit 1(10) Application
Exhibit 3 Opinion of Counsel
Exhibit 6 Actuarial Consent
Exhibit 8 Consent of Independent Accountants
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
SELLING GROUP AGREEMENT
THIS AGREEMENT ("Agreement") is made as of ___________, 2000 by and
between First Union Securities Inc., a Delaware corporation ("FUSI"), and the
undersigned broker-dealer ("Broker-Dealer").
DEFINITIONS:
BROKER-DEALERS - broker-dealers registered with the Securities and Exchange
Commission ("SEC") under the 1934 Act that are members of the National
Association of Securities Dealers, Inc. ("NASD") or entities that are excluded
from the definitions of "broker" or "dealer" pursuant to the "bank" exclusion
under Sections 3(a)(4) and Sections 3(a)(5) of the 1934 Act. Notwithstanding the
fact that a bank is not a Broker-Dealer, a bank that is exempt from registration
with the SEC under the 1934 Act but is otherwise permitted to sell the Products
until May 12, 2001 will be treated and defined as a Broker-Dealer for the
purposes of this Agreement until May 12, 2001.
INSURANCE COMPANY(IES) - All Products will be issued by Allmerica Financial Life
Insurance and Annuity Company for non-New York sales and First Allmerica
Financial Life Insurance Company - for NewYork sales (herein collectively
referred to as the "Insurance Companies"). The Principal Office of the Insurance
Companies is located at 440 Lincoln Street, Worcester, Massachusetts 01653.
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ALLMERICA DRAFT
MARCH 16, 2000
PRODUCTS - The variable annuity contracts and variable life insurance policies
of the Insurance Companies identified on the Schedule of Products, attached
hereto, or on a supplement to such Schedule of Products. Certain products are
anticipated to be registered under the 1933 Act and other products will not be
registered in reliance on exemptions under the 1933 Act and the 1940 Act.
REPRESENTATIVES - Individuals affiliated with a Broker-Dealer who are licensed
as life insurance agents in those jurisdictions in which applications for the
sale of the Products are to be solicited and who are also duly registered with
the NASD in compliance with the 1934 Act. Notwithstanding the fact that Bank
employees may not be Representatives, Bank employees who are licensed as life
insurance agents in those jurisdictions in which applications for the sale of
the Products are to be solicited and who are authorized to sell until May 12,
2001, will be treated and defined as Representatives for the purpose of this
Agreement until May 12, 2001.
PROSPECTUS - The prospectuses for the Products which are registered under the
1933 Act. Notwithstanding the fact that a private placement memorandum is not a
Prospectus, the private placement memorandums for the Products, which are not
registered in reliance on exemptions under the 1933 Act and the 1940 Act, will
be treated and defined as a Prospectus.
1933 ACT - The Securities Act of 1933, as amended.
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ALLMERICA DRAFT
MARCH 16, 2000
1934 ACT - The Securities Exchange Act of 1934, as amended.
RECITALS:
A. FUSI, pursuant to the provisions of a distribution agreement (the
"Distribution Agreement") between FUSI and the Insurance Companies, acts as a
distributor of the Products.
B. FUSI desires that the Broker-Dealer distribute the Products in those
jurisdictions in which the Broker-Dealer, FUSI, the Insurance Company and the
Products are appropriately licensed, qualified or approved, as the case may be,
and the Broker-Dealer desires to sell the Products, through its agents in such
jurisdictions, on the terms and conditions set forth hereinafter.
C. The Insurance Company, pursuant to the Distribution Agreement, has
authorized FUSI to recommend broker-dealers, including the Broker-Dealer, for
appointment by the Insurance Company to engage in the distribution activities
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and of the
mutual covenants hereinafter set forth, the parties agree as follows:
1. AUTHORITY TO SELL PRODUCTS.
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ALLMERICA DRAFT
MARCH 16, 2000
1.1 GENERAL. FUSI, subject to the terms and conditions contained
herein, hereby authorizes the Broker-Dealer, as an independent contractor, on a
non-exclusive basis, to offer and sell the Products. The Broker-Dealer hereby
agrees to use its best efforts to sell the Products.
1.2 COMPENSATION/EXPENSES. Except as otherwise provided herein, the
Broker-Dealer shall be entitled to commissions with respect to sales of the
Products made by the Broker-Dealer and its Representatives, in accordance with
the Schedule of Commissions attached to this Agreement, as such Schedule may be
amended from time to time. FUSI reserves the right to amend the Schedule of
Commissions at any time and from time to time. PROVIDED, HOWEVER, that any such
amendment shall apply only to Products applied for after the effective date of
each such amendment. All commissions shall be payable by FUSI. As a result, the
Broker-Dealer understands and agrees that the Insurance Company shall not be
responsible for payment of any compensation due and payable to the Broker-Dealer
hereunder, and that FUSI is solely responsible for the payment of all such
compensation. The Broker-Dealer shall be responsible for the payment of all
expenses incurred by the Broker-Dealer in connection with this Agreement and the
performance of its obligations, and the exercise of its rights hereunder.
2. REPRESENTATIONS AND WARRANTIES.
The Broker-Dealer represents and warrants to, and covenants with, FUSI
that:
(a) the Broker-Dealer (i) is a member in good standing of
the National Association of Securities Dealers, Inc. (the "NASD"), (ii) is duly
registered as a broker-dealer with
4
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
the Securities and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended (the "1934 Act"), and registered in each state or other
jurisdiction in which the Broker-Dealer is required to be registered in order to
sell the Products, (iii) is licensed and appointed to sell the Products under
the insurance laws of each state or other jurisdiction in which the
Broker-Dealer is required to be licensed and appointed in order to sell the
Products, and (iv) otherwise maintains in effect all governmental and other
registrations, licenses and permits necessary for it to carry out its
obligations, and the transactions contemplated hereunder (the "Required
Registrations");
(b) the Broker-Dealer is in compliance, in all material respects,
with all applicable federal and state securities laws and regulations, the
requirements of the NASD and any applicable securities exchanges of which it is
a member and all codes of conduct and codes of ethics applicable to its
activities (collectively, the "Regulations");
(c) the Broker-Dealer is a corporation duly organized and in good
standing under the law of its jurisdiction of organization and is qualified to
do business as a corporation in those states or jurisdictions where it is, or
will be, doing business pursuant to this Agreement; and
(d) this Agreement and the transactions contemplated hereby
(i) have been duly approved by all required corporate action on the part of the
Broker-Dealer and (ii) do not
5
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
conflict with any law, regulation, court order or agreement to which the
Broker-Dealer is subject or the Broker-Dealer's properties are bound.
3. COVENANTS OF THE BROKER-DEALER.
3.1 SALE OF PRODUCTS. The Broker-Dealer agrees that (a) offers and
sales of the Products will be made only through the use of a then current
prospectus which is a part of a registration statement which is then effective
under the 1933 Act (each a "Prospectus"), (b) a Prospectus relating to the
Product in question will be delivered prior to, or concurrently with any sales
presentation or other offer of such Product, (c) no oral or written statements
will be made by or on behalf of the Broker-Dealer to a prospective purchaser of
a Product other than statements identical to, or based solely on information set
forth in the Prospectus, and (d) in connection with offers and sales of the
Products, the Broker-Dealer will at all times comply with the Regulations and
offer and sell the Products only in those jurisdictions, and in the manner in
which the Products may be lawfully sold.
3.2 REPRESENTATIONS AND WARRANTIES TRUE, ETC. At all times during the
term hereof the representations and warranties of the Broker-Dealer contained in
Section 2, above, shall be true.
3.3 REPRESENTATIVES. The Broker-Dealer may recommend persons
associated with it who are duly licensed and qualified under applicable law and
regulations to act in the offer or sale of the Products (the "Representatives")
for appointment as insurance agents of the Insurance Company, PROVIDED that such
person: (a) has not been subject to any civil, administrative or criminal
6
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
actions or sanctions by, or entered into any settlement agreements with, any
governmental or quasi-governmental regulatory authority or self regulatory
organization, (b) has not been precluded or restricted for any period of time by
any entity from selling any securities, insurance products or other products of
such entity, (c) otherwise is qualified to offer and sell the Products, (d)
agrees in writing (i) to comply with all of the obligations of the Broker-Dealer
and the Representatives hereunder, (ii) not to make any recommendation to an
applicant or prospective purchaser to purchase a Product without having
reasonable grounds to believe that the purchase of the Product is suitable for
the prospective purchaser, (iii) to report promptly in writing to the Insurance
Company and FUSI all customer or regulatory complaints or inquiries with respect
to such Representative, whether written or oral, and to assist the Insurance
Company and FUSI in resolving any complaint to the satisfaction of all parties
involved, (e) possesses all Required Registrations and agrees to maintain in
force during the term hereof all Required Registrations, and (f) agrees that
prior to soliciting Products on behalf of the Insurance Company that he/she must
be appointed as an insurance agent of the Insurance Company. The Broker-Dealer
is authorized, except as hereinafter specifically provided, to cause the
Representatives to offer and sell the Products in the states and jurisdictions
in which the Products, the Broker-Dealer and such Representatives are
registered, licensed and appointed or otherwise appropriately qualified. The
Broker-Dealer shall be solely responsible for the supervision of the
Representatives and shall enforce written supervisory procedures to assure
strict compliance with NASD rules and applicable rules and regulations under the
1934 Act, and other applicable
7
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
federal and state statutes and regulations. The Broker-Dealer agrees to provide
to the Representatives instructions sufficient to provide them with information
needed to offer and sell the Products in compliance with this Agreement and the
Regulations. The Broker-Dealer shall direct the sales activities of the
Representatives and shall be solely responsible for the conduct of the
Representatives in the offer and sale of the Products.
3.4 NO AUTHORITY TO MODIFY, ETC. The Broker-Dealer acknowledges and
agrees that neither the Broker-Dealer nor any of the Representatives shall have
the authority, on behalf of FUSI or the Insurance Company or otherwise, to (a)
modify any of the terms of the Products, including, but not limited to, any
forfeiture provisions thereof, or (b) extend the time of payment of any premiums
with respect to a Product. The Broker-Dealer acknowledges that neither the
Broker-Dealer nor any Representative may receive any premiums or other funds
from applicants for, or purchasers of the Products (except for the sole purpose
of forwarding such funds to the Insurance Company). If the Broker-Dealer or a
Representative inadvertently receives any funds from applicants for, or
purchasers of, the Products they shall hold such funds in a fiduciary capacity
on behalf of the Insurance Company and promptly submit them to the Insurance
Company.
3.5 REJECTION OF PRODUCT APPLICATIONS, ETC. The Broker-Dealer
acknowledges and agrees that (a) the Insurance Company, in its sole discretion,
may reject any application for a Product submitted to it by the Broker-Dealer or
any of the Representatives, (b) nothing herein contained shall constitute the
Broker-Dealer or any of its Representatives as employees of FUSI or the
Insurance
8
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
Company, and (c) the Schedule of Products may be amended by FUSI at its sole
discretion from time to time to add other Products distributed by FUSI pursuant
to the Distribution Agreement or other distribution agreements with the
Insurance Company, or to delete Products therefrom.
3.6 ACCESS TO INFORMATION. The Broker-Dealer shall give FUSI and the
Insurance Company full access upon reasonable advance notice during the
Broker-Dealer's normal business hours to all information in the possession or
control of the Broker-Dealer or any Representative relating to, arising out of
or in connection with the offer and sale of Products pursuant to this Agreement,
and shall be required to provide to FUSI and the Insurance Company copies of any
documents relating thereto within ten (10) days after a written request
therefor. The Broker-Dealer shall be entitled to reimbursement of the expenses
it incurs in connection with providing documents to FUSI or the Insurance
Company, as required by the preceding sentence.
3.7 BASIS FOR RECOMMENDATIONS. The Broker-Dealer shall be solely
responsible for the approval of suitability determinations for the purchase of
any Product or the selection of any investment option thereunder, in compliance
with the Regulations and shall appropriately supervise the Representatives in
determining client suitability. The Broker-Dealer, through the Representatives
or otherwise, shall not make any recommendations to a prospective purchaser to
purchase a Product without having reasonable grounds to believe that the
purchase of that Product is suitable for such prospective purchaser. Among other
things, a determination of suitability shall
9
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
be based on information supplied to a Representative after a reasonable inquiry
concerning the prospective purchaser's insurance and investment objectives,
financial situation and needs.
3.8 NO MISREPRESENTATIONS; DISCLOSURE. The Broker-Dealer, through the
Representatives or otherwise, shall not (a) make any misrepresentation of a
material fact with respect to the Products or omit to state a material fact
necessary to make statements made with respect to a Product in light of the
circumstances in which they were made, not misleading or (b) otherwise engage in
any deceptive or misleading practice or activity in connection with the offer
and the sale of the Products. The Broker-Dealer, through the Representatives or
otherwise, shall not: (a) give any oral information or make any representations
or statements in connection with the offer or sale of a Product that is not the
same as, or based solely on the then current version provided by FUSI or the
Insurance Company of the registration statement, Prospectus or statement of
additional information, as the case may be, relating to the such Product, or (b)
provide prospective purchasers of the Products or otherwise utilize in
connection with the offer of sale of the Products any advertising materials,
sales literature, signage or other promotional material, written, electronic,
graphic or audio visual materials other than materials supplied by, or approved
in writing in advance, by FUSI or the Insurance Company (the "Disclosure
Material"). The Broker-Dealer shall not modify in any way any Disclosure
Material which has been approved for use by the Broker-Dealer by FUSI or the
Insurance Company. The Broker-Dealer shall immediately cease using, and shall
cause the Representatives to immediately cease using, any Disclosure Material
previously approved
10
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ALLMERICA DRAFT
MARCH 16, 2000
by FUSI or the Insurance Company upon receipt of an oral or written instruction
to do so by FUSI or the Insurance Company. FUSI agrees to follow-up in writing
within three business days any such oral instruction from FUSI or the Insurance
Company to discontinue such use. The Broker-Dealer will maintain complete
records indicating the manner and extent of distribution of any such Disclosure
Material, and will make such records available to the Insurance Company, FUSI,
state insurance departments, the NASD, the SEC and any other regulatory agency
which has regulatory authority over the Insurance Company or FUSI.
3.9 EXCHANGE OF PRODUCTS. The Broker-Dealer or the Representatives may
solicit exchanges of contracts issued by insurance carriers other than the
Insurance Company or any of its affiliates for Products only when the
Broker-Dealer can demonstrate that the exchange would be beneficial to the
prospective purchaser or class of purchasers, as the case may be, and provided
that the exchange offer is approved in advance by an NASD-licensed principal of
the Broker-Dealer. The Broker-Dealer shall maintain records of the basis for any
determination that an exchange would be beneficial to a prospective purchaser,
including the name of such principal approving the exchange offer. Without the
express written permission of the Insurance Company, neither the Broker-Dealer
nor the Representatives may solicit exchanges of contracts issued by the
Insurance Company or any of its affiliates for Products.
3.10 COMPLAINTS AND INVESTIGATION. The Broker-Dealer shall
report in writing within three (3) business days after the occurrence thereof to
the Insurance Company and FUSI all
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ALLMERICA DRAFT
MARCH 16, 2000
customer complaints or inquiries relating to the offer, sale or ownership of the
Products or made by or on behalf of any prospective purchaser or owner of a
Product, whether written or oral, and shall assist the Insurance Company and
FUSI in resolving those complaints to the satisfaction of such prospective
purchaser, owner, FUSI and the Insurance Company. The Broker-Dealer shall
cooperate fully with FUSI and the Insurance Company in connection with any
governmental or other investigation or proceeding relating to any complaint
related to the Products by any prospective purchaser or owner of the Products.
3.11 NOTICE OF CLAIMS. If any action or proceeding shall be brought
against the Broker-Dealer or any of its Representatives or affiliates relating
to the Products, the Broker-Dealer shall give written notice to FUSI and the
Insurance Company within (3) business days after it receives notice of any such
action or proceeding.
3.12 FIDELITY BOND. The Broker-Dealer represents and warrants that all
directors, officers and employees of the Broker-Dealer (including the
Representative) who have access to funds of the Insurance Company are, and will
continue to be, covered by a blanket fidelity bond including coverage for
larceny, embezzlement and other defalcation, issued by a reputable bonding
company acceptable to the Insurance Company in an amount at least equivalent to
the minimal coverage required under the NASD Rules of Fair Practice, and
endorsed to extend coverage to variable life insurance and variable annuity
transactions. The Broker-Dealer acknowledges that the Insurance Company may
require evidence that such coverage is in force and the Broker-Dealer shall
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ALLMERICA DRAFT
MARCH 16, 2000
promptly give notice to the Insurance Company of any notice of cancellation or
change of coverage. The Broker-Dealer hereby assigns any proceeds received from
the fidelity bond company to the Insurance Company to the extent of the
Insurance Company's loss due to activities covered by such bond. If the payment
to the Insurance Company under the fidelity bond is insufficient to cover the
Insurance Company's loss, the Broker-Dealer will promptly pay the Insurance
Company an amount equal to the balance of such loss on demand. The Broker-Dealer
indemnifies and holds harmless the Insurance Company from any deficiency and
from the cost of collection thereof. The Broker-Dealer agrees to maintain the
fidelity bond coverage described in this Section 3.12 at all times while the
Agreement remains in force.
3.12 Other Broker-Dealers. Subject to the consent of the Insurance
Company, Broker-Dealer may recruit other broker-dealers that are registered
under the 1934 Act to offer and sell the Products provided that: (a) such
broker-dealer enters into an agreement in the form of this Agreement which
agreement is delivered to FUSI for its review, and (b) FUSI has the right, in
its sole discretion, to accept or reject such broker-dealer as authorized to
sell the Products. Any such other broker-dealer which is approved by FUSI to
sell the Products is referred to herein as a "Downstream Broker-Dealer."
Broker-Dealer shall be entitled to receive commissions from a Downstream
Broker-Dealer based on the sales of the Products made by such Downstream
Broker-Dealer upon such arrangements as may be agreed to by Broker-Dealer and
such Downstream Broker-Dealer (the "Downstream Agreement"); provided, however,
that such arrangements are subject to
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ALLMERICA DRAFT
MARCH 16, 2000
review and approval by FUSI in its sole discretion. Broker-Dealer acknowledges
that Broker-Dealer shall not be entitled to any commissions or other
compensation from FUSI or the Insurance Company in connection with the
recruiting, or any activities of a Downstream Broker-Dealer and shall only be
entitled to receive payments in connection with the activities of a Downstream
Broker-Dealer from such Downstream Broker-Dealer pursuant to any arrangement
that may be agreed to between Broker-Dealer and such downstream Broker-Dealer.
Broker-Dealer shall take all reasonable actions to insure that each Downstream
Broker-Dealer complies with the terms of its Downstream Agreement and all laws,
rules and regulations applicable to the Downstream Broker-Dealer in connection
with such Downstream Broker-Dealer's offers and sales of the Products. Any
breach by a Downstream Broker-Dealer of its Downstream Agreement shall be deemed
for all purposes, including, but not limited to, indemnification provided in
Section 9, below, to be a breach by Broker-Dealer of this Agreement. The
Insurance Company reserves the right, in its sole discretion, to terminate a
Downstream Broker-Dealer's authority to sell the Products.
4. REPRESENTATIONS AND WARRANTIES OF FUSI.
(a) FUSI is (i) a member in good standing of the NASD, (ii) duly
registered as a broker-dealer with the SEC under the 1934 Act, and registered in
each state or other jurisdiction in which FUSI is required to be registered in
order to sell the Products and otherwise maintains in effect all Required
Registrations;
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ALLMERICA DRAFT
MARCH 16, 2000
(b) FUSI conducts its operations is in compliance, in all
material respects, with all applicable federal and state securities laws and
regulations, with all applicable state insurance laws, and the requirements of
the NASD and any applicable securities exchanges of which it is a member;
(c) FUSI is a corporation duly organized and in good standing
under the law of its jurisdiction of organization and is qualified to do
business as a corporation in those states or jurisdictions where it is, or will
be, doing business pursuant to this Agreement; and
(d) this Agreement and the transactions contemplated hereby (i)
have been duly approved by all required corporate action on the part of FUSI and
(ii) do not conflict with any law, regulation, court order or agreement to which
FUSI is subject or FUSI's properties are bound.
5. COVENANTS OF FUSI. FUSI covenants with the Broker-Dealer that:
5.1 PRODUCTS. The SEC registered Products, when they are made
available to the Broker-Dealer for offer and sale, will be duly registered under
applicable federal and state securities laws.
5.2 INSURANCE COMPLIANCE. The Products, when they are made
available to the Broker-Dealer for offer and sale, will be in compliance with
applicable state insurance laws.
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ALLMERICA DRAFT
MARCH 16, 2000
5.3 DISCLOSURE. With respect to the Product it purports to
describe, each Prospectus, provided to the Broker-Dealer by FUSI or the
Insurance Company:
(a) will be true, accurate and complete in all material respects;
(b) will not contain any false or misleading statements of
material fact or omit any material fact necessary to make statements contained
therein not misleading in light of the circumstances under which they are made;
and
(c) will fully and adequately disclose all material terms,
conditions, limitations and restrictions with respect to the Products.
5.4 REPRESENTATIONS AND WARRANTIES TRUE, ETC. At all times during the
term hereof, the representations and warranties of FUSI contained in Section 4,
above, shall be true.
5.5 DOCUMENTS. FUSI shall provide the Broker-Dealer with
quantities of Prospectuses reasonably sufficient for the Broker-Dealer to
effectively market the Products.
6. TERM AND TERMINATION OF AGREEMENT
6.1 TERM. Unless sooner terminated pursuant to this Section 6, this
Agreement shall terminate on the earlier to occur of the date of termination of
the Distribution Agreement and the _____ anniversary of the date hereof.
6.2 TERMINATION. This Agreement shall be subject to termination at any
time by the Broker-Dealer or by FUSI, with or without cause, upon the giving of
at least thirty (30) days' written notice to such effect to the other party.
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ALLMERICA DRAFT
MARCH 16, 2000
6.3 EFFECT OF TERMINATION.
(a) In the event this Agreement is terminated, (i) the
Broker-Dealer and the Representatives shall immediately cease to have the right
to offer or sell any of the Products; (ii) the Broker-Dealer shall return
forthwith, upon the request of FUSI or the Insurance Company, all written
materials related to the Products delivered to the Broker-Dealer or the
Representatives by or on behalf of FUSI or the Insurance Company on or before
the date of such termination; (ii) all compensation required to be paid to
Broker-Dealer shall be paid in accordance with the Schedule of Commissions
attached hereto; (iii) all amounts due from the Broker-Dealer to FUSI shall be
immediately due and payable to FUSI, notwithstanding any other terms of such
payments that may have been in effect during the term of this Agreement; and
(iv) the Broker-Dealer shall carry out all residual obligations, if any, which
arose while this Agreement was in effect.
(b) In the event that this Agreement is terminated by FUSI after
a breach by the Broker-Dealer of any of its representations and warranties or
covenants hereunder, then FUSI may offset against any amounts owed to the
Broker-Dealer hereunder an amount equal to (i) the damages, losses and expenses
(including reasonable attorneys' fees) incurred by FUSI as a result of such
breach and (ii) any amount that may be owed by the Broker-Dealer to FUSI under
Section 9, below.
7. CONFIDENTIALITY
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ALLMERICA DRAFT
MARCH 16, 2000
7.1 GENERALLY. Each party will hold the other party's Confidential
Information (as defined below) in confidence and will safeguard such
Confidential Information as provided herein. The party receiving Confidential
Information (a "Recipient") will not, directly or indirectly, report, publish,
distribute, disclose, or otherwise disseminate the Confidential Information, or
any portion thereof, to any individual or entity for any purpose, except as
necessary to perform such Party's duties hereunder, or as expressly authorized
in writing by the party providing the Confidential Information (the "Provider").
Disclosure of Confidential Information internally by the recipient thereof will
be limited to those of its officers, directors, employees and agents who are
required to have access to the Confidential Information to enable the party to
perform its duties hereunder. In order to safeguard Confidential Information,
the Recipient shall (a) inform each party to whom it discloses Confidential
Information of the confidential nature thereof and of the requirements of this
Agreement, (b) direct such recipients to comply with the terms of this
Agreement, and (c) exercise any other precautions reasonably necessary to
prevent any improper disclosure of such Confidential Information.
7.2 DEFINITION. For purposes of the Agreement, "Confidential
Information" shall mean information: (a) regarding the Provider's or any
affiliate of the Provider's financial condition, information systems, business
operations, plans and strategies, products or services, customers or prospective
customers, and marketing and distribution plans, methods and techniques; (b)
that is marked confidential, "proprietary" or in like words, or that is
indicated in writing as being
18
<PAGE>
ALLMERICA DRAFT
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confidential prior to or promptly after disclosure to the Recipient; and (c) any
and all research and designs, ideas, concepts, and technology embodied in the
items described in clauses 7.2(a) or (b). Information shall not be deemed to be
Confidential Information hereunder if that information (a) is or becomes
generally available to the public other than as a result of disclosure by the
Recipient; (b) was available to, or already known by the Recipient on a
non-confidential basis prior to its receipt from the Provider; (c) is developed
by the Recipient independently of any information or data acquired from the
Provider; or (d) is disclosed pursuant to a court order or the requirement of
any federal or state regulatory, judicial, or government authority.
7.3 REMEDIES. Each party acknowledges and agrees that monetary damages
would not be a sufficient or adequate remedy for a breach or anticipated breach
of this Section 7 and that, in addition to any other legal or equitable remedies
which may be available, each party shall be entitled to specific performance and
injunctive relief, without the posting of a bond, for any breach or anticipated
breach of this Section.
7.4 SURVIVAL. The provisions of this Section 7 shall survive the
expiration or other termination of this Agreement.
8. MODIFICATION OF AGREEMENT
This Agreement may not be modified in any way unless by written
agreement signed by both of the parties, except for any amendment of the
Schedule of Products pursuant to the terms of Section 3.5 hereof or of the
Schedule of Commissions pursuant to the terms of Section 1.2 hereof,
19
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ALLMERICA DRAFT
MARCH 16, 2000
which Schedules shall be deemed to be modified upon the giving by FUSI to the
Broker-Dealer of revised versions thereof.
9. INDEMNIFICATION
9.1 GENERAL. The Broker-Dealer will indemnify FUSI, each affiliate of
FUSI (as defined in Rule 405 under the 1933 Act), the Insurance Company, each
affiliate of the Insurance Company (as defined in Rule 405 under the 1933 Act),
and each of their shareholders, officers, directors, employees, agents and
attorneys (each an "Indemnified Party") against, and hold each Indemnified Party
harmless from and in respect of, all losses, damages, costs, (expenses including
reasonable attorneys' fees) judgments, fines, penalties, settlements resulting
from claims, demands, actions, cases, proceedings, suits or investigations
conducted by, or pending before any governmental agency or authority or any
arbitration proceeding based on, arising from, related to or otherwise
attributable to (a) any breach of the representations and warranties of the
Broker-Dealer set forth in this Agreement or (b) any nonfulfillment of any
covenant or agreement on the part of the Broker-Dealer under this Agreement.
9.2 CONDITIONS OF INDEMNIFICATION.
(a) All claims for indemnification under this Agreement shall be
asserted and resolved as provided in this Section 9.2. An Indemnified Party
claiming indemnification under this Agreement shall promptly (i) notify the
Broker-Dealer (in this Section 9, the "INDEMNIFYING
20
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ALLMERICA DRAFT
MARCH 16, 2000
PARTY") of any third-party claim or claims asserted against the Indemnified
Party (a "THIRD PARTY CLAIM") that could give rise to a right of indemnification
under this Agreement and (ii) transmit to the Indemnifying Party a written
notice ("Claim Notice") describing in reasonable detail the nature of the Third
Party Claim, a copy of all papers served with respect to that claim (if any),
and the basis for the Indemnified Party's request for indemnification under this
Agreement. The failure to promptly deliver a Claim Notice shall not relieve the
Indemnifying Party of its obligations to the Indemnified Party with respect to
the related Third Party Claim, except to the extent that the resulting delay is
materially prejudicial to the defense of that claim. Within fifteen (15) days
after receipt of any Claim Notice (the "Election Period"), the Indemnifying
Party shall notify the Indemnified Party (i) whether the Indemnifying Party
disputes its potential liability to the Indemnified Party under this Section 9
with respect to that Third Party Claim and (ii) if the Indemnifying Party does
not dispute its potential liability to the Indemnified Party with respect to
that Third Party Claim, whether the Indemnifying Party desires, at the sole cost
and expense of the Indemnifying Party, to defend the Indemnified Party against
that Third Party Claim.
(b) If the Indemnifying Party does not dispute its potential
liability to the Indemnified Party and notifies the Indemnified Party within the
Election Period that the Indemnifying Party elects to assume the defense of the
Third Party Claim, then the Indemnifying Party shall have the right to defend,
at its sole cost and expense, that Third Party Claim by all appropriate
proceedings, which proceedings shall be prosecuted diligently by the
Indemnifying Party
21
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ALLMERICA DRAFT
MARCH 16, 2000
to a final conclusion or settled at the discretion of the Indemnifying Party in
accordance with this Section 9, and the Indemnified Party will furnish the
Indemnifying Party with all information in its possession with respect to that
Third Party Claim and otherwise cooperate with the Indemnifying Party in the
defense of that Third Party Claim; PROVIDED, HOWEVER, that the Indemnifying
Party shall not enter into any settlement with respect to any Third Party Claim
that purports to limit the activities of, or otherwise restrict in any way, any
Indemnified Party or any affiliate of any Indemnified Party without the prior
consent of that Indemnified Party (which consent may be withheld in the sole
discretion of that Indemnified Party). The Indemnified Party may participate in,
but not control, any defense or settlement of any Third Party Claim controlled
by the Indemnifying Party pursuant to this Section 9 and will bear its own costs
and expenses with respect to that participation; PROVIDED, HOWEVER, that if the
named parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party, and the Indemnified Party has
been advised by counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
Indemnifying Party, then the Indemnified Party may employ separate counsel at
the expense of the Indemnifying Party, and, on its written notification of that
employment, the Indemnifying Party shall not have the right to assume or
continue the defense of such action on behalf of the Indemnified Party.
(c) If the Indemnifying Party (i) within the Election Period (A)
disputes its potential liability to the Indemnified Party under this Section 9,
(B) elects not to defend the
22
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
Indemnified Party as described, above, or (C) fails to notify the Indemnified
Party that the Indemnifying Party elects to defend the Indemnified Party as
provided above, or (ii) elects to defend the Indemnified Party as provided,
above, but fails diligently and promptly to prosecute or settle the Third Party
Claim, then the Indemnified Party shall have the right to defend, at the sole
cost and expense of the Indemnifying Party (if the Indemnified Party is entitled
to indemnification hereunder), the Third Party Claim by all appropriate
proceedings, which proceedings shall be promptly and vigorously prosecuted by
the Indemnified Party to a final conclusion or settled. The Indemnified Party
shall have full control of such defense and proceedings. Notwithstanding the
foregoing, if the Indemnifying Party has delivered a written notice to the
Indemnified Party to the effect that the Indemnifying Party disputes its
potential liability to the Indemnified Party under this Section 9 and if that
dispute is resolved in favor of the Indemnifying Party, the Indemnifying Party
shall not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this Section 9, or of the Indemnifying Party's participation
therein at the Indemnified Party's request, and the Indemnified Party shall
reimburse the Indemnifying Party in full for all reasonable costs and expenses
of such participation. The Indemnifying Party may participate in, but not
control, any defense or settlement controlled by the Indemnified Party pursuant
to this Section 9, and the Indemnifying Party shall bear its own costs and
expenses with respect to that participation.
(d) In the event any Indemnified Party should have a claim
against any Indemnifying Party hereunder that does not involve a Third Party
Claim, the Indemnified Party shall
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ALLMERICA DRAFT
MARCH 16, 2000
transmit to the Indemnifying Party a written notice (the "Indemnity Notice")
describing in reasonable detail the nature of the claim, an estimate of the
amount of damages attributable to that claim to the extent feasible (which
estimate shall not be conclusive of the final amount of that claim) and the
basis of the Indemnified Party's request for indemnification under this
Agreement. If the Indemnifying Party does not notify the Indemnified Party
within fifteen (15) days from its receipt of the Indemnity Notice that the
Indemnifying Party disputes the claim specified by the Indemnified Party in the
Indemnity Notice, that claim shall be deemed a liability of the Indemnifying
Party hereunder. If the Indemnifying Party has timely disputed that claim, as
provided above, that dispute shall be resolved by proceedings in an appropriate
court of competent jurisdiction if the parties do not reach a settlement of that
dispute within thirty (30) days after notice of that dispute is given (the
"INDEMNITY NOTICE PERIOD").
(e) Payments of all amounts owing by an Indemnifying Party
pursuant to this Section 9 relating to a Third Party Claim shall be made
within thirty (30) days after the latest of (i) the settlement of that Third
Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of that Third Party Claim and (iii) the expiration of the period
for appeal of a final adjudication of the Indemnifying Party's liability to
the Indemnified Party under this Agreement in respect of that Third Party
Claim. Payments of all amounts owing by an Indemnifying Party with respect to
claims other than Third Party Claims shall be made within thirty (30) days
after the later of the expiration of (i) the Indemnity Notice Period and (ii)
the expiration of the period for appeal
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ALLMERICA DRAFT
MARCH 16, 2000
of a final adjudication of the Indemnifying Party's liability to the
Indemnified Party under this Agreement.
9.3 SURVIVAL. The provisions of this Section 9 shall survive the
expiration or other termination of this Agreement.
10. REMEDIES CUMULATIVE; NON-WAIVER. The rights and remedies of the parties
contained in this Agreement are cumulative and are in addition to any and all
rights and remedies at law or in equity, which the parties hereto are entitled
to under applicable law. Failure of either party to insist upon strict
compliance with any of the conditions of this Agreement shall not be construed
as a waiver of any of the conditions, but the same shall remain in full force
and effect. No waiver of any of the provisions of this Agreement shall be
deemed, or shall constitute, a waiver of any other provisions, whether or not
similar, nor shall any waiver constitute a continuing waiver.
11. MITIGATION OF LOSSES. In the event of any dispute between an owner
of a Product (a "Disputing Owner") and FUSI, the Insurance Company, the
Broker-Dealer, a Representative or any other party with respect to such
Product, FUSI shall have the right, with prior written notice and
consultation with the Broker-Dealer and the Insurance Company, to take such
action as FUSI may deem necessary to promptly effect a mitigation of damages
or limitation of losses, and without waiving or electing to relinquish any
rights or remedies FUSI may have against the Broker-Dealer, FUSI shall have
the right to settle any such dispute without the prior consent of the
Broker-Dealer
25
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ALLMERICA DRAFT
MARCH 16, 2000
and without waiving or electing to relinquish any rights or remedies FUSI may
have against the Broker-Dealer.
12. GOVERNING LAW, ETC. This Agreement shall be governed by and construed
in accordance with the laws of North Carolina, without regard to choice of law
provisions, and the venue for all actions or proceedings brought by either party
to this Agreement arising out of or relating to this Agreement shall be in the
state or federal courts, as the case may be, located in Mecklenburg County,
North Carolina (collectively, the "Courts"). The Broker-Dealer hereby
irrevocably waives any objection which the Broker-Dealer now or hereafter may
have to the laying of venue of any action or proceeding arising out of or
relating to this Agreement brought in any of the Courts, and any objection on
the ground that any such action or proceeding in any of the Courts has been
brought in an inconvenient forum. In the event of any litigation between the
parties hereto with respect to this Agreement, the prevailing party therein
shall be entitled to receive from the other party all of such prevailing party's
expenses in connection with such litigation, including, but not limited, to
reasonable attorneys' fees.
13. NOTICES. Any notices or demands given in connection herewith shall be
in writing and deemed given when (i) personally delivered, (ii) sent by
facsimile transmission to a number provided in writing by the addressee and a
confirmation of the transmission is received by the sender or (iii) three (3)
days after being deposited for delivery with a recognized overnight courier,
such as
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ALLMERICA DRAFT
MARCH 16, 2000
FedEx, and addressed or sent, as the case may be, to the address or facsimile
number set forth below or to such other address or facsimile number as such
party may in writing designate:
(a) TO FUSI:
Attention:
(b) TO THE BROKER-DEALER:
Attention:
14. ARBITRATION
14.1 Any disagreement, dispute, claim or controversy arising out of or
relating to this Agreement, performance hereunder or the breach hereof, or
otherwise arising between the Broker-Dealer and FUSI, shall be subject to
mandatory arbitration under the auspices, rules and bylaws of the NASD, to the
full extent applicable and as may be amended from time to time.
14.2 Where the NASD Code of Arbitration Procedure is not applicable,
any dispute between the Broker-Dealer and FUSI arising under or relating to this
Agreement shall be settled by compulsory arbitration before one arbitrator in
accordance with the Commercial Arbitration Rules then in force of the American
Arbitration Association. The arbitration shall take place in North Carolina,
unless the parties agree on another location. The arbitrator shall have no
authority to issue any decision or award for punitive damages or for treble or
any other type of multiple damages, consequential damages, or any compensatory
damages based on a claim of lost profits or similar claim. Each party shall bear
its own costs and expenses incurred by it in any such
27
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
arbitration, except that the parties shall bear the expenses of the arbitrator's
services equally. The provisions of this Section shall survive the expiration or
other termination of this Agreement.
15. ENTIRE AGREEMENT; CERTAIN TERMS. This Agreement, together with the
Schedules hereto, constitutes and contains the entire agreement of the parties
with respect to the matters addressed herein and supersedes any and all prior
negotiations, correspondence, understandings and agreements between the parties
respecting the subject matter hereof. No waiver of any rights under this
Agreement, nor any modification or amendment of this Agreement shall be
effective or enforceable unless in writing and signed by the party to be charged
therewith. When used in this Agreement, the terms "hereof," "herein" and
"hereunder" refer to this Agreement in its entirety, including the Schedules
attached to this Agreement, and not to any particular provisions of this
Agreement, unless otherwise indicated.
16. HEADINGS
The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
17. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which
together shall be deemed an original, but both of which together shall
constitute one and the same instrument.
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ALLMERICA DRAFT
MARCH 16, 2000
18. SEVERABILITY. It is the intention of the parties hereto that any
provision of this Agreement found to be invalid or unenforceable be reformed
rather than eliminated. If any of the provisions of this Agreement, or any part
thereof, is hereinafter construed to be invalid or unenforceable, the same shall
not affect the remainder of such provision or the other provisions of this
Agreement, which shall be given full effect, without regard to the invalid
portions. In the event that the courts of any one or more jurisdictions shall
hold such provisions wholly or partially unenforceable by reason of the scope
thereof or otherwise, it is the intention of the parties hereto that such
determination not bar or in any way affect the parties' rights provided for
herein in the courts of any other jurisdictions as to breaches or threatened
breaches of such provisions in such other jurisdictions, the above provisions as
they relate to each jurisdiction being, for this purpose, severable into diverse
and independent covenants.
19. ASSIGNMENT Except as specifically set forth herein, the Broker-Dealer
may not assign any of its rights or obligations hereunder without the prior
written approval of FUSI.
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ALLMERICA DRAFT
MARCH 16, 2000
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first indicated above.
FUSI
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
BROKER-DEALER
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Accepted and Agreed to
[Name of Insurance Company]
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
<TABLE>
<CAPTION>
SCHEDULE OF PRODUCTS
to
First Union Securities, Inc.
SELLING GROUP AGREEMENT
- --------------------------------------------------------------------------------
Policy/Certificate
Product Description Form
- --------------------------------------------------------------------------------
<S> <C> <C>
ValuPlus Assurance Registered Retail 1036-99
Variable Universal Life
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
ALLMERICA DRAFT
MARCH 16, 2000
SCHEDULE OF COMMISSIONS
to
First Union Securities, Inc.
SELLING GROUP AGREEMENT
I. PURPOSE
This Schedule of Commissions ("Schedule") is adopted pursuant to
Section 1.2 of the Selling Group Agreement (the "Agreement") and
governs the determination and payment by FUSI of commissions
("Compensation") to the Broker-Dealer in connection with premium
payments received under the products specified herein.
II. COVERED PRODUCTS
The only products covered by this Schedule ("Covered Products") are the
following:
COVERED PRODUCT POLICY FORM
ValuPlus Assurance 1036-99
III. COMPENSATION
The Compensation to the Broker-Dealer under this Selling Group
Agreement shall be as outlined below:
VABL
Year 1: 6.0%
Years 2-4: 6.0%
Years 5-10: 3.0%
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ALLMERICA DRAFT
MARCH 16, 2000
Years 11+: 1.50%
The foregoing amounts shall be payable by FUSI within five (5) business
days after FUSI receives such amounts from the Insurance Company.
IV. CHARGEBACK OF COMPENSATION
A. The termination of a Covered Product (1) within twelve (12) months
of its date of issue will result in a charge-back of one hundred
percent (100%) of the Compensation paid to the Broker-Dealer respecting
the sale of the Covered Product if the Covered Product terminates for
reasons other than death; (2) seventy-five percent (75%) of the
compensation paid to the Broker-Dealer if a Covered Product terminates
for reasons other than death during the second twelve (12) months
following issue; (3) fifty percent (50%) of the Compensation paid to
the Broker-Dealer if a Covered Product terminates for reasons other
than death during the third twelve (12) months following issue; (4)
twenty five percent (25%) of the Compensation paid to the Broker-Dealer
if a Covered Product terminates for reasons other than death during the
fourth twelve (12) months following issue; and (5) nothing from the
Broker-Dealer (i.e., no charge back) if the Covered Product terminates
thereafter. However, notwithstanding any other provision of the
Agreement, if termination of a Covered Product at any time is due to
the willful or negligent wrongful actions or representations of the
Broker-Dealer or any Representative, FUSI reserves the right to recover
one hundred (100%) of the Compensation paid to the Broker-Dealer
respecting the sale of the Covered Product.
In the event a Covered Product owner makes a withdrawal from or
partially surrenders a Covered Product within forty-eight (48) months
following its date of issue, the charge back rules described in the
preceding paragraph shall apply, except that the amount of the charge
back shall be pro-rated. Any such pro-rated charge back shall be
determined in accordance with the following formula:
Charge Back = Charge Back Percentage* x Withdrawal Amount
-----------------
Covered Product
Cash Value**
*100% year one; 75% year two; 50% year three; 25% year four
**determined as of the date of the withdrawal
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ALLMERICA DRAFT
MARCH 16, 2000
B. Compensation charge-backs will be due within 60 days of notification
by FUS. Compensation will be charged back by credit against
Compensation to be paid in the future and/or by requiring cash
repayment to be made by the Broker-Dealer.
V. MODIFICATIONS AND TERMINATION
A. No Compensation shall be paid on Covered Products that are changed
from their original version, either under a policy provision or
otherwise, or on Covered Products that are issued using cash values of
Insurance Company policies, either under a policy provision or
otherwise.
B. Except as otherwise provided in the Agreement, termination of the
Agreement for any reason shall not impair the right of the
Broker-Dealer to receive Compensation accrued and payable on account of
premium received under Covered Products issued on applications procured
by the Broker-Dealer, or by Representatives operating under supervision
of the Broker-Dealer, prior to the termination of the Selling Group
Agreement.
VI. APPLICABILITY
This Schedule supersedes and replaces any and all previous Schedules of
Commissions and Allowances.
34
<PAGE>
HERE IS YOUR
ALLMERICA VARIABLE LIFE
INSURANCE POLICY
FROM ALLMERICA FINANCIAL
LIFE INSURANCE AND ANNUITY
COMPANY
PLEASE READ IT CAREFULLY
THIS FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY IS A LEGAL CONTRACT between
you (the owner) and Allmerica Financial Life Insurance Company. We will pay your
beneficiary the net death benefit when the person you are insuring dies, while
this policy is in force.
YOU MAY CHANGE THE AMOUNT of insurance as well as the payments you make. You may
direct your payments into an account that has a guaranteed minimum interest
rate, and into sub-accounts of an account that has a rate of return that will
vary. These two accounts are called the Fixed and Variable Accounts.
THE VALUE OF THE VARIABLE ACCOUNT MAY INCREASE OR DECREASE ACCORDING TO ITS
INVESTMENT RESULTS. FOR MORE DETAILS, PLEASE SEE THE VARIABLE ACCOUNT POLICY
VALUE PROVISION ON PAGE [14].
THE VALUE IN THE FIXED ACCOUNT will accumulate interest at a rate set by us
which will not be less than 4% a year.
THE AMOUNT OF THE DEATH BENEFIT AND THE LENGTH OF TIME THIS POLICY WILL REMAIN
IN FORCE MAY BE VARIABLE OR FIXED AS DESCRIBED IN THE DEATH BENEFIT PROVISIONS
BEGINNING ON PAGE [18] AND THE PROVISIONS BEGINNING ON PAGE [11].
SUMMARY:
- - FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
- - ADJUSTABLE SUM INSURED
- - DEATH PROCEEDS PAYABLE AT DEATH OF INSURED
- - FLEXIBLE PREMIUMS PAYABLE TO THE FINAL PAYMENT DATE
- - COVERAGE TO THE FINAL PAYMENT DATE AND AMOUNT OF POLICY VALUE NOT GUARANTEED
- - NONPARTICIPATING
YOUR RIGHT TO EXAMINE THIS
POLICY
You have the right to void this policy by returning it to our Home Office at 440
Lincoln Street, Worcester, MA 01653, or to one of our authorized representatives
within ten days after receiving it.
If you return the policy, it will be void from the date of its issue, and you
will receive a refund equal to the total of:
- - the difference between any payments made, including fees or other charges,
and the amounts allocated to the Variable Account, AND
- - the value of the amounts in the Variable Account on the date the returned
policy is received at our Principal Office, AND
- - any fees or other charges imposed on amounts in the Variable Account.
President
Secretary
Allmerica Financial Life Insurance and Annuity
Company
Home Office: Dover, Delaware
Principal Office: 440 Lincoln Street
Worcester, MA
01653
1
<PAGE>
TABLE OF CONTENTS
Cover Page.....................................................................1
Specifications Page............................................................3
Riders/Endorsements............................................................3
Monthly Policy Charges.........................................................4
Important Definitions..........................................................8
General Terms..................................................................9
Information About You and the Beneficiary.....................................10
What You Should Know About the Premiums.......................................11
Information About the Value of Your Policy....................................12
What You Should Know About the Variable Account...............................14
What You Should Know About the Fixed Account..................................15
What You Should Know About Transfers..........................................16
If You Want to Borrow from Your Policy........................................17
Details on Surrenders and Partial Withdrawals.................................17
What You Should Know About the Death Benefit..................................18
Payment of Benefits...........................................................20
ALPHABETICAL INDEX
Addition, Deletion or Substitution
of Investments................................................................14
Allocation of Payments........................................................12
Assignment....................................................................10
Basis of Value of Fixed Account...............................................16
Beneficiary...................................................................10
Death Benefit.................................................................18
Decrease in Face Amount.......................................................20
Entire Contract................................................................9
Fixed Account.................................................................15
Fixed Account Policy Value....................................................15
Foreclosure...................................................................17
Grace Period..................................................................11
Increase in Face Amount.......................................................19
Lapse.........................................................................11
Loans on Policy...............................................................17
Misstatement of Age or Sex.....................................................9
Monthly Policy Charge..........................................................8
Net Investment Factor.........................................................14
Owner.........................................................................10
Partial Withdrawals...........................................................17
Payment Options...............................................................20
Policy Value..................................................................12
Postponement of Payment.......................................................18
Preferred Loan Option.........................................................17
Premiums......................................................................11
Protection of Benefits.........................................................9
Reinstatement.................................................................12
Right to Contest Policy........................................................9
Right to Examine...............................................................1
Suicide Exclusion..............................................................9
Surrender.....................................................................17
Transfers.....................................................................16
Valuation Dates and Periods...................................................14
Variable Account..............................................................14
Variable Account Policy Value.................................................14
2
<PAGE>
WHO IS INSURED AND FOR
HOW MUCH?
POLICY OWNER'S NAME: John Doe
INSURED'S NAME: John Doe
INSURED'S AGE AT ISSUE: 35
UNDERWRITING CLASS: Preferred Male Non-Smoker
POLICY NUMBER: VM00000001
INITIAL FACE AMOUNT: $50,000
DATE OF ISSUE: 11/15/1999
MONTHLY PROCESSING DATE: On the 15th day of each month
YOUR FINAL PAYMENT DATE: 11/15/2063
THE DEATH BENEFIT OPTION
YOU HAVE CHOSEN: Option 1
ADDITIONAL INSURANCE BENEFITS
[ OTHER INSURED RIDER ]
YOUR MAXIMUM PAYMENT
GUIDELINE SINGLE PREMIUM: $16,460.30
GUIDELINE LEVEL PREMIUM: $1,406.92
3
<PAGE>
THE CHARGES YOU WILL PAY
MONTHLY POLICY CHARGE: See pages [5], [12] and [13].
TRANSFER CHARGE: You may make 12 transfers in any policy year free of charge.
After 12 transfers, you may be charged up to $25 to transfer funds from one
account to another, see page [16].
VARIABLE ACCOUNT MORTALITY AND EXPENSE RISK CHARGE: You will be assessed a
charge each month not to exceed: (1) 1/12 of [0.75%] of the Variable Account
policy value for the mortality and expense risks assumed by us during the first
[120] months this policy is in force; (2) 1/12 of [0.50%] of the Variable
Account policy value for the mortality and expense risks assumed by us during
the next [120] months this policy is in force; and (3) 1/12 of [0.30%] on an
annual basis thereafter.
MINIMUM MONTHLY PAYMENT: A monthly factor of $33.79, used to determine if your
policy will lapse within 48 months of the date of issue; see page [11].
PARTIAL WITHDRAWAL TRANSACTION CHARGES: If you withdraw part of your funds, we
will deduct a 2% withdrawal transaction charge (maximum $25) from the policy
value each time you make a partial withdrawal.
4
<PAGE>
YOUR MONTHLY POLICY CHARGES ARE GUARANTEED NEVER TO GO HIGHER
THAN THE FOLLOWING:
<TABLE>
<CAPTION>
INSURANCE RATE INSURANCE RATE
AGE RATE PER $1000 AGE RATE PER $1000
<S> <C> <C> <C>
35 0.055 70 2.941
36 0.059 71 3.313
37 0.067 72 3.631
38 0.073 73 4.058
39 0.078 74 4.541
40 0.191 75 5.063
41 0.206 76 5.622
42 0.221 77 6.214
43 0.239 78 6.833
44 0.256 79 7.496
45 0.277 80 8.230
46 0.300 81 9.054
47 0.324 82 9.997
48 0.350 83 11.073
49 0.379 84 12.267
50 0.410 85 13.556
51 0.447 86 14.918
52 0.490 87 16.344
53 0.538 88 17.808
54 0.593 89 19.333
55 0.654 90 20.942
56 0.723 91 22.668
57 0.795 92 24.577
58 0.873 93 26.764
59 0.962 94 29.637
60 1.061 95 33.931
61 1.171 96 41.279
62 1.296 97 56.040
63 1.439 98 83.333
64 1.602 99 83.333
65 1.781
66 1.975
67 2.186
68 2.412
69 2.660
</TABLE>
5
<PAGE>
MINIMUM DEATH BENEFIT - OPTIONS 1 AND 2
GUIDELINE MINIMUM SUM INSURED TEST TABLE
<TABLE>
<CAPTION>
AGE PERCENTAGE AGE PERCENTAGE
<S> <C> <C> <C>
Thru 40 250% 60 130%
41 243% 61 128%
42 236% 62 126%
43 229% 63 124%
44 222% 64 122%
45 215% 65 120%
46 209% 66 119%
47 203% 67 118%
48 197% 68 117%
49 191% 69 116%
50 185% 70 115%
51 178% 71 113%
52 171% 72 111%
53 164% 73 109%
54 157% 74 107%
55 150% 75 thru 90 105%
56 146% 91 104%
57 142% 92 103%
58 138% 93 102%
59 134% 94 101%
95 -100 100%
</TABLE>
6
<PAGE>
MINIMUM DEATH BENEFIT - OPTION 3
CASH VALUE ACCUMULATION TEST TABLE
<TABLE>
<CAPTION>
AGE PERCENTAGE AGE PERCENTAGE
<S> <C> <C> <C>
35 435.21% 70 151.05%
36 419.38% 71 147.81%
37 404.15% 72 144.77%
38 389.54% 73 141.87%
39 375.48% 74 139.14%
40 361.95% 75 136.59%
41 350.08% 76 134.20%
42 338.66% 77 131.97%
43 327.66% 78 129.86%
44 317.08% 79 127.87%
45 306.88% 80 125.98%
46 297.07% 81 124.19%
47 287.63% 82 122.49%
48 278.55% 83 120.90%
49 269.81% 84 119.43%
50 261.40% 85 118.06%
51 253.30% 86 116.81%
52 245.52% 87 115.64%
53 238.06% 88 114.55%
54 230.91% 89 113.52%
55 224.05% 90 112.52%
56 217.49% 91 111.54%
57 211.22% 92 110.54%
58 205.21% 93 109.51%
59 199.45% 94 108.40%
60 193.93% 95 107.20%
61 188.66% 96 105.91%
62 183.62% 97 104.58%
63 178.81% 98 103.37%
64 174.23% 99 102.44%
65 169.87%
66 165.73%
67 161.79%
68 158.04%
69 154.46%
</TABLE>
7
<PAGE>
IMPORTANT DEFINITIONS
AGE means how old the insured is on the birthday closest to the policy
anniversary.
ASSIGNEE is the person to whom you have transferred your ownership of this
policy.
COMPANY means Allmerica Financial Life Insurance and Annuity Company, also
referred to as we, our and us. Our telephone number is 1-800-366-1492.
DATE OF ISSUE is stated on page 3 of the policy. Policy months, years and
anniversaries are measured from this date.
EARNINGS means the amount by which the policy value exceeds the sum of the
payments made less all partial withdrawals and partial withdrawal transaction
charges. Earnings are calculated on each monthly processing date.
EVIDENCE OF INSURABILITY is the information, including medical information, that
we use to decide the underwriting class for the person insured.
FACE AMOUNT is the amount of insurance you elect to buy in the application or
enrollment form. The face amount is shown on page 3 of the policy. The death
benefit is based on the face amount; see the Net Death Benefit provisions
beginning on page [18].
FINAL PAYMENT date is the policy anniversary nearest the insured's 100th
birthday. No payments may be made by you after this date.
INSURANCE PROTECTION AMOUNT is the death benefit minus the policy value.
MONTHLY POLICY CHARGE is the amount of money we deduct from the policy value
each month to pay for the insurance; see pages [12] and [13] for more details.
MONTHLY PROCESSING DATE is the date on which the monthly policy charge is
deducted from the policy value. This date is shown on page 3 of the policy.
OUTSTANDING LOAN means all unpaid policy loans plus interest due or accrued on
such loans.
POLICY CHANGE means any change in the face amount, the underwriting class, the
addition or deletion of a rider, or a change in the death benefit option.
POLICY VALUE is the sum of your values in the Variable Account and the Fixed
Account.
PREMIUM means a payment you must make to keep the policy in force.
PRINCIPAL OFFICE means our office located at 440 Lincoln Street, Worcester,
Massachusetts 01653.
PRO RATA refers to an allocation among the sub-accounts of the Variable Account
and the Fixed Account. A pro-rata allocation will be in the same proportion that
the policy value in each sub-account of the Variable Account and the unloaned
policy value in the Fixed Account have to the total unloaned policy value.
RIDER is an optional benefit, which may be added to your policy for an
additional charge.
SPECIFICATION PAGES contain information specific to your policy, and are located
after the Table of Contents in your policy.
SUB-ACCOUNTS are subdivisions of the Variable Account investing exclusively in
the shares of one or more Funds, which you chose for your initial allocations.
UNDERWRITING CLASS means the insurance risk classification that we assign to the
insured based on the information in the application or enrollment form and any
other evidence of insurability we obtain. The insured's underwriting class
affects the monthly policy charge and the amount of the payments required to
keep the policy in force.
WRITTEN NOTICE OF CLAIM means written notification of the death of the insured
received in the Principal Office of the Company.
WRITTEN REQUEST is a request you make in writing in a form which is satisfactory
to us and which is filed at our Principal Office.
YOU OR YOUR means the owner of this policy as shown in the application or in the
latest change filed with us.
8
<PAGE>
GENERAL TERMS
OUR RIGHT TO CONTEST THE POLICY IS LIMITED: A contest is any action taken by us
to cancel your insurance or deny a claim based on untrue or incomplete answers
in your application. We cannot contest the initial face amount of the policy if
it has been in force for two years from the date it is issued, and the insured
is alive at the end of this two-year period.
If the face amount is increased or the underwriting class is changed at your
request, we cannot contest the increase or change after it has been in force for
two years from its effective date and the insured is alive.
ENTIRE CONTRACT: This policy, with a copy of the application, any endorsements
and riders attached to it, is the entire contract between you and us. The entire
contract also includes: a copy of any application to increase the face amount or
to change to a better underwriting class; any new specification pages; and any
supplemental pages issued.
We assume that the information you and the insured provide in any application is
accurate and complete to the best of your knowledge. If we contest this policy
or deny a claim, we may use only the information you and the insured provided in
an application. Our representatives are not permitted to change this policy or
extend the time for paying premiums. Only our President, a Vice President or
Secretary may change the provisions of this policy, and then only in writing.
NONPARTICIPATING: No insurance dividends will be paid on this policy.
ADJUSTMENT OF COST FACTORS: We determine the monthly policy charge and Fixed
Account interest rates which are used to calculate the policy value, subject to
the guarantees noted in this policy. Any changes in these charges and rates will
be made by underwriting class only, and will be based on changes in our future
expectations for such things as: our investment earnings, our expenses, life
expectancy rates, and how many policy owners keep their policies.
SUICIDE EXCLUSION: If the insured, while sane or insane, commits suicide within
two years of the date this policy is issued, we will not pay a death benefit.
The beneficiary will receive only the total amount of payments made to us less
any outstanding loan and amounts withdrawn. If the face amount is increased at
your request, and then the insured commits suicide within two years, while sane
or insane, we will not pay the increased amount. Instead the beneficiary will
receive the monthly policy charges paid for this increase, plus any net death
benefit otherwise payable.
MISSTATEMENT OF AGE OR SEX: If the insured's age or sex is not correctly stated,
we will adjust the net death benefit we will pay. The amount will be:
- - the policy value, plus
- - the insurance protection amount that would have been purchased by the last
monthly policy charge using the correct age and sex.
No adjustment will be made if:
- - the insured dies after the final payment date; or
- - the underwriting class is unisex and there has been a misstatement of sex.
PROTECTION OF BENEFITS: To the extent allowed by law, the benefits provided by
this policy cannot be reached by the beneficiary's creditors. No beneficiary may
assign, transfer, anticipate or encumber the policy value or benefit unless you
give them this right.
PERIODIC REPORT: We will mail a report to you at your last known address at
least once a year. This report will provide the following information.
- - death benefit;
- - policy values in each sub-account and in the Fixed Account;
- - the value of the policy if you surrender it;
- - payments made by you and monthly deductions by us since the last report; and
- - outstanding loan and any other information required by law.
9
<PAGE>
INFORMATION ABOUT YOU AND THE BENEFICIARY
OWNER: The insured is the owner of this policy unless another person (which
could include a trust, corporation, partnership, etc.) is named as owner in the
application. The owner may change the ownership of this policy without the
consent of any beneficiary. Whenever the face amount of insurance is increased,
the insured must agree.
ASSIGNMENT: You may change the ownership of this policy by sending us a written
request. An absolute assignment will transfer ownership of the policy from you
to another person called the assignee.
You may also assign this policy as collateral to a collateral assignee. The
limitations on your ownership rights while a collateral assignment is in effect
are specified in the assignment.
An assignment will take place only when the written request is recorded at our
Principal Office. When recorded, it will take effect on the date you signed it.
Any rights created by the assignment will be subject to any payments made or
actions taken by us before the change is recorded. We are not responsible for
assuring that any assignment or any assignee's interest is valid.
BENEFICIARY: You name the beneficiary to receive the net death benefit. The
beneficiary's interest will be affected by any assignment you make. If you
assign this policy as collateral, all or a portion of the net death benefit will
first be paid to the collateral assignee; any money left over from the amount
due the assignee will go to those otherwise entitled to it.
Your choice of beneficiary may be revocable or irrevocable. You may change a
revocable beneficiary at any time by written request; but an irrevocable
beneficiary must agree to any change in writing. You will also need an
irrevocable beneficiary's permission to exercise other rights and options
granted by this policy. Unless you have asked otherwise, this policy's
beneficiary will be revocable.
Any change of the beneficiary must be made while the insured is living. This
change will take place on the date the request is signed, even if the insured is
not living on the day we receive it. Any rights created by the change will be
subject to any payments made, or actions taken, before we receive the written
request.
If a beneficiary dies before the insured, his or her interest in this policy
will pass to any surviving beneficiaries in proportion to their share in the net
death benefit, unless you have requested otherwise. If all beneficiaries die
before the insured, the net death benefit will pass to you or your estate.
COMMON DISASTER PROVISION: The beneficiary must be alive 10 days following the
insured's date of death in order to be entitled to receive a benefit; otherwise
we will pay the net death benefit as though the beneficiary died before the
insured. The number of days, which the beneficiary must live after the insured's
death, may be changed by your written request. You may also cancel this
provision by written request.
10
<PAGE>
WHAT YOU SHOULD KNOW ABOUT THE PREMIUMS
PREMIUMS: This policy will not be in force until the first premium is paid to
us. Additional payments may be made to us at any time before the final payment
date. We reserve the right to obtain evidence of insurability, which is
satisfactory to us as a condition to accepting any premium, which would increase
the death benefit by more than the amount of the payment. Payments must be sent
either to our Principal Office or to our authorized representative.
If you request it in writing, we will send you a signed receipt after payment.
The payment amount, which must be paid to keep the policy in force, is described
in the Grace Period and Policy Lapse provision.
MAXIMUM PAYMENT LIMITS: We may limit the amount you pay to us in any policy year
if your death benefit option is either 1 or 2; see page [19]. This limit will
not be less than the guideline level premium; however, the sum of all payments
made from the issue date, minus any partial withdrawals, may not be more than
the greater of:
- - the guideline single premium, or
- - the sum of the guideline level premiums to the date of payment.
The guideline premium amounts are shown on page 3 of the policy. These premium
limitations will not apply if they prevent you from paying us enough to keep the
policy in force.
Guideline premiums are determined according to rules in the federal tax law, and
will be adjusted as that law changes.
If the maximum payment limit applies to this policy, the excess payment will be
applied first to the outstanding loan and we will then return any balance to
you.
PREMIUM GRACE PERIOD AND POLICY LAPSE: We will send you a notice if your
payments are not enough to keep the policy in force. Your policy will continue
for 62 days, which is the grace period.
The first day of the grace period is called the date of default. We will send
the notice to your last known address, or to the person you name to receive this
notice, showing the due date and the amount of premium you must pay to keep the
policy in force.
The date when the grace period begins and the amount you must pay depends on how
long the policy has been in force and whether there have been any increases in
the face amount.
Beginning on the date this policy is issued or the effective date of any
increase in the face amount, whichever is later, and continuing for the next 47
monthly processing dates, the grace period will begin when both the following
conditions occur:
- - the policy value less any outstanding loan is less than the amount needed to
pay the next monthly deduction; and
- - the sum of the payments made minus any outstanding loan, partial withdrawals
and partial withdrawal transaction charges since the latest of the following
three dates:
- the date this policy is issued, or
- the effective date of any increase in the face amount, or
- the date of any policy change which changes the minimum monthly payment,
is less than the accumulated minimum monthly payments to date.
11
<PAGE>
Thereafter, the grace period will begin if the policy value less any outstanding
loan on a monthly processing date is less than the amount needed to pay the next
monthly deduction plus any outstanding loan interest.
The minimum monthly payment, which is shown on page 4 of the policy, will change
if the policy is changed; it will be listed in new specification pages provided
to you.
The death benefit during the grace period will be reduced by any overdue
charges. The policy will lapse if the amount shown in the notice remains unpaid
at the end of the grace period. The policy terminates on the date of lapse.
REINSTATEMENT: If this policy has lapsed or foreclosed for failure to pay loan
interest, and has not been surrendered, it may be restored (called "reinstated"
in this policy) within three years after the date of default or foreclosure. We
will reinstate the policy on the monthly processing date following the day we
receive all of the following items:
- - a written application for reinstatement,
- - evidence of insurability showing the insured is insurable according to our
underwriting rules, and
- - a payment large enough to keep the policy in force for three months.
You may repay or reinstate any outstanding loan on the date of default or
foreclosure.
Your reinstatement premium will be allocated to the Fixed Account until we
approve your application, at which time we will transfer the reinstatement
premium, plus accrued interest, as you directed in your most recent payment
allocation request.
The policy value on the reinstatement date is:
- - the payment to reinstate the policy, including the interest earned from the
date we received your payment; plus
- - an amount equal to the policy value less any outstanding loan on the default
date; less
- - the monthly deduction due on the rein-statement date.
INFORMATION ABOUT THE VALUE OF YOUR POLICY
PAYMENT AND ALLOCATION OF NEW PAYMENTS: Each payment made to us will be added to
the policy value. The policy value consists of all the money in the Variable
Account and the Fixed Account.
ALLOCATION OF PAYMENTS: If you make a payment with your application or at any
time before the date of issue, we will hold the payment in the Fixed Account as
of the day we receive it at our Principal Office. When the policy has been
issued, we will transfer any funds from the Fixed Account (which were not
allocated by you to the Fixed Account) as you directed in your application or by
later request. All payments received thereafter will be allocated in accordance
with your most recent payment allocation request. All percentage allocations
must be in whole numbers, with the total allocation to all selected accounts
equaling 100%. A processing charge of up to $25 may be made for changing the
payment allocation.
MONTHLY DEDUCTION: the monthly deduction is the sum of the following charges:
- - the monthly policy charges;
- - the mortality and expense risk charge shown on page 4 of the policy;
- - any monthly rider charge(s).
Monthly deductions are made on the date of issue and on each monthly processing
date until the final payment date. Thereafter, the mortality and expense risk
charge will be deducted on the monthly processing date for the life of the
insured.
You may choose one or more sub-accounts from which the monthly deduction will be
made. If you do not make a choice, we will deduct the monthly deduction
pro-rata. In the event any charge is greater than the value of a sub-account to
which it relates on a monthly processing date, the unpaid balance will be
12
<PAGE>
totaled and allocated pro-rata among the other sub-accounts of the Variable
Account.
Charges allocated to the Fixed Account will be deducted on a last-in, first-out
basis. This means that we use the most recent payments to pay the fees.
The monthly policy charge equals the sum of the charges that apply to:
- - the initial face amount, plus
- - each increase in the face amount.
We will determine the monthly policy charge each month. Any changes in this
charge will be made by underwriting class. If you decrease the face amount of
the policy, we will adjust the monthly policy charge according to the Benefit
Change provision on page [19].
The monthly policy charge for the initial face amount will not be more than (1)
multiplied by (2) where:
- - (1) is the insurance rate shown for the insured's age in the Table on
page 5; and
- - (2) is the initial face amount divided by 1,000.
For the purposes of this calculation, if one of the level death benefit options
(see page [18]) is in effect, the initial face amount will be reduced by the
policy value, minus charges for rider benefits at the beginning of the month,
but not less than zero.
If you increase the face amount, the monthly policy charge will not be more than
(3) multiplied by (4) where:
- - (3) is the insurance rate applicable to the increased face amount for the
insured's age; and
- - (4) is the amount of the increase in the face amount divided by 1,000.
For purposes of this calculation, "age" means how old the insured is on the
birthday closest to the anniversary of the effective date of the increase. If
one of the level death benefit options is in effect and the policy value is
higher than the initial face amount, the excess policy value, minus charges for
rider benefits at the beginning of the month, will be used to reduce any
increases in the face amount in the order in which the increases were issued.
If the death benefit is the minimum death benefit required for the policy to
qualify as life insurance under the federal tax law (see page [20]), the monthly
policy charge for the portion of the death benefit, which exceeds the face
amount (i.e., initial face amount plus any increases), will not be higher than
(5) multiplied by (6) divided by 1,000 where:
- - (5) is the insurance rate applicable to the initial face amount; and
- - (6) is the death benefit less:
- the greater of the face amount or the policy value if either of the level
death benefit options is in effect, or
- the face amount plus the policy value, if the Death Benefit Option 2 (see
page [20]) is in effect.
INSURANCE RATES: The cost of insurance rate includes an expense factor and a
mortality factor. The expense factor covers a portion of our acquisition and
distribution costs, tax and administrative expenses. The mortality factor is
based on the insured's:
- - age,
- - sex (unless this policy is issued in a unisex class as indicated on page 3 of
the policy),
- - underwriting class, and
- - face amount.
The guaranteed rates will be no greater than the:
- - the Commissioners 1980 Standard Ordinary Mortality Table, Male, Female, or
Table B for unisex risks , and
- - appropriate increases in such tables for rated risks.
The insurance rates actually charged will usually be lower than, and never will
be higher than, the guaranteed rates. We will review the actual insurance rates
for this policy whenever we change these rates for new policies. In any event,
rates will be reviewed not more often than once each year, but not less than
once in a five-year period.
13
<PAGE>
WHAT YOU SHOULD KNOW ABOUT THE VARIABLE ACCOUNT
VARIABLE ACCOUNT: The value of your policy will vary if it is funded through
investments in the sub-accounts of the Variable Account. This account is
separate from our Fixed Account. We have exclusive and absolute ownership and
control of all assets, including those in the Variable Account. However, the
portion of assets in the Variable Account equal to the reserves and liabilities
of the policies which are supported by this account will not be charged with
liabilities that come from any other business we conduct.
This account, which we established to support variable life insurance policies,
is registered with the Securities and Exchange Commission (SEC) as a unit
investment trust under the Investment Company Act of 1940. It is also governed
by the laws of the State of Delaware.
This account has several sub-accounts. Each sub-account invests its assets in a
separate series of a registered investment company (called a "Fund"). We reserve
the right, when the law allows, to change the name of the Variable Account or
any of its sub-accounts. You will find a list in your application of the
sub-accounts in which you first chose to invest.
VARIABLE ACCOUNT POLICY VALUE: Payments made, which are allocated to the
sub-accounts, will purchase units of the sub-accounts.
The number of units purchased in each sub-account is equal to the portion of the
payment allocated to the sub-account, divided by the value of the applicable
unit as of the valuation date the payment is received at our Principal Office or
on the date value is trans-ferred to the sub-account from another sub-account or
the Fixed Account.
The number of units will remain fixed unless (1) changed by a subsequent split
of unit value, or (2) reduced because of a transfer, policy loan, partial
withdrawal, transaction charges, monthly deduction or surrender allocated to the
sub-account. Any transaction described in (2) will result in the cancellation of
a number of units, which are equal in value. On each valuation date we will
value the assets of each sub-account in which there has been activity. The
policy value in a sub-account at any time is equal to the number of units this
policy then has in that sub-account multiplied by the sub-account's unit value.
The value of a unit for any sub-account for any valuation period is determined
by multiplying that sub-account's unit value for the immediately preceding
valuation period by the net investment factor for the valuation period for which
the unit value is being calculated. The unit value will reflect the investment
advisory fee and other expenses incurred by the registered investment companies.
NET INVESTMENT FACTOR: This measures the investment performance of a sub-account
during the valuation period that has just ended. This factor is equal to 1.00
plus the result from dividing (a) by (b) where:
- - (a) is the investment income of the sub-account for the valuation period,
plus capital gains, realized or unrealized, credited during the valuation
period; minus capital losses, realized or unrealized, charged during the
valuation period; adjusted for provisions made for taxes, if any; and
- - (b) is the value of that sub-account's assets at the beginning of the
valuation period
Since the net investment factor may be more or less than one, the unit value may
increase or decrease. You bear the investment risk. We reserve the right
(subject to any required regulatory approvals) to change the method we use to
determine the net investment factor.
VALUATION DATES AND PERIODS: A valuation date is each day that the New York
Stock Exchange (NYSE) is open for business and any other day in which there is
enough trading in the Variable Account's underlying portfolio securities to
materially affect the value of the Variable Account. A valuation period is the
period between valuation dates.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS: We may not change the
investment policy of the Variable Account without the approval of the Insurance
Commissioner of Delaware. This approval process is on file with the Commissioner
of your state.
14
<PAGE>
We reserve the right, subject to compliance with applicable law to add to,
delete from, or substitute for the shares of a Fund that are held by the
Variable Account or that the Variable Account may purchase. We also reserve the
right to eliminate the shares of any Fund if they are no longer available for
investment, or if we believe investing more in any eligible Fund is no longer
appropriate for the purposes of the Variable Account.
We will notify you before we substitute any of your shares in the Variable
Account. However, this will not prevent the Variable Account from buying other
shares of underlying securities for other series or classes of policies, or from
permitting a conversion between series or classes of policies or contracts if
holders request it.
We reserve the right to establish other sub-accounts, and to make them available
to any class or series of policies as we think appropriate. Each new sub-account
would invest in a new investment company or in shares of another open-end
investment company. We also reserve the right to eliminate or combine existing
sub-accounts of the Variable Account and to transfer the assets between
sub-accounts, when allowed by law.
If we make any substitutions or changes that we believe are necessary or
appropriate, we may make changes in this policy by written notice to reflect the
substitution or change. If we think it is in the best interests of our policy
owners, we may operate the Variable Account as a management company under the
Investment Company Act of 1940, or we may de-register it under that Act if the
registration is no longer required. We may also combine it with other separate
accounts.
FEDERAL TAXES: If we must pay taxes on the Variable Account, we will charge you
for that tax. Although the account is not now taxable, we reserve the right to
make a charge for taxes if the account becomes taxable.
SPLITTING OF UNITS: We reserve the right to split the value of a unit, either to
increase or decrease the number of units. Any splitting of units will have no
material effect on policy benefits.
WHAT YOU SHOULD KNOW ABOUT THE FIXED ACCOUNT
FIXED ACCOUNT: The Fixed Account is a part of our General Account. The General
Account consists of all assets owned by us, other than those in the Variable
Account and other separate accounts. Except as limited by law, we have sole
control over the investment of these General Account assets. You do not share
directly in the investment experience of the General Account, but are allowed to
allocate and transfer funds into the Fixed Account.
FIXED ACCOUNT INTEREST RATES: The interest rate credited to policy value in the
Fixed Account is set by us but is guaranteed never to be less than 4%. We will
review the non-guaranteed interest rate from time to time, at least once a year.
The following guarantees apply to money in the Fixed Account:
- - the interest rate in effect on the day we receive your payment at our
Principal Office is guaranteed until the next policy anniversary unless you
borrow money from that policy value.
- - the interest rate in effect on the day funds are transferred from a
sub-account of the Variable Account to the Fixed Account is guaranteed until
the next policy anniversary unless you borrow from that policy value.
- - the interest rate in effect on a policy anniversary is guaranteed for one
year for those policy values in the Fixed Account on the policy anniversary
so long as those values remain in the Fixed Account and are not borrowed.
FIXED ACCOUNT POLICY VALUE: On each monthly processing date, the policy value of
the Fixed Account is:
- - the policy value in this account on the preceding monthly processing date
increased by one month's interest, plus
- - payments received since the last monthly processing date which are allocated
to the Fixed Account plus the interest accrued from the date the payments are
received by us, plus
- - Variable Account policy value transferred to the Fixed Account from any
sub-accounts
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since the preceding monthly processing date, increased by interest from the
date the policy value is transferred, minus
- - policy value transferred from the Fixed Account to a sub-account since the
preceding monthly processing date and interest accrued on these transfers
from the transfer date to the monthly processing date, minus
- - partial withdrawals from the Fixed Account and partial withdrawal
transaction charges since the last monthly processing date, interest
accrued on these withdrawals and charges from the withdrawal date to the
monthly processing date, minus
- - any transaction charges allocated to the Fixed Account for any changes in the
face amount since the last monthly processing date and interest accrued on
such charges to the monthly processing date, minus
- - the portion of the monthly deduction allocated to the policy value in the
Fixed Account.
During any policy month the Fixed Account policy value will be calculated on a
consistent basis.
BASIS OF VALUE OF THE FIXED ACCOUNT: We base the minimum surrender value in the
Fixed Account on mortality no greater than the Commissioners 1980 Standard
Ordinary Mortality Table, Male, Female or Table B for unisex risks (or
appropriate increases in such tables for rated risks) with interest at 4% each
year, compounded annually.
Actual policy values are based on interest and insurance rates that we set. We
have filed a detailed description of the way we determine this value with the
State Insurance Department. All values equal or exceed the minimums required by
law in the state in which this policy is delivered.
WHAT YOU SHOULD KNOW ABOUT TRANSFERS
You may transfer amounts between the Fixed Account and the sub-accounts or among
sub-accounts, on request.
You may transfer, without charge, all or part of the policy value in the
Variable Account to the Fixed Account once during the first 24 months after the
policy is issued, and once during the first 24 months after you have increased
the face amount in order to convert to a fixed-only product. If you do so,
future payments will be allocated to the Fixed Account unless you specify
otherwise. All other transfers are subject to the following rules, and will be
permitted with our approval.
We will determine the minimum and maximum amounts that may be transferred
according to the rules that are in effect at the time of the transfer.
We also reserve the right to limit the number of transfers that can be made in
each policy year, and to set other reasonable rules controlling transfers.
If a transfer would reduce the policy value in a sub-account to less than the
current minimum balance required for such accounts, we reserve the right to
include the remaining value in the amount transferred.
You will not be charged for the first 12 transfers in a policy year, but a
transfer charge of up to $25 may be made on each additional transfer. Transfers
that result from a policy loan or repayment of a loan are not subject to these
rules.
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IF YOU WANT TO BORROW FROM YOUR POLICY
Your policy will be the security for the loan.
AMOUNT YOU MAY BORROW: The total amount you may borrow is the loan value. The
loan value is 90% of the policy value .
If you do not specify from which accounts you want to borrow, we will allocate
the loan pro rata.
In order to secure the outstanding loan, we will transfer the policy value in
each sub-account equal to the policy loan allocated to each sub-account to the
Fixed Account.
LOAN INTEREST: Interest is due on policy loans. Except as otherwise provided in
the Preferred Loan Option, the current rate of interest is [4.8%] and is
guaranteed not to exceed 6%. Interest accrues daily, and is payable at the end
of each policy year. Any interest that is not paid on time will be added to the
loan principal and bear interest at the same rate. If this makes the principal
higher than the policy value in the Fixed Account, we will offset this shortfall
by transferring funds from the sub-accounts to the Fixed Account. We will
allocate the transferred amount pro rata among the sub-accounts in the same
proportion that the value in each sub-account has to the total value in all of
them.
REPAYING THE OUTSTANDING LOAN: You may repay the outstanding loan at any time
before this policy lapses. When you repay it, we will transfer the policy value
securing the loan that is in the Fixed Account to the various sub-accounts and
increase the value in them. You may tell us how to allocate repayments, but if
you do not, we will allocate them according to the most recent payment
allocation choices you have made. Loan repayments made to the Variable Account
cannot be higher than the amounts you transferred from it to secure the
outstanding loan.
FORECLOSURE: If at any time your policy value less any outstanding loan is
insufficient to cover the monthly deduction, we will terminate the policy. We
will mail a notice of this termination to the last known address of you and any
assignee. If the excess outstanding loan is not paid within 62 days after this
notice is mailed, the policy will terminate with no value. You may reinstate
this policy according to the Reinstatement provision on page [12].
PREFERRED LOAN OPTION: This option may be revoked by you at any time. While this
option is in effect, the current annual interest rate charged to that portion on
the policy loan that is secured by earnings will be 4%. This annual interest
rate is guaranteed not to exceed 4.5%.
DETAILS ON SURRENDER AND PARTIAL WITHDRAWALS
SURRENDER: You may cancel this policy and receive its surrender value as long as
the insured is living on the date we receive your written request in our
Principal Office. The policy will be canceled on that day. You may choose to
receive the surrender value in a lump sum or under a benefit option.
SURRENDER VALUE: The surrender value equals the policy value minus any
outstanding loan.
PARTIAL WITHDRAWALS: Partial withdrawals are not allowed during the first policy
year. After the first policy year, you may withdraw up to 90% of the surrender
value on written request. Each partial withdrawal must be at least $500. We will
deduct a 2% partial withdrawal transaction charge (maximum $25) from the policy
value each time you make a partial withdrawal.
If you elected one of the Level Death Benefit Options, the face amount and
policy value will be reduced by the amount of the partial withdrawal, and the
policy value will be further reduced by the partial withdrawal transaction
charge. The face amount will be decreased in the following order:
- - first, the most recent increase,
- - second, the next most recent increases in succession, and
- - last, the initial face amount.
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If you elected the Death Benefit Option 2, the policy value will be reduced by
the amount of the partial withdrawal and the partial withdrawal transaction
charge.
We will not permit a partial withdrawal if it reduces the face amount to less
than $40,000.
If you do not allocate a partial withdrawal and the partial withdrawal
transaction charge among the Fixed Account and each sub-account, we will
allocate that amount pro rata.
POSTPONEMENT OF PAYMENT: We may postpone any transfer from the Variable Account
or payment of any amount payable on:
- - surrender,
- - partial withdrawal,
- - transfer,
- - policy loan, or
- - death of the insured.
The postponement will continue during any period when:
- - trading on the New York Stock Exchange (NYSE) is restricted as determined by
the SEC, or the NYSE is closed for days other than weekends and holidays, or
- - the SEC by order has permitted such suspension, or
- - the SEC has determined that such an emergency exists that disposal of
portfolio securities or valuation of assets is not reasonably practical.
We may also postpone any transfer from the Fixed Account or payment of any
portion of the amount payable on surrender, partial withdrawal or policy loan
from the Fixed Account for not more than six months from the day we receive your
written request and, if it is required, your policy. If we postpone those
payments for 30 days or more, the amount postponed will earn interest during
that period of not less than 3% per year or such higher rate as required by law.
We will not postpone payments to pay premiums on our policies.
WHAT YOU SHOULD KNOW ABOUT THE DEATH BENEFIT
NET DEATH BENEFIT: If the insured dies on or before the final payment date, we
will pay the net death benefit. The amount of the net death benefit depends on
which death benefit option is in effect on the date of death (There are three
death benefit options, which are described later). We will deduct from the death
benefit any outstanding loan, and monthly deductions due and unpaid through the
policy month in which the insured dies, as well as any partial withdrawals and
partial withdrawal transaction charges.
If the insured dies after the final payment date, we shall pay the policy value
minus any outstanding loan as of the date we receive written notice of claim.
Except as otherwise provided, we will pay interest from the date the insured
dies to the date the net death benefit is paid. If you choose a lump sum
payment, the interest rate will be at least 3% a year, or the minimum rate set
by law, whichever is greater. If the Death Benefit Option 2 is in effect on the
date of the insured's death, we will begin calculating interest on the policy
value portion of the net death benefit on the date we receive written notice of
claim.
DEATH BENEFIT OPTIONS: You have three options for determining the amount of the
death benefit. The option you elected in your application is shown on page 3 of
the policy.
There are two level death benefit options: Death Benefit Option 1 and 3.
Under the level death benefit options, the death benefit is:
- - the face amount, or
- - the minimum death benefit, whichever is greater.
Under the Death Benefit Option 2, the death benefit is:
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<PAGE>
- - the face amount plus the policy value on the date we receive written notice
of claim (we will refund monthly deductions from the policy value after the
insured's date of death), or
- - the minimum death benefit, whichever is greater.
REQUIRED MINIMUM AMOUNT OF DEATH BENEFIT: In order to qualify as "life
insurance" under the federal tax law, this policy must provide a minimum death
benefit. The minimum death benefit is obtained by multiplying the policy value
by a percentage shown in the applicable Minimum Death Benefit Table for the
insured's attained age and death benefit option. For the Death Benefit Options 1
and 2, the table used is the Guideline Minimum Sum Insured Table. This table is
determined according to the guideline minimum sum insured test set forth in the
Federal tax laws.
For the Death Benefit Option 3, the Cash Value Accumulation Table is used. This
table is calculated to conform to the Cash Value Accumulation test set forth in
the federal tax laws.
The minimum death benefit will be determined as of the date of death. The
minimum death benefit will be adjusted to conform to any changes in the tax law.
DEATH BENEFIT OPTION CHANGES: If you have selected Death Benefit Option 3, you
are not permitted by law to change your death benefit option. You may change
your death benefit option only if you have selected either Death Benefit
Options 1 or 2.
You may change the death benefit option by written request. Evidence of
insurability may be required for a death benefit option change. The change will
be made on the next monthly processing date after we approve your request.
You may not change your death benefit option more than once in any policy year
or if the change reduces the face amount to less than $50,000.
If you change from Death Benefit Option 1 to the Death Benefit Option 2, the
face amount under the Death Benefit Option 2 will be equal to the death benefit
under the Death Benefit Option 1, minus the policy value on the date of change.
If you change from the Death Benefit Option 2 to the Death Benefit Option 1, the
face amount will be equal to the death benefit under the Death Benefit Option 2
on the date of change.
BENEFIT CHANGE: You may increase or decrease the face amount of insurance if you
make a written request during the insured's lifetime.
You may not change the face amount if it does not meet the minimum death benefit
requirement set by federal tax law.
INCREASE: To increase the face amount:
- - you must complete our application and provide us with evidence of
insurability; and
- - the insured must be under our maximum issue age for new insurance; and
- - the insured must be approved by us according to our underwriting rules; and
- - you must pay the amount which is necessary to keep the policy in force for
three months if the policy value is less than this amount.
This increased face amount will become effective on the first monthly processing
date on or following the date that all the conditions are met. We will provide
you new specification pages, including a Supplemental Insurance Charge Table.
These pages will include the following information:
- - effective date of the increase,
- - amount of the increase,
- - underwriting class,
- - monthly policy charges for the increase,
- - new minimum monthly payment, and
- - new guideline premiums.
We reserve the right to set a limit on the minimum amount of an increase in the
face amount. No increase may be less than our minimum limit in effect on the
date we receive your request.
You may return the new specification pages to us within ten days after receiving
them. If you return these pages, we will consider the increase void from the
beginning. We will add the charges back to the policy value unless you request
otherwise.
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DECREASE: You may decrease the face amount of the policy at any time. It will be
effective on the first monthly processing date after we receive your written
request.
The face amount will be decreased or eliminated in the following order:
- - first, the most recent increase,
- - second, the next most recent increases in succession, and
- - last, the initial face amount.
We will provide you with new specification pages. These pages will include the
following information:
- - effective date of the decrease,
- - amount of the decrease and the face amount remaining in force,
- - new minimum monthly payment, if any, and
- - new guideline premiums.
You may not decrease the face amount to less than our minimum issue limit for
this type of policy. We reserve the right to establish a minimum limit on the
amount of any decrease.
PAYMENT OF BENEFITS
PAYMENT OPTIONS: Upon written request, the surrender value or all or part of the
net death benefit may be placed under one or more of the payment options offered
by us at the time the request is made. If you make no election, we will pay the
benefit in a lump sum. A certificate will be provided to the payee describing
the payment option selected.
If a payment option is selected, the beneficiary, when filing proof of claim,
may pay us any amount that otherwise would be deducted from the net death
benefit.
The amounts payable under these options are paid from the General Account. The
options are not based on the investment experience of the Variable Account.
The amount applied under any one option for any one payee must be at least
$5,000. The periodic payment for any one payee must be at least $50.
Subject to the Owner and Beneficiary provisions, you may change any option
selection before the net death benefit becomes payable. If you make no
selection, the beneficiary may select an option when the proceeds become
payable.
SUMMARY:
- - FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY
- - ADJUSTABLE SUM INSURED
- - DEATH PROCEEDS PAYABLE AT DEATH OF INSURED
- - FLEXIBLE PREMIUMS PAYABLE TO THE FINAL PAYMENT DATE
- - COVERAGE TO THE FINAL PAYMENT DATE AND AMOUNT OF POLICY VALUE NOT GUARANTEED
- - NONPARTICIPATING
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FORM
EVERGREEN VARIABLE ANNUITY TRUST
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this ____ day of __________, 1999 between
EVERGREEN VARIABLE ANNUITY TRUST, an open-end management investment company
organized as a Delaware business trust (the "Trust"),
and________________________, a life insurance company organized under the laws
of the State of __________ (the "Company"), on its own behalf and on behalf of
each segregated asset account of the Company set forth on Schedule A, as may be
amended from time to time (the "Accounts").
W I T N E S S E T H:
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and the offer and sale of its shares are registered under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has obtained an order from the Securities and
Exchange Commission ("Commission") granting Participating Insurance Companies
and their separate account(s) exemptions from the provisions of Section(s) 9(a),
13(a), 15(a) and 15(b) of the 1940 Act and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and nonaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Trust Exemptive Order"); and
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and/or variable annuity contracts
identified by the form number(s) listed on Schedule A, as may be amended from
time to time (the "Contracts"); and
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act; and
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WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company on the date shown for that Account on Schedule A, to set aside and
invest assets attributable to the Contracts; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares of the Portfolios at net
asset value on behalf of each Account to fund the Contracts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
Sale of Trust Shares
1.1. The Trust shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust. Shares of a particular
Portfolio of the Trust shall be ordered in such quantities and at such times as
determined by the Company to be necessary to meet the requirements of the
Contracts. The trustees of the Trust (the "Trustees") may refuse to sell shares
of any Portfolio to any person or suspend or terminate the offering of shares of
any Portfolio if such action is required by law or by regulatory authorities
having jurisdiction or is, in the sole discretion of the Trustees acting in good
faith and in light of their fiduciary duties under federal and any applicable
state laws, necessary and in the best interest of the shareholders of such
Portfolio.
1.2. The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net asset
value next computed after receipt by the Trust (or its agent) of the request for
redemption, as established in accordance with the provisions of the then current
prospectus of the Trust. The Trust shall make payment for such shares in the
manner established from time to time by the Trust, but in no event shall payment
be delayed for a greater period than is permitted by the 1940 Act.
1.3. For the purposes of Sections 1.1. and 1.2., the Trust hereby
appoints the Company as its agent for the limited purpose of receiving and
accepting purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company shall constitute receipt by
the Trust provided that: (a) such orders are received by the Company in good
order prior to the close of the regular trading session of the New York Stock
Exchange, and (b) the Trust receives notice of such orders by 9:30 a.m., New
York time, on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value.
1.4. Purchase orders that are transmitted to the Trust in accordance
with Section 1.3. shall be paid for on the same Business Day that the Trust
receives notice of the order. Payments shall be made in federal funds
transmitted by wire.
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1.5. The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on shares of any Portfolio. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio. The Trust shall notify the Company of the number of shares so
issued as payment of such dividends and distributions.
1.6. The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 7:00 p.m., New
York time.
1.7. The Trust agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Trust Exemptive Order. No shares of any Portfolio will be sold directly to the
general public. The Company agrees that the Trust shares will be used only for
the purposes of funding the Contracts and Accounts listed in Schedule A, as
amended from time to time.
1.8. The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.12. and
Article IV of this Agreement.
ARTICLE II
Obligations of the Parties
2.1. The Trust shall bear the costs of registering and qualifying the
Trust's shares, and of preparing and filing the Trust's prospectus, registration
statement, Trust sponsored proxy materials (or similar materials such as voting
instruction solicitation materials), reports to shareholders, and all statements
and notices required by federal or state law. The Trust shall pay all taxes on
the issuance and/or transfer of the Trust's shares.
2.2. The Trust shall bear the printing costs (or duplicating costs with
respect to the statement of additional information) associated with distributing
the Trust's current prospectus, statement of additional information, annual
report, semi-annual report, Trust sponsored proxy material or other shareholder
communications, including any amendments or supplements to any of the foregoing,
to the extent required to be provided by the Trust to its then-current
shareholders. The Trust shall also bear the mailing costs associated with
distributing Trust sponsored proxy material. The Trust shall not bear any costs
of preparing, printing, recording, taping or disseminating sales literature or
other promotional materials or the costs of printing and mailing prospective
Contract owners copies of the Trust's prospectus, statement of additional
information, periodic reports or other printed materials.
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<PAGE>
2.3. The Trust shall provide the Company (at the Company's expense)
with as many copies of the Trust's current prospectus as the Company may
reasonably request for distribution to prospective purchasers of Contracts. If
requested by the Company in lieu thereof, the Trust shall provide such
documentation (including a final copy of the current prospectus as set in type
at the Trust's expense) and other assistance as is reasonably necessary in order
for the Company once each year (or more frequently if the prospectus for the
Trust is amended) to have the prospectus for the Contracts and the Trust's
prospectus printed together in one document (at the Company's expense).
2.4. The Company will bear the costs of registering and qualifying the
Accounts for sale, printing (or duplicating costs with respect to the statement
of additional information) and mailing costs associated with the delivery of the
Accounts' current prospectuses and statements of additional information, private
placement memoranda, annual and semi-annual reports, Contracts, Contract
applications, sales literature or other promotional material, Account sponsored
proxy materials and voting solicitation instructions.
2.5. The Company will bear the responsibility and correlative expense
for administrative and support services for Contract owners. The Trust
recognizes the Company as the sole shareholder of shares of the Trust issued
under this Agreement.
2.6. The Company agrees and acknowledges that one of the Trust's
advisers, Evergreen Asset Management Corp. ("Evergreen Asset"), is the sole
owner of the name and mark "Evergreen" and that all use of any designation
comprised in whole or in part of Evergreen (an "Evergreen Mark") under this
Agreement shall inure to the benefit of Evergreen Asset. Except as provided in
Section 2.6., the Company shall not use any Evergreen Mark on its own behalf or
on behalf of the Accounts or Contracts in any registration statement,
advertisement, sales literature or other materials relating to the Accounts or
Contracts without the prior written consent of Evergreen Asset. Upon termination
of this Agreement for any reason, the Company shall cease all use of any
Evergreen Mark(s) as soon as reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust
or its designee, a copy of each Contract prospectus or statement of additional
information in which the Trust or its investment advisers are named prior to the
filing of such document with the Commission. The Company shall also furnish, or
shall cause to be furnished, to the Trust or its designee, each piece of sales
literature or other promotional material including private placement memoranda,
in which the Trust or its investment advisers are named, at least fifteen
Business Days prior to its use. No such material shall be used if the Trust or
its designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
2.8. The Company will provide to the Trust at least one complete copy
of each report, solicitation for voting instructions, application for exemption,
request for no-action relief, and any amendment to any of the above (or any
amendment to the registration statement, prospectus, statement of additional
information, piece of sales literature or other promotional material) that
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<PAGE>
relates to the Contracts or the Account, contemporaneously with the filing of
the document with the Commission, the NASD, or other regulatory authorities.
2.9. For purposes of this Article II, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements,
newspapers, magazines, or other periodicals, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media, sales literature (i.e., any written communication
distributed or made generally available to customers or the public, including
brochures, circulars, research reports, market letters, form letters,
shareholder newsletters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
statements of additional information, shareholder reports and proxy materials.
2.10. The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment advisers in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
annual and semi-annual reports of the Trust, Trust-sponsored proxy statements,
or in sales literature or other promotional material approved by the Trust or
its designee, except as required by legal process or regulatory authorities or
with the written permission of the Trust or its designee.
2.11. The Trust shall furnish or cause to be furnished, to the Company
or its designee, a copy of each Trust prospectus or statement of additional
information in which the Company or the Accounts are named prior to the filing
of such document with the Commission. The Trust shall furnish, or shall cause to
be furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or the Accounts are named, at
least fifteen Business Days prior to its use. No such material shall be used if
the Company or its designee reasonably objects to such use within fifteen
Business Days after receipt of such material.
2.12. The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or representations
contained in and accurately derived from the registration statement, prospectus
or private placement memorandum for the Contracts (as such registration
statement, prospectus or private placement memorandum may be amended or
supplemented from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials, except
as required by legal process or regulatory authorities or with the written
permission of the Company.
2.13. At the request of either party to this Agreement, the other party
will make available to the requesting party's independent auditors and/or
representatives of the appropriate
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regulatory agencies, all records, data and access to operating procedures that
may be reasonably requested.
2.14. So long as, and to the extent that the Commission interprets the
1940 Act to require pass-through voting privileges for variable contract owners,
the Company will provide pass-through voting privileges to owners of policies
whose cash values are invested, through the Accounts, in shares of the Trust and
shall distribute all proxy material furnished by the Trust. The Trust shall
require all Participating Insurance Companies to calculate voting privileges in
the same manner and the Company shall be responsible for assuring that the
Accounts calculated voting privileges in the manner established by the Trust.
With respect to each Account, the Company will vote shares of the Trust held by
the Account and for which no timely voting instructions from policy owners are
received as well as shares it owns that are held by that Account, in the same
proportion as those shares for which voting instructions are received. The
Company and its agents will in no way recommend or oppose or interfere with the
solicitation of proxies for Trust shares held by Contract owners without the
prior written consent of the Trust, which consent may be withheld in the Trust's
sole discretion.
ARTICLE III
Representations and Warranties
3.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the State of
____________ and that it has legally and validly established each Account as a
segregated asset account under such law on the dates set forth in Schedule A.
3.2. The Company represents and warrants that it has registered or,
prior to any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
3.3. The Company represents and warrants that the Contracts are, or
will be, registered under the 1933 Act to the extent required by the 1933 Act
prior to any issuance or sale of the Contracts, the Contracts will be issued and
sold in compliance in all material respects with all applicable federal and
state law, and the sale of the Contracts will comply in all material respects
with state insurance suitability requirements.
3.4. The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5. The Trust represents and warrants that the Trust shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
that the Trust is registered under the 1940 Act prior to any issuance or sale of
such shares. The Trust shall amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Trust shall register and qualify its shares for sale
in
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<PAGE>
accordance with the laws of the various states only if and to the extent
deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements set forth in Section
817(h) of the Internal Revenue Code of 1986, as amended (the "Code"), and the
rules and regulations thereunder. In the event of a breach of this Section 3.6
by the Trust, it will take all reasonable steps to: (1) immediately notify the
Company of such breach, and (2) adequately diversify the Trust so as to achieve
compliance within the grace period afforded by Section 1.817-5(b) of the rules
and regulations under the Code.
3.7. The Company represents that the Contracts are currently treated as
annuity or life insurance contracts under applicable provisions of the Code and
warrants and agrees that it will make every effort to maintain such treatment
and that it will notify the Trust immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
ARTICLE IV
Potential Conflicts
4.1. The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. A material irreconcilable conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory or other authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Trustees shall promptly inform the Company
if they determine that a material irreconcilable conflict exists and the
implications thereof. The Trustees shall have sole authority to determine
whether a material irreconcilable conflict exists and their determination shall
be binding upon the Company.
4.2. The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Trust Exemptive
Order and this Article IV by providing the Trustees with all information
reasonably necessary for them to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions.
7
<PAGE>
4.3. If it is determined by a majority of the Trustees, or a majority
of the disinterested Trustees, that a material irreconcilable conflict exists
that affects the interests of Contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its expense and to the extent reasonably practicable (as determined
by the Trustees) take whatever steps are necessary to remedy or eliminate the
material irreconcilable conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from the Trust or any Portfolio
and reinvesting such assets in a different investment medium, including (but not
limited to) another Portfolio of the Trust, or submitting the question of
whether or not such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any appropriate
group (i.e., annuity contract owners, life insurance contract owners, or
variable contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected Contract owners
the option of making such a change; and (b) establishing a new registered
management investment company or managed separate account and obtaining any
necessary approvals or orders of the Commission in connection therewith.
4.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end of such
six (6) month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
4.5. If any material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the Trust
gives written notice that it has determined that such decision has created a
material irreconcilable conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6. For purposes of Sections 4.3. through 4.5. of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict. The Company
shall not be required by Section 4.3 to establish a new funding medium for the
Contracts if any offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the material irreconcilable
conflict. In the event that the Trustees determine that any proposed action does
not adequately remedy any material irreconcilable conflict, then the Company
will withdraw the Account's investment
8
<PAGE>
in the Trust and terminate this Agreement within six (6) months after the Trust
gives written notice of the foregoing determination; provided, however, that
such withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict, as determined by a majority of the
disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Trust
Exemptive Order and this Article IV. Said reports, materials and data shall be
submitted more frequently if deemed appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed and/or shared
funding (as defined in the Shared Trust Exemptive Order) on terms and conditions
materially different from those contained in the Shared Trust Exemptive Order,
then the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V
Indemnification
5.1. The Company agrees to indemnify and hold harmless the Trust and
each of its Trustees, officers, employees and agents, and each person, if any,
who controls the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 5.1.)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or expenses (including
the reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the Indemnified Parties
may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale, acquisition, or
redemption of the Trust's shares or the Contracts and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in a registration
statement, prospectus or private placement memorandum for the Contracts or in
the Contracts themselves or in sales literature generated or approved by the
Company relating to the Contracts or Accounts (or any amendment or supplement to
any of the foregoing) (collectively, "Company Documents"), 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, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived from written
information furnished to the Company by or on behalf of the Trust for use in
Company Documents or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
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<PAGE>
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately derived
from Trust Documents as defined in Section 5.2.(a)) or wrongful conduct of the
Company or persons under its control, with respect to the sale, distribution or
acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust Documents as
defined in Section 5.2.(a) or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was made in
reliance upon and accurately derived from written information furnished to the
Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation, warranty or agreement made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Company; or
(f) arise out of or result from negligence or wrongful conduct
in the Company's administration of the Accounts or the Contracts.
5.2. The Trust agrees to indemnify and hold harmless the Company and
each of its directors, officers, employees and agents and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 5.2.)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Trust) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses"), to which the Indemnified Parties may become
subject under any statute or regulation, or at common law or otherwise, insofar
as such Losses are related to the sale, acquisition, or redemption of the
Trust's shares or the Contracts and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the registration
statement or prospectus for the Trust (or any amendment or supplement thereto),
(collectively, "Trust Documents"), 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,
provided, that this indemnity shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was made in
reliance upon and was accurately derived from written information furnished to
the Trust by or on behalf of the Company for use in Trust Documents or otherwise
for use in connection with the sale of the Contracts or Trust shares; or
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<PAGE>
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately derived
from Company Documents) or wrongful conduct of the Trust or persons under its
control, with respect to the sale, distribution or acquisition of the Contracts
or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company Documents or
the omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such statement or omission was made in reliance upon and accurately derived form
written information furnished to the Company by or on behalf of the Trust; or
(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required under the terms of this
Agreement; or
(e) arise out of or result from any material breach of any
representation, warranty or agreement made by the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement by the
Trust.
5.3. Neither the Company nor the Trust shall be liable under the
indemnification provisions of Section 5.1. or 5.2., as applicable, with respect
to any Losses incurred or assessed against an indemnified party that arise from
such indemnified party's willful misfeasance, bad faith or gross negligence in
the performance of such indemnified party's duties or by reason of such
indemnified party's reckless disregard of obligations or duties under this
Agreement.
5.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions of Section 5.1. or 5.2., as applicable, with respect
to any claim made against an indemnified party unless such indemnified party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim which shall have been served upon or otherwise received by
such indemnified party (or after such indemnified party shall have received
notice of service upon or other notification to any designated agent), but
failure to notify the party against whom indemnification is sought of any such
claim shall not relieve that party from any liability which it may have to the
indemnified party in the absence of Sections 5.1. and 5.2. except to the extent
that the indemnifying party has been prejudiced by such failure to give notice.
5.5. In case any such action is brought against the indemnified
parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the indemnifying party to the
indemnified party of an election to assume such defense, the indemnified party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the indemnified party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
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<PAGE>
ARTICLE VI
Termination
6.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by six (6) months advance
written notice delivered to the other party; or
(b) termination by the Company by written notice to the Trust with
respect to any Portfolio based upon the Company's determination that shares of
such Portfolio are not reasonably available to meet the requirements of the
Contracts or not consistent with the Company's obligations to Contract owners;
provided, however, that such a termination shall apply only to the Portfolio not
reasonably available and the Trust shall have ninety (90) days from the initial
notification by the Company of the deficiency to correct such deficiency. If not
cured within ninety (90) days, prompt written notice of the election to
terminate for such cause shall again be furnished by the Company to the Trust;
or
(c) termination by the Company by written notice to the Trust with
respect to any Portfolio in the event such Portfolio's shares are not
registered, issued or sold in accordance with applicable state and/or federal
law or such law precludes the use of such shares as the underlying investment
media of the Contracts issued or to be issued by the Company; or
(d) termination by the Company by written notice to the Trust with
respect to any Portfolio in the event that the Trust ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code or any independent
or resulting failure under Section 817 of the Code, or under any successor or
similar provision of either, or if the Company reasonably believes that the
Trust may fail to so qualify; or
(e) termination by the Trust by written notice to the Company if the
Trust shall determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity and that material
adverse change or material adverse publicity will have a material adverse impact
upon the business and operations of the Company or the Trust; but no such
termination shall be effective under this subsection (e) until the Company has
been afforded a reasonable opportunity to respond to a statement by the Trust
concerning the reason for notice of termination hereunder; or
(f) termination by the Company by written notice to the Trust if the
Company shall determine, in its sole judgment exercised in good faith, that
either the Trust or an investment adviser to the Trust has suffered a material
adverse change in its business, operations, financial condition or prospects
since the date of this Agreement or is the subject of material adverse publicity
and that material adverse change or material adverse publicity will have a
material
12
<PAGE>
adverse impact upon the business and operations of the Trust; but no such
termination shall be effective under this subsection (f) until the Trust has
been afforded a reasonable opportunity to respond to a statement by the Company
concerning the reason for notice of termination hereunder; or
(g) termination by the Trust in the event that formal administrative
proceedings are instituted against the Company by the NASD, the Commission, an
insurance commissioner or any other regulatory body regarding the Company's
duties under this Agreement or related to the sale of the Contracts, the
operation of any Account, or the purchase of the Trust's shares; provided,
however, that the Trust determines in its sole judgement exercised in good
faith, that any such administrative proceedings will have a material adverse
effect upon the ability of the Company to perform its obligations under this
Agreement; or
(h) termination by the Company in the event that formal administrative
proceedings are instituted against the Trust by the NASD, the Commission, any
state securities or insurance department or any other regulatory body regarding
the Trust's duties under this Agreement, provided, however, that the Company
determines in its sole judgement exercised in good faith, that any such
administrative proceedings will have a material adverse effect upon the ability
of the Trust to perform its obligations under this Agreement.
6.2. Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available additional
shares of the Trust (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement, provided that the Company continues to pay the costs set
forth in Article II.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.12. shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
ARTICLE VII
Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
IF TO THE TRUST:
Evergreen Funds
200 Berkeley Street
Boston, Massachusetts 02116-9000
Attention: Legal Department
13
<PAGE>
IF TO THE COMPANY:
ARTICLE VIII
Miscellaneous
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
8.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
8.5. The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising directly or indirectly under this Agreement, of
any and every nature whatsoever, shall be satisfied solely out of the assets of
the Trust and that no Trustee, officer, agent or holder of shares of beneficial
interest of the Trust shall be personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Commission, the NASD and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
8.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
8.8. The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
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<PAGE>
8.9. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and assigns, provided that no party
may assign this Agreement without the prior written consent of the other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative as
of the date and year first above written.
_______________ INSURANCE COMPANY EVERGREEN VARIABLE ANNUITY TRUST
By: __________________________ By:___________________________
Name: Name:
Title: Title:
15
<PAGE>
SCHEDULE A
Separate Accounts, Contracts and Associated Portfolios
------------------------------------------------------
Name of Separate Accounts and Date
Established by Board of Directors
- ---------------------------------
Contracts Funded by Separate Account and Form Number
- ----------------------------------------------------
Designated Portfolios
- ---------------------
<PAGE>
DISTRIBUTION AGREEMENT
By and Between
Allmerica Financial Life Insurance and Annuity Company
First Allmerica Financial Life Insurance Company
Allmerica Investments, Inc.
and
First Union Securities, Inc.
<PAGE>
TABLE OF CONTENTS
SECTION PAGE NO.
Additional Definitions ...............................................2
Distribution Activities - Authority ..................................3
Distribution Activities - Appointment ................................4
Distribution Activities - Duties .....................................4
Limitations on Authority .............................................5
Selling Group Agreements .............................................6
Payment of Expenses .................................................6
Forms, Applications, and Licensing....................................7
Marketing Materials ..................................................8
The Distributor's Compensation .......................................9
Representations and Warranties ......................................10
Indemnification .....................................................11
Records .............................................................16
Investigations and Proceedings ......................................16
Term and Termination ................................................17
Rights Upon Termination .............................................18
Independent Contractor ..............................................19
Notices .............................................................19
Arbitration .........................................................20
Confidentiality .....................................................20
Severability ........................................................21
Choice of Law .......................................................22
No Waiver ...........................................................22
Agreement Non-Assignable ............................................22
Schedules ...........................................................22
Headings ............................................................22
Entire Agreement ....................................................22
<PAGE>
DISTRIBUTION AGREEMENT
AGREEMENT made as of the ____________ day of _________________ 2000, by and
between Allmerica Financial Life Insurance and Annuity Company, a Delaware
insurance company ("AFLIAC"), First Allmerica Financial Life Insurance Company,
a Massachusetts insurance company ("FAFLIC" and, together with AFLIAC,
collectively, the "Insurance Companies"), Allmerica Investments, Inc., a
Massachusetts corporation (the "Underwriter") and First Union Securities, Inc.,
a Delaware corporation (the "Distributor"), on its own behalf and on behalf of
the individuals and entities listed on Schedule 1 to this Agreement (the
"Distributor Agency Affiliates"), as such Schedule may be amended from time to
time in accordance with this Agreement.
RECITALS:
WHEREAS, the Insurance Companies propose to issue certain variable annuity
contracts and variable life insurance policies; and
WHEREAS, certain of the variable annuity contracts and variable life insurance
policies to be issued by the Insurance Companies (the "Private Placements") may
be offered and sold in reliance upon exemptions from the registration
requirements of the Securities Act of 1933 (the "1933 Act") and the Investment
Company Act of 1940 (the "1940 Act"), while certain other variable annuity
contracts and variable life insurance policies to be issued by the Insurance
Companies may be offered and sold pursuant to Registration Statements (the
"Registered Products") and their related Prospectuses filed with and declared
effective by the Securities and Exchange Commission (the "Commission") under the
provisions of the 1933 Act and the 1940 Act (collectively, the "Private
Placements" and the "Registered Products" are referred to as the "Variable
Products") (Variable Products are identified in Schedule 2 to this Agreement, as
such Schedule may be amended from time to time); and
WHEREAS, the Distributor is registered as a broker-dealer with the Commission
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD") that engages in the distribution of variable annuity contracts and
variable life insurance products; and
WHEREAS, the Insurance Companies and the Underwriter desire to retain the
Distributor to distribute the Variable Products through registered
broker-dealers ("Broker-Dealers") and their registered representatives
("Representatives"); and
WHEREAS, the Distributor desires to be retained by the Insurance Companies and
the Underwriter to distribute the Variable Products on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises contained herein, the
parties hereto agree as follows:
<PAGE>
1. ADDITIONAL DEFINITIONS
(a) AFFILIATE -- With respect to a person, any other person
controlling, controlled by, or under common control with, such
person.
(b) APPLICATIONS -- The forms used by a prospective purchaser to
apply for a variable life insurance policy or a variable
annuity contract.
(c) CONTRACTS -- The variable annuity contracts set forth in
Schedule 2 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(d) FUNDS -- The funds set forth in Schedule 4 to this Agreement,
as such Schedule may be amended from time to time in
accordance with this Agreement, through which benefits
provided by the Variable Products are to be funded.
(e) FUND PROSPECTUS -- At any time while this Agreement is in
effect, the prospectus and statement of additional information
for each Fund most recently filed with the Commission pursuant
to Rule 497 under the 1933 Act.
(f) FUND REGISTRATION STATEMENT -- At any time while this
Agreement is in effect, the currently effective registration
statement filed with the Commission under the 1933 Act, or
currently effective post-effective amendment thereto, for
shares of each Fund.
(g) POLICIES -- The variable life insurance policies set forth in
Schedule 2 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(h) PORTFOLIOS -- The underlying Fund portfolios, set forth in
Schedule 4 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(i) PREMIUM -- A payment made under a Policy by an applicant or
purchaser.
(j) PRIVATE PLACEMENT GUIDELINES -- The guidelines set forth in
Schedule 3 to this Agreement, as such Schedule may be amended
from time to time in accordance with this Agreement.
(k) PRIVATE PLACEMENT MEMORANDUM -- The document through which the
Insurance Companies offer Private Placements. (For purposes of
Section 12 of this Agreement, however, the term "any Private
Placement Memorandum" means any document which is or at any
time was a Private Placement Memorandum within the meaning of
this Section 1(k)).
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<PAGE>
(l) PRIVATE PLACEMENTS -- Contracts and Policies being offered and
sold in reliance upon exemptions from the registration
requirements of the 1933 Act and the 1940 Act for non-public
offerings.
(m) PROSPECTUS -- The prospectus, if any, included within a
Registration Statement or, if more recent, the prospectus
filed pursuant to Rule 497 under the 1933 Act. (For purposes
of Section 12 of this Agreement, however, the term "any
Prospectus" means any document which is or at any time was a
Prospectus within the meaning of this Section 1(m)).
(n) PURCHASE PAYMENT -- A payment made under a Contract by an
applicant or purchaser.
(o) REGISTRATION STATEMENT -- At any time while this Agreement is
in effect, each currently effective registration statement, or
currently effective post-effective amendment thereto, relating
to the Contracts or Policies, including financial statements
included in, and all exhibits to, that registration statement
or post-effective amendment. (For purposes of Section 12 of
this Agreement, however, the term "Registration Statement"
means any document which is or at any time was a Registration
Statement within the meaning of this Section 1(o)).
(p) REGULATIONS -- The rules and regulations promulgated by the
Commission under the 1933 Act, the 1934 Act and the 1940 Act
as in effect at the time this Agreement is executed or
thereafter promulgated.
(q) VARIABLE ACCOUNTS -- Separate accounts established pursuant to
Delaware state insurance law (in the case of AFLIAC) or
Massachusetts state insurance law (in the case of FAFLIC)
supporting the Variable Products specified in Schedule 2 as in
effect at the time this Agreement is executed, or as such
Schedule may be amended from time to time in accordance with
this Agreement.
2. DISTRIBUTION ACTIVITIES -- AUTHORITY
(a) The Insurance Companies and the Underwriter authorize the
Distributor, and the Distributor accepts the authority, to act
as a distributor of the Variable Products, subject to any
applicable requirements of the 1933 Act and the 1940 Act.
The Insurance Companies hereby authorize the Distributor to
recommend to the Insurance Companies persons that may be
authorized to engage in solicitation activities with respect
to the Variable Products, including the recruitment and
appointment of Broker-Dealers and Representatives who, in
turn, may be authorized to engage in solicitation activities
involving the solicitation of Applications, Premiums and
Purchase Payments directly from prospective purchasers.
3
<PAGE>
The Insurance Companies shall have the right to reject any
such recommendation, but shall not do so unreasonably, and
shall notify the Distributor of any such rejection.
(b) The Distributor shall enter into separate written "Selling
Group Agreements" with Broker-Dealers for distribution of the
Variable Products. These Selling Group Agreements will be in a
form mutually agreeable to the parties to this Agreement. The
standard form of Selling Group Agreement to be used on the
effective date of this Agreement is set forth in Schedule 5 to
this Agreement.
(c) Nothing in this Agreement precludes additional mutually
agreeable distribution and compensation arrangements among the
parties to this Agreement, including ones that may have
compensation arrangements that reward the Insurance Companies
for identifying and recruiting new Broker-Dealers to sell the
Variable Products, for identifying potential purchasers of the
Variable Products, or for providing superior support under
this Agreement.
3. DISTRIBUTION ACTIVITIES -- APPOINTMENT
(a) Where required by applicable state insurance law, the
Insurance Companies hereby appoint the Distributor as their
agent under that state insurance law to represent the
Insurance Companies in the distribution activities
contemplated by this Agreement. The Insurance Companies and
the Underwriter hereby authorize the Distributor under
applicable securities laws to engage in the activities
contemplated by this Agreement relating to the distribution of
the Variable Products.
(b) In states where the Distributor is not licensed as an
insurance agent and applicable state insurance law requires
that the Distributor be so licensed, the Insurance Companies
hereby appoint each Distributor Agency Affiliate listed on
Schedule 1 to this Agreement (as that Schedule may be amended
from time to time by the Distributor when required by
applicable state insurance law to reflect changes in the
licensing status of the Distributor or the Distributor Agency
Affiliates) as their agent under applicable state insurance
laws to represent the Insurance Companies in the distribution
activities contemplated by this Agreement.
4. DISTRIBUTION ACTIVITIES -- DUTIES
(a) The Distributor shall use its best efforts to market the
Variable Products through Broker-Dealers and Representatives
in accordance with the terms and conditions of this
Agreement, subject to applicable material market and
regulatory conditions.
In addition, the Distributor (both on its own behalf and on
behalf of the Distributor Agency Affiliates) undertakes to use
its best efforts to recruit Broker-
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Dealers in accordance with Section 3 of this Agreement,
consistent with market conditions and in compliance with
its responsibilities under the federal securities laws
and NASD rules and regulations.
(b) The Distributor shall assist and provide information to
Broker-Dealers and their Representatives in connection with
the sale and servicing of Variable Products.
(c) Under no circumstances shall the Insurance Companies or the
Underwriter be responsible under this Agreement for any
failure by Broker-Dealers or their Representatives to comply
with applicable law.
(d) Under no circumstances shall the Distributor be responsible
under this Agreement for any failure by Broker-Dealers or
their Representatives to comply with applicable law.
Notwithstanding the foregoing, the Distributor agrees to
indemnify the Insurance Companies and the Underwriter for any
such failure to comply with applicable law, as provided in
Section 12(a)(1)(viii) of this Agreement.
(e) Under no circumstances shall the Distributor be responsible
under this Agreement for any failure by the Insurance
Companies or the Underwriter to comply with applicable law.
(f) Under no circumstances shall the Insurance Companies or the
Underwriter be responsible under this Agreement for any
failure by the Distributor to comply with applicable law.
5. LIMITATIONS ON AUTHORITY
(a) The Distributor shall not have the authority, and shall not
grant authority to Broker-Dealers or their Representatives, on
behalf of the Insurance Companies:
(1) to make, alter or discharge any Variable Product or
other contract entered into pursuant to a Variable
Product;
(2) to waive any Variable Product forfeiture provision;
(3) to extend the time of paying any Purchase Payments,
or Premiums due under the Variable Products; and
(4) to receive any monies, Purchase Payments or
Premiums (except for the sole purpose of forwarding
monies, Purchase Payments or Premiums to the
appropriate Insurance Company).
(b) The Distributor shall not expend, nor contract for the
expenditure of, funds of the Insurance Companies.
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(c) The Distributor shall not possess or exercise any authority on
behalf of the Insurance Companies other than that expressly
conferred on the Distributor by this Agreement.
6. SELLING GROUP AGREEMENTS
(a) The Distributor shall not enter into any Selling Group
Agreement with a Broker-Dealer relating to the distribution of
any Variable Product, unless that Selling Group Agreement (i)
is substantially identical to the form of Selling Group
Agreement mutually agreed to by the parties to this Agreement
(the standard form of Selling Group Agreement in use on the
effective date of this Agreement is set forth in Schedule 5
hereto) or (ii) is approved by the appropriate Insurance
Company, provided that the approval of the Insurance Company
shall be deemed to have been given if no written objection to
the Selling Group Agreement has been delivered by the
Insurance Company to the Distributor within five (5) business
days after being provided by facsimile or express courier with
a copy of the proposed Selling Group Agreement.
(b) The Distributor shall provide to the appropriate Insurance
Company a copy of each Selling Group Agreement entered into by
the Distributor and a Broker-Dealer within five (5) business
days following execution thereof.
(c) The Insurance Companies agree to appoint Representatives of
Broker-Dealers as life insurance agents of the Insurance
Companies to the extent that such Representatives satisfy the
licensing and qualification requirements of applicable state
insurance laws, as well as the Insurance Companies' own
standards applicable to life insurance agents. The Insurance
Companies reserve the right, which right shall not be
exercised unreasonably, to refuse to appoint any
Representative as their life insurance agent. The Insurance
Companies reserve the right to terminate immediately the
appointment of any Representative as their life insurance
agent if such Representative fails to maintain his or her
registration, license or qualifications under federal and
state securities laws, as well as applicable state insurance
laws, is subject to disciplinary action by any governmental
authority or self-regulatory organization, fails to meet
minimum sales requirements established from time to time by
the Insurance Companies, or fails, in the reasonable view of
the Insurance Companies, to satisfy appropriate industry
standards. The Insurance Companies shall promptly notify the
Distributor and the Broker-Dealer with which the
Representative is affiliated of their intent to terminate a
Representative and the reasons for such termination.
(d) As outlined in the Selling Group Agreement, the Broker-Dealer
will pay the initial and renewal fees for agent appointments
by the respective company of the Broker-Dealers and
Broker-Dealer Representatives.
7. PAYMENT OF EXPENSES
Expenses will be paid in accordance with Schedule 7 to this Agreement.
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8. FORMS, APPLICATIONS, AND LICENSING
(a) The Insurance Companies, or their agent, shall forward to the
Distributor, Applications, other administrative forms, and any
amendments or supplements to the foregoing, necessary to carry
out the Distributor's distribution authority and
responsibilities with respect to the Variable Products.
(b) The Insurance Companies shall obtain all requisite regulatory
approvals of the Variable Products and shall comply with all
applicable laws, rules, regulations and orders of any
governmental authority relating to the issuance or sale of the
Variable Products.
(c) Subject to any Addendum to the Selling Group Agreement for
netting commissions, all Premiums and Purchase Payments paid
by check or money order that are collected by the Distributor
or any Broker-Dealer or Representative shall be remitted
promptly, and in any event not later than two business days,
in full, together with Applications, forms, and any other
required documentation, to the appropriate Insurance Company.
Checks or money orders in payment of Premiums and Purchase
Payments shall be drawn to the order of AFLIAC or FAFLIC, as
appropriate. If any Premium or Purchase Payment is held at any
time by the Distributor, Broker-Dealers, Representatives,
agents, or any affiliates, the Distributor, the
Broker-Dealers, the Representatives, the agents or the
affiliates shall hold that Premium or Purchase Payment in a
fiduciary capacity. All Premiums and Purchase Payments whether
by check, money order or wire, shall be the property of the
appropriate Insurance Company.
(d) The Distributor acknowledges that the Insurance Companies
shall have the unconditional right to reject, in whole or in
part, any Application. The Insurance Companies shall return
any monies received by them or from an applicant or purchaser
whose Application has been rejected. The Insurance Companies
shall notify the Distributor in writing one business day prior
to taking any action to return any such monies, which notice
shall identify, if applicable, the Representative who
submitted the rejected Application.
(e) If a purchaser rescinds a Variable Product or exercises its
"free look right" under a Variable Product, any refund of
Premiums or Purchase Payments due as provided in that Variable
Product, shall be made by the issuing Insurance Company to the
purchaser. The Insurance Companies shall notify the
Distributor in writing one business day prior to taking any
action to refund any such Premiums or Purchase Payments, which
notice shall identify, if applicable the Broker-Dealer or the
Representative through which the Variable Product had been
purchased.
If a purchaser rescinds a Variable Product or exercises its
"free look right" under a
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Variable Product, the Distributor will pay to AFLIAC or
FAFLIC, whichever is the issuing Insurance Company, within
five (5) business days of a written request for repayment, the
amount of any commission or other compensation the Distributor
or a Distributor Agency affiliate received on the Premiums or
Purchase Payments returned.
(f) The Distributor agrees to maintain all registrations,
licenses, and qualifications under federal and state
securities laws that are applicable to its activities and
those of its registered representatives in connection with the
performance of this Agreement. The Distributor also agrees to
maintain all registrations, licenses, and qualifications under
state insurance laws that are applicable to the activities of
the Distributor, the Distributor Agency Affiliates and their
agents and registered representatives in performing this
Agreement.
(g) The Distributor agrees to notify the Insurance Companies
within three (3) business days of obtaining actual knowledge
of any changes in the registrations, licenses, or
qualifications of the Distributor, the Distributor Agency
Affiliates, or the agents or registered representatives of the
Distributor or Distributor Agency Affiliates that would
adversely affect its performance of this Agreement.
(h) The Insurance Companies agree to obtain and maintain all
registrations, licenses, qualifications and approvals under
federal securities laws and state blue sky and insurance laws
in connection with qualifying the Variable Products for sale.
(i) The Insurance Companies agree to notify the Distributor within
three (3) business days of obtaining actual knowledge of any
changes in the registrations, licenses, qualifications, or
approvals of the Variable Products that would adversely affect
the offering of the Variable Products.
9. MARKETING MATERIALS
Prior to use with any member of the public, the Distributor shall
provide to the Insurance Companies copies of all promotional, sales and
advertising material developed by the Distributor for the Insurance
Companies' review and written approval. Upon receipt of such material
from the Distributor, the Insurance Companies shall be given a
reasonable amount of time to complete their review. The Insurance
Companies will respond on a prompt and timely basis in approving any
such material. Failure to respond shall not relieve the Distributor of
the obligation to obtain the prior written approval of the Insurance
Companies.
The Insurance Companies shall be responsible for filing, as required,
all promotional, sales or advertising material related to the Variable
Products with the NASD and any federal and state securities,
governmental or regulatory agencies. The Insurance Companies shall also
be responsible for filing, as required, such material with any state
insurance department.
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10. THE DISTRIBUTOR'S COMPENSATION
(a) In consideration for the services rendered by the Distributor
pursuant to this Agreement, the Insurance Companies, as agent
for the Underwriter, shall pay the Distributor the
compensation set forth in Schedule 6 to this Agreement.
Schedule 6 and/or Schedule 2 may be modified at any time, and
from time to time, by adding or deleting Policies or Contracts
and changing the compensation payable for those Policies and
Contracts, provided that any such modifications are mutually
agreed upon by both the Insurance Companies and the
Distributor, in writing, and signed by both parties. Any such
modification shall apply only to Policies and Contracts
applied for after the effective date of each such
modification.
(b) In the event a Variable Product terminates within twelve (12)
months of the date of issue, the Insurance Companies reserve
the right to recover: (1) one hundred percent (100%) of the
compensation paid to the Distributor respecting the sale of
the Variable Product if that Variable Product terminates for
reasons other than death during the first twelve (12) months
following issue; (2) seventy five percent (75%) of the
compensation paid to the Distributor if a Variable Product
terminates for reasons other than death during the second
twelve (12) months following issue; (3) fifty percent (50%) of
the compensation paid to the Distributor if a Variable Product
terminates for reasons other than death during the third
twelve (12) months following issue; (4) twenty five percent
(25%) of the compensation paid to the Distributor if a
Variable Product terminates for reasons other than death
during the fourth twelve (12) months following issue; and (5)
nothing from the Distributor (i.e., no charge back) if the
Variable Product terminates thereafter. However,
notwithstanding any other provision of this Agreement, if
termination of a Variable Product at any time is due to the
willful or negligent wrongful actions or representations of
the Distributor, a Broker-Dealer or any Representative, the
Insurance Companies reserve the right to recover one hundred
percent (100%) of the compensation paid to the Distributor
respecting the sale of the Variable Product.
In the event a Variable Product owner makes a withdrawal from
or partially surrenders a Variable Product within forty-eight
(48) months following its date of issue, the charge back rules
described in the first paragraph of this Section 10(b) shall
apply, except that the amount of the charge back shall be
pro-rated. Any such pro-rated charge back shall be determined
in accordance with the following formula:
Charge Back = Charge Back Percentage* x Withdrawal Amount
-----------------
Variable Product
Cash Value**
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*100% year one; 75% year two; 50% year three; 25% year four
**determined as of the date of the withdrawal
With respect to any other Variable Product terminations or
withdrawals, the Insurance Companies shall have no right to
recover any portion of the compensation paid to the
Distributor. In no event shall the Insurance Companies have
the right to recover any portion of any compensation received
by the Distributor as a basis point charge against investment
values under the Policies and Contracts. The Insurance
Companies shall have the right to set off any amounts owed by
the Distributor under this Section 10(b) against any amounts
owed by the Insurance Companies to the Distributor.
11. REPRESENTATIONS AND WARRANTIES
(a) BY THE DISTRIBUTOR
The Distributor represents and warrants to, and covenants
with, the Insurance Companies as follows:
(1) The Distributor has taken all actions necessary,
including without limitation, those necessary under
its articles of incorporation, by-laws and applicable
state corporate law, to authorize the execution,
delivery and performance of this Agreement and all
transactions contemplated hereunder.
(2) Prior to the sale of any Variable Product hereunder,
the Distributor will be, and shall thereafter remain
during the term of this Agreement, registered as a
broker-dealer under the 1934 Act, a member in good
standing of the NASD, and duly registered under
applicable state securities laws.
(3) Prior to the sale of any Variable Product hereunder,
the Distributor will be, and shall thereafter remain
during the term of this Agreement, in compliance with
the eligibility requirements for certain affiliated
persons and underwriters found in Section 9(a) of the
1940 Act.
(4) Prior to the sale of any Variable Product hereunder,
the Distributor and each Distributor Agency Affiliate
and their employees, agents and registered
representatives will have all necessary state
insurance licenses and other regulatory approvals to
perform the services required by this Agreement and
the Distributor will notify the Insurance Companies
and the Underwriter within three business days of
obtaining actual knowledge of any change in the
status of such licenses or regulatory approvals.
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(5) While this Agreement remains in force and at any time
following termination of this Agreement for any
reason, the Distributor and the Distributor Agency
Affiliates agree that they will not take any action
designed or calculated to result in the transfer,
exchange or replacement of any Policy or Contract.
(b) BY THE INSURANCE COMPANIES AND THE UNDERWRITER
The Insurance Companies and the Underwriter represent and
warrant to, and covenant with, the Distributor, as follows:
(1) All necessary regulatory approvals and licenses from
any state or federal governmental body having
jurisdiction over the Insurance Companies, the
Underwriter or the Variable Products have been
obtained, and the Insurance Companies will notify the
Distributor within one business day of obtaining
actual knowledge of any change in the status of any
approvals or licenses related to the marketing, sale
or distribution of the Variable Products.
(2) The Insurance Companies and the Underwriter have
taken all actions necessary including, without
limitation, those necessary under their articles of
incorporation, bylaws and applicable state corporate
law, to authorize the execution, delivery and
performance of this Agreement and all transactions
contemplated hereunder.
(3) The Insurance Companies and the Underwriter are and
shall remain during the term of this Agreement in
compliance with the eligibility requirements for
certain affiliated persons and underwriters found in
Section 9(a) of the 1940 Act.
12. INDEMNIFICATION
(a) BY THE DISTRIBUTOR
(1) The Distributor agrees to indemnify and hold harmless
the Insurance Companies, each Affiliate of the
Insurance Companies and the Underwriter and each of
their directors, officers, employees or agents and
each person, if any, who controls the Insurance
Companies or the Underwriter within the meaning of
the federal securities laws (collectively, the
"Indemnified Parties" for purposes of this Section 12
(a)) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement
with the written consent of the Distributor) or
litigation (including legal and other expenses) to
which the Indemnified Parties may become subject
under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect
thereof) or settlements are related to the
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offer or sale of the Variable Products or the
operation of the Variable Accounts and:
(i) arise out of, or are based upon,
violation(s) by the Distributor of federal
or state securities law(s) or regulation(s),
applicable banking law(s) or regulation(s),
insurance law(s) or regulation(s) or any
rule or requirement of the NASD; or
(ii) arise out of, or are based upon, any
tortious conduct (including oral or written
misrepresentation), or any unlawful sales
practices concerning the Variable Products
by the Distributor; or
(iii) arise out of, or are based upon, any untrue
statement or alleged untrue statement of a
material fact or omission or alleged
omission to state a material fact required
to be stated therein or necessary to make
the statements therein not misleading, in
light of the circumstances in which they
were made, contained in any advertising,
sales literature, or other promotional
material designed, developed, and produced
by the Distributor and used by it in the
distribution of the Variable Products;
PROVIDED THAT the Distributor shall not be
liable in any such case to the extent that
such losses, claims, damages, liabilities or
expenses arises out of, or are based upon,
an untrue statement or alleged untrue
statement or omission or alleged omission
made in reliance upon information furnished
in writing to the Distributor by the
Insurance Companies or the Underwriter
specifically for use in the preparation of
any such promotional material; or
(iv) arise out of, or are based upon, claims by
Broker-Dealers, Representatives or
employees, agents or registered
representatives of the Distributor for
commissions or other compensation or
remuneration of any type; or
(v) arise as a result of any failure on the part
of the Distributor, a Broker-Dealer or a
Representative to submit Premiums, Purchase
Payments, or Applications to the Insurance
Companies, or to submit the correct amount
of a Premium or Purchase Payment, on a
timely basis and in accordance with this
Agreement, subject to applicable law; or
(vi) arise as a result of any failure on the part
of the Distributor, a Broker-Dealer or a
Representative to deliver the Variable
Products to purchasers thereof on a timely
basis; PROVIDED THAT the Distributor shall
not be liable in any such case to the extent
that
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<PAGE>
such losses, claims, damages, liabilities or
expenses arise as a result of any failure on
the part of the issuing Insurance Company to
perform its obligations under this Agreement
on a timely basis; or
(vii) arise as a result of a material breach by
the Distributor of any provisions of this
Agreement; or
(viii) arise as a result of actions of a
Broker-Dealer or its Representatives;
as limited by and in accordance with the provisions
of Sections 12(a)(2) and 12 (a)(3) hereof.
(2) The Distributor shall not be liable under this
indemnification provision with respect to any losses,
claims, damages, liabilities or litigation ("Losses"
for purposes of this Section 12 (a)(2)) incurred or
assessed against an Indemnified Party that may arise
from any Indemnified Party's willful misfeasance or
bad faith. The Distributor's liability for Losses in
the event of its breach of this Agreement shall be
limited to that portion of Losses caused by its
breach, and the Distributor shall not be liable for
that portion of Losses caused by breach of this
Agreement by an Indemnified Party or from any act or
omission by an Indemnified Party.
(3) The Distributor shall not be liable under this
indemnification provision with respect to any claim
made against an Indemnified Party unless that
Indemnified Party shall have notified the Distributor
in writing within a reasonable time after the summons
or other first legal process giving information of
the nature of the claim shall have been served upon
that Indemnified Party (or after the Indemnified
Party shall have received notice of such service on
any designated agent). Notwithstanding the foregoing,
the failure of any Indemnified Party to give notice
as provided herein shall not relieve the Distributor
of its obligations hereunder except to the extent
that the Distributor has been prejudiced by such
failure to give notice. In addition, any failure by
the Indemnified Party to notify the Distributor of
any such claim shall not relieve the Distributor from
any liability which it may have to the Indemnified
Party against whom the action is brought otherwise
than on account of this indemnification provision. In
case any such action is brought against the
Indemnified Parties, the Distributor shall be
entitled to participate, at its own expense, in the
defense of the action. The Distributor also shall be
entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action;
PROVIDED, HOWEVER, that if the Indemnified Party
shall have reasonably concluded that there may be
defenses available to it which are different from or
additional to those available to the Distributor, the
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Distributor shall not have the right to assume said
defense, but shall pay the costs and expenses thereof
(except that in no event shall the Distributor be
liable for the fees and expenses of more than one
counsel for Indemnified Parties in connection with
any one action or separate but similar or related
actions in the same jurisdiction arising out of the
same general allegations or circumstances). After
notice from the Distributor to the Indemnified Party
of the Distributor's election to assume the defense
thereof, and in the absence of such a reasonable
conclusion that there may be different or additional
defenses available to the Indemnified Party, the
Indemnified Party shall bear the fees and expenses of
any additional counsel retained by it, and the
Distributor will not be liable to that party under
this Agreement for any legal or other expenses
subsequently incurred by the party independently in
connection with the defense thereof other than
reasonable costs of investigation.
(4) The Indemnified Parties will notify the Distributor
within a reasonable time, not to exceed five (5)
business days, of the receipt of service of process
in any litigation or proceedings against them in
connection with the offer or sale of the Variable
Products or the operation of the Variable Accounts.
(b) BY THE INSURANCE COMPANIES AND THE UNDERWRITER
(1) The Insurance Companies and the Underwriter agree,
jointly and severally, to indemnify and hold harmless
the Distributor and each director, officer, employee
or agent of the Distributor, and each person, if any,
who controls the Distributor within the meaning of
the federal securities laws (collectively, the
"Indemnified Parties" for purposes of this Section
12(b)) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement
with the written consent of the Insurance Companies
and the Underwriter) or litigation (including legal
and other expenses) to which the Indemnified Parties
may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements are related to the
offer or sale of the Variable Products or the
operation of the Variable Accounts and:
(i) arise out of or are based upon any untrue
statement or alleged untrue statement of a
material fact or omission or alleged
omission to state a material fact required
to be stated therein or necessary to make
the statements therein not misleading, in
light of the circumstances in which they
were made, contained in any: (A)
Registration Statement or Prospectus; (B)
blue-sky application or other document
executed by the Insurance Companies
specifically for the purpose of exempting
the Private Placements from, or qualifying
any or all of the Registered
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Products for sale under, the securities laws
of any jurisdiction; or (C) information
furnished in writing to the Distributor
specifically for the purpose of being
included in any advertising, sales
literature, or other promotional material to
be used in connection with the distribution
of the Variable Products; PROVIDED THAT
neither the Insurance Companies nor the
Underwriter shall be liable in any such case
to the extent that such losses, claims,
damages, liabilities or expenses arise out
of, or are based upon, an untrue statement
or alleged untrue statement or omission or
alleged omission made in reliance upon
information furnished in writing to the
Insurance Companies by the Distributor
specifically for use in the preparation of
any such document, application, or
promotional material; or
(ii) result because of the provisions of any
Variable Product or because of any material
breach by the Insurance Companies or the
Underwriter of any provision of this
Agreement or of any Variable Product or
which result from any wrongful activities of
the Insurance Companies' or the
Underwriter's officers, directors, employees
or agents or their wrongful failure to take
any action in connection with the sale,
processing or administration of the Variable
Products including, without limitation,
obtaining auditors' reports, computing
accurate separate account and/or underlying
fund performance data, preparation and
timely filing and delivery, as required, of
annual and semiannual reports and reports on
Form NSAR and the timely payment of all
state and federal registration fees; as
limited by and in accordance with the
provisions of Sections 12 (b)(1) and 12
(b)(2) hereof.
(2) Neither the Insurance Companies nor the Underwriter
shall be liable under this indemnification provision
with respect to any losses, claims, damages,
liabilities or litigation ("Losses" for purposes of
this Section 12 (b)(2)) incurred or assessed against
an Indemnified Party that may arise from any
Indemnified Party's willful misfeasance or bad faith.
The Insurance Companies' and the Underwriter's
liability for Losses in the event of its (or their)
breach of this Agreement shall be limited to that
portion of Losses caused by its (or their) breach,
and that party shall not be liable for that portion
of Losses caused by breach of this Agreement by an
Indemnified Party or from any act or omission by an
Indemnified Party.
(3) The Insurance Companies and the Underwriter shall not
be liable under this indemnification provision with
respect to any claim made against an Indemnified
Party unless the Indemnified Party shall have
notified the Insurance Companies and the Underwriter
in writing within a reasonable time after receiving
the summons or other first legal process giving
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information of the nature of the claim against the
Indemnified Party (a "Claim"). Notwithstanding the
foregoing, the failure of any Indemnified Party to
give notice as provided herein shall not relieve the
Insurance Companies or the Underwriter of their
obligations hereunder except to the extent that they
have been prejudiced by the failure of the
Indemnified Party to give notice. In addition, any
failure by the Indemnified Party to notify the
Insurance Companies or the Underwriter of any Claim
shall not relieve the Insurance Companies or the
Underwriter from any liability which they may have to
the Indemnified Party against whom the action is
brought otherwise than on account of this
indemnification provision. In case any Claim is
brought against the Indemnified Parties, the
Insurance Companies and the Underwriter shall be
entitled to participate, at their own expense, in the
defense of the Claim. The Insurance Companies and the
Underwriter also shall be entitled to assume the
defense thereof, with counsel satisfactory to the
party named in the Claim. After notice to the
Indemnified Party of the Insurance Companies' and the
Underwriter's election to assume a defense to a
Claim, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it,
and neither the Insurance Companies nor the
Underwriter will be liable to the Indemnified Party
under this Agreement for any legal or other expenses
subsequently incurred by the Indemnified Party
independently in connection with the defense of a
Claim other than the reasonable costs of
investigation.
13. RECORDS
The parties to this Agreement shall maintain such accounts, books and
records and other documents as are required to be maintained under
applicable laws and regulations and shall preserve such accounts, books
and records, and other documents for the periods prescribed by such
laws and regulations. Each party shall have the right to inspect and
audit the accounts, books and records and other documents of the other
party that pertain to the Variable Products during normal business
hours upon reasonable written notice to the other party. Any party
requesting such an audit shall bear the expense of the audit, including
the reasonable costs (other than overhead costs or costs for time spent
on audit-related matters by officers, directors, or employees of the
other party) borne by the other party in connection with the audit.
14. INVESTIGATIONS AND PROCEEDINGS
The parties to this Agreement shall notify each other promptly of any
insurance or securities regulatory investigation, administrative or
judicial proceeding, or material complaint arising in connection with
the offer or the sale of the Variable Products. The parties shall
cooperate fully in the resolution of any insurance or securities
investigation, administrative or judicial proceeding, or material
complaint.
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15. TERM AND TERMINATION
(a) TERM -- This Agreement shall be effective from the date hereof
through December 31, 2002, which term shall automatically be
extended for a period of three (3) years unless this Agreement
is sooner terminated in accordance with the termination
provisions in Section 15(b) of this Agreement.
(b) TERMINATION -- No party hereto may terminate this Agreement
except as expressly provided in this Section 15(b).
(1) The Insurance Companies and the Underwriter (as one
party) or the Distributor may terminate this
Agreement effective at the close of business on
December 31, 2002 upon written notice delivered to
the other party not less than 30 nor more than 60
days prior to such date, which notice shall specify
that it is being given pursuant to this Section
15(b)(1).
(2) A party (the "Terminating Party") may terminate this
Agreement for cause if:
(i) another party (the "Breaching Party")
materially breaches this Agreement,
(ii) the Terminating Party has delivered to the
Breaching Party a notice specifying the
nature of the breach and that this notice is
being given pursuant to this Section
15(b)(2), and
(iii) the Breaching Party has not cured the breach
within 30 days after the delivery of the
notice.
(3) A Terminating Party may terminate this Agreement
immediately for cause:
(i) in the event of the voluntary institution by
the Distributor of bankruptcy proceedings or
the voluntary institution by an Insurance
Company of insolvency or rehabilitation
proceedings under any state insurance laws
or regulations (each an "Insolvent Party"),
or
(ii) in the event of a formal order or written
finding by a court of competent jurisdiction
that the Insolvent Party is bankrupt or
insolvent, there is a degradation of the
Insolvent Party's reputation that would
materially impair the ability of the
Insolvent Party to carry out its obligations
under this Agreement, or
17
<PAGE>
(iii) if the Commission institutes a formal cease
and desist order or proceeding prohibiting
the offer of the sale of the Variable
Products or the operation of a Variable
Account, or a governmental or regulatory
authority of a state or other jurisdiction
institutes a formal order or proceeding
prohibiting the offer or the sale of the
Variable Products or the operation of a
Variable Account; PROVIDED, that this
Agreement will be terminated only with
respect to the particular state or
jurisdiction issuing such order or
proceeding, or
(iv) if the Commission, the NASD, or any other
government authority or self-regulatory
organization revokes or suspends the
registration or license of the Distributor,
or the Distributor's ability to do business
is so materially impaired, in the reasonable
view of the Insurance Companies or the
Underwriter, that it could not perform its
obligations under this Agreement, or
(v) if a state insurance commissioner suspends
or revokes an Insurance Company's ability to
do business or the Insurance Company's
ability to do business is so materially
impaired, in the reasonable view of the
Distributor, that it could not perform its
obligations under this Agreement.
(c) SOLICITATION AFTER TERMINATION -- After termination of this
Agreement for any reason, the Distributor and the Distributor
Agency Affiliates agree that they will not take any action
designed or calculated to result in the transfer, exchange or
replacement of any Policy or Contract.
(d) SURVIVAL -- The provisions of Sections 11, 12, 16, 19 and 20
(Representations and Warranties, Indemnification, Rights Upon
Termination, Arbitration, and Confidentiality, respectively)
shall survive the termination of this Agreement.
16. RIGHTS UPON TERMINATION
(a) In no event will any further compensation be paid to the
Distributor should the Insurance Companies or the Underwriter
terminate this Agreement for cause pursuant to Section
15(b)(2) or Section 15(b)(3).
(b) As of the date of termination, the Insurance Companies shall
have the right to set off against any monies they owe the
Distributor any amounts owed by the Distributor to an
Insurance Company. In the event that the amounts owed by the
Distributor exceed the amounts owed by the Insurance
Companies, the difference shall become immediately due and
payable by the Distributor.
18
<PAGE>
(c) In the event that either party does not pay within 45 days
after resolution of the net amount payable, then the net
amount owed will accrue interest, compounded daily, at the
fluctuating prime interest rate charged by The Chase Manhattan
Bank, N.A., plus two percent (2%).
(d) If the Insurance Companies and the Underwriter terminate this
Agreement pursuant to Section 15(b)(1), the Insurance
Companies shall continue to:
(1) pay the Distributor the compensation set forth in
Schedule 6 to this Agreement; and
(2) offer all of the Variable Products then identified on
Schedule 2 to this Agreement for a period of one (1)
year from the date of termination of this Agreement,
during which period of time (i) the Insurance
Companies shall employ at least the same level of
effort in offering and supporting the Variable
Products as they did before the termination of this
Agreement and (ii) the terms of this Agreement shall
remain in full force and effect as though the
Agreement had not been terminated. The parties
further agree that such compensation shall only be
based on the Variable Products that have not lapsed
or been surrendered, due to 1035 exchanges or other
means, whether such lapse or surrender occurred
before or after the termination date.
(e) If the Distributor terminates this Agreement pursuant to
Section 15(b)(1), the Insurance Companies shall continue to
pay the Distributor the compensation set forth in Schedule 6
to this Agreement. The parties further agree that such
compensation shall only be based on the Variable Products that
have not lapsed or been surrendered, due to 1035 exchanges or
other means, whether such lapse or surrender occurred before
or after the termination date.
17. INDEPENDENT CONTRACTOR
The Distributor shall act as an independent contractor in the
performance of its duties and obligations under this Agreement and
nothing herein contained shall constitute the Distributor,
Broker-Dealers, Representatives or employees or officers of the
Distributor or Broker-Dealers as employees of AFLIAC, FAFLIC or the
Underwriter in connection with the distribution of the Variable
Products.
18. NOTICES
Any notice required or permitted under this Agreement shall be
delivered personally or sent by facsimile or by registered or certified
mail, return receipt requested, with all postage prepaid:
(a) TO THE DISTRIBUTOR:
19
<PAGE>
First Union Securities, Inc.
Attention: David Hebner
Fax: (704)374-3105
(b) TO THE INSURANCE COMPANIES:
First Allmerica Financial Life Insurance Company
Attention: Guy Sullivan
Fax: (508) 854-2193
(C) TO ALLMERICA INVESTMENTS, INC.:
Attention: David J. Mueller
Fax: (508) 855-6641
A party may change its address or fax number for the delivery of
notices by delivering a written notice to the other party at its last
specified address. All notices shall be effective upon delivery;
PROVIDED that any notice sent by facsimile shall be deemed ineffective
unless a copy of the notice is also delivered personally or sent by
express courier or mail for delivery on the same or next business day.
19. ARBITRATION
Any dispute between the Distributor and an Insurance Company or between
the Distributor and the Underwriter arising under or relating to this
Agreement shall be settled by compulsory arbitration before a single
arbitrator experienced in the insurance industry in accordance with the
Commercial Arbitration Rules then in force of the American Arbitration
Association. The arbitration shall take place in Charlotte, North
Carolina unless some other location is mutually agreed upon by the
parties in dispute. Each party shall bear its own costs and expenses in
any such arbitration, except that the expenses of the arbitrators'
services shall be divided equally between the Distributor and the other
party to the dispute (either one or both of the Insurance Companies
and/or the Underwriter).
20. CONFIDENTIALITY
(a) GENERALLY. Each party will hold the other party's Confidential
Information (as defined below) in confidence and will
safeguard it as provided herein. The party receiving
Confidential Information will not, directly or indirectly,
report, publish, distribute, disclose, or otherwise
disseminate the Confidential Information, or any portion
thereof, to any third party including its Affiliates, and will
not use the Confidential Information, or any portion thereof,
for the benefit of itself or any third party including its
Affiliates or for any purpose, except only as necessary to
perform its duties and exercise its rights hereunder,
20
<PAGE>
or as expressly authorized in writing by the party who owns
such Confidential Information. Disclosure of Confidential
Information internally by a recipient will be limited to those
of its and its Affiliates' officers, directors, employees, and
agents on a "need to know" basis who must have access to the
Confidential Information to enable such party to perform its
duties and exercise its rights hereunder. In order to
safeguard the Confidential Information, each party shall (i)
inform each recipient of the Confidential Information of the
confidential nature thereof and of the requirements of this
Agreement, (ii) direct such recipients to comply with the
terms of this Agreement, and (iii) exercise any other
precautions necessary to prevent any improper use or
disclosure of Confidential Information.
(b) DEFINITION. "Confidential Information" shall mean: (i)
information regarding a party's or such party's Affiliates',
financial condition, information systems, business operations,
plans and strategies, products or services, customers and
prospective customers, and marketing and distribution plans,
methods and techniques; (ii) information that is marked
"confidential", "proprietary" or in like words, or that is
summarized in writing as being confidential prior to or
promptly after disclosure to the other party; (iii) any and
all related research; and (iv) any and all designs, ideas,
concepts, and technology embodied therein. Confidential
Information of the Distributor or its Affiliates that is to be
kept confidential by the Insurance Companies shall also
include: (v) any information regarding the pricing strategies
of each Broker-Dealer; (vi) specific marketing and training
materials of each Broker-Dealer; and (vii) any information of
the Distributor or its Affiliates in any form whatsoever that
is covered by a patent issued by the United States Patent and
Trademark Office.
Information is not considered confidential or proprietary if
such information: (1) is or becomes generally available to the
public other than as a result of disclosure by the recipient;
(2) was available to or already known by the recipient on a
non-confidential basis prior to its receipt from the party
claiming confidentiality; (3) is developed by the recipient
independently of any information or data acquired from the
party claiming confidentiality; or (4) is, or is required to
be, disclosed pursuant to a court order or the requirement of
any federal or state regulatory, judicial, or government
authority.
(c) REMEDIES. Each party acknowledges and agrees that monetary
damages would not be a sufficient or adequate remedy for a
breach or anticipated breach of this Section and that, in
addition to any other legal or equitable remedies which may be
available, each party shall be entitled to specific
performance and injunctive relief for any breach or
anticipated breach of this Section.
(d) SURVIVAL. The provisions of this Section shall survive the
expiration or other termination of this Agreement.
21. SEVERABILITY
21
<PAGE>
If any provision of this Agreement is held to be unenforceable or
invalid, that provision shall be severed from this Agreement and the
remainder of this Agreement shall remain in full force and effect.
22. CHOICE OF LAW
This Agreement and any disputes, actions or other proceedings arising
under or relating to it shall be governed by law of the State of North
Carolina without regard to its principles of conflicts of law.
23. NO WAIVER
No failure or delay on the part of any party hereto in exercising any
power or right under this Agreement shall operate as a waiver thereof,
nor shall any single or partial exercise of such power or right
preclude any other or further exercise thereof or the exercise of any
other power or right. No waiver by any party of any provision of this
Agreement, nor of any breach or default, shall be effective unless in
writing and signed by the party against whom such waiver is to be
enforced.
24. AGREEMENT NON-ASSIGNABLE
Any assignment of this Agreement in whole or in part by a party without
the prior written consent of the other parties thereto shall be void
and shall vest no rights in the assignee.
25. SCHEDULES
The Schedules to this Agreement are a part of this Agreement as if set
forth in full herein. With the exception of Schedule 6, all other
schedules attached to this agreement may be revised by the Insurance
Companies and the Underwriter, subject to review by the Distributor.
26. HEADINGS
The headings herein are for the purpose of convenience only and have no
legal force, meaning or effect.
27. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter hereof and supersedes all prior and
contemporaneous agreements (other than on matters related to
confidentiality), understandings, negotiations and discussions, whether
oral or written, of the parties and there are no warranties,
representations and/or
22
<PAGE>
agreements between the parties in conjunction with the subject matter
hereof except as set forth in this Agreement. This Agreement, including
any Schedule hereto, may be amended or modified only by written
instrument, executed by duly authorized officers of the parties.
23
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be executed
as of the date first above written.
FIRST UNION SECURITIES, INC.
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
FIRST ALLMERICA FINANCIAL LIFE INSURANCE
COMPANY
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
ALLMERICA INVESTMENTS, INC.
By:__________________________
Name:_______________________
Title:________________________
Date:________________________
24
<PAGE>
SCHEDULE 1
DISTRIBUTOR AGENCY AFFILIATES
[TO BE ADDED]
<PAGE>
SCHEDULE 2
VARIABLE PRODUCTS
<TABLE>
<CAPTION>
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
PRODUCT POLICY/CERTIFICATE NUMBER DESCRIPTION EXPENSE ALLOWANCE
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
ValuPlus Assurance 1036-99 Registered Retail VUL .50%*
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
*Once the total Premiums and Purchase Payments received since the effective date
of this Agreement exceed $100 million, the .5% is replaced with .35%. Such
decreased percentage shall be pro-rated for the year the $100 million threshold
is first achieved.
<PAGE>
SCHEDULE 3
PRIVATE PLACEMENT GUIDELINES
The Insurance Companies rely on exemptions under the 1933 Act and the 1940 Act
in the issuance of certain of their variable annuity contracts and variable life
insurance policies. Reliance on these exemptions generally depends upon the
number and identity of the purchasers, the number of securities offered, the
size of the offering, the manner of the offering, and whether the securities are
being purchased only for investment purposes (and not for the purpose of
distributing or reselling them).
SECTION 3(c)(7)
Section 3(c)(7) exempts from the registration requirements of the 1940 Act
certain companies owned exclusively by an unlimited number of "qualified
purchasers", as defined in amended Section 2(a)(51) of the 1940 Act. Section
2(a)(51) establishes asset tests for four categories of "qualified purchasers":
(1) a natural person who owns at least $5 million in investments; (2) a family
investment vehicle that owns at least $5 million in investments; (3) a trust
whose trustees and settlers are qualified persons, provided that the trust was
not formed for the purpose of investing in the Section 3(c)(7) company; and (4)
any other person who owns and invests on a discretionary basis, for itself or
other qualified purchasers, at least $25 million in "investments."
In order to preserve their right to rely on Section 3(c)(7) of the 1940 Act, the
Insurance Companies require, and the Distributor shall require, through any
Sales Agreements entered into pursuant to Section 2(b) of this Agreement that
each Broker-Dealer require each prospective purchaser to represent and warrant
(in response to a questionnaire) that it owns sufficient "investment securities"
(as defined in Rule 2a 51-1 under the 1940 Act) to meet the financial
requirements and otherwise meet the requirements of the appropriate definition
of "qualified purchaser" in Section 2(a)(51) of the 1940 Act.
In addition, if the Private Placement will be used by a corporation to assist it
in funding its obligation to employees under a non-funded deferred compensation
plan, the Insurance Companies therefore, will impose certain additional
conditions on the purchase and will request additional information from the
purchaser in order to insure compliance with Section 3(c)(7). These additional
requirements also are designed to insure that the employer is and remains the
sole beneficial owner of the Private Placement for purposes of the 1940 Act.
SECTION 3(c)(1)
Certain of the Variable Accounts for the Private Placements are not registered
under the 1940 Act in reliance on Section 3(c)(1) of the 1940 Act. Section
3(c)(1) exempts from the registration requirements of the 1940 Act certain
companies who are issuers whose outstanding securities (other than short-term
paper) are beneficially owned by not more than one hundred persons and which are
not making and do not presently propose to make a public offering of their
securities.
<PAGE>
In order to preserve their right to rely on Section 3(c)(1) of the 1940 Act, the
Insurance Companies require, and the Distributor shall require, through any
Sales Agreements entered into pursuant to Section 2(b) of this Agreement that
each Broker-Dealer require its Representatives to comply with the requirements
of a non-public offering and monitor the number of prospective purchasers to
whom offers of sales have been made.
REGULATION D - RULE 501
With respect to the Private Placements, each prospective purchaser must also be
qualified as an "accredited investor" or otherwise be a "suitable investor,"
prior to offering the Private Placements to that prospective purchaser. An
"accredited investor" is: (a) a natural person, (i) whose individual net worth,
or joint net worth with the person's spouse, at the time of purchase exceeds
$1,000,000; or (ii) who has had individual income in excess of $200,000 in each
of the two (2) most recent years or joint income with that person's spouse in
excess of $300,000 in each of those years and who reasonably expects an income
in excess of such amounts in the current year; (b) a bank or savings and loan
association, whether acting in an individual or fiduciary capacity; (c) a
registered broker or dealer; (d) an insurance company; (e) a registered
investment company; (f) a Small Business Investment Company; (g) any plan
established by a state or municipal agency or government for the benefit of its
employees, with total assets in excess of $5,000,000; (h) certain employee
benefit plans (within the meaning of ERISA) with total assets in excess of
$5,000,000; (i) a private business development company; (j) a charitable
organization, corporation, business trust, any trust whose purchase is directed
by a person with knowledge and experience in financial and business matters, or
partnerships, not formed to acquire the securities offered, with total assets in
excess of $5,000,000; or (k) an entity in which all of the equity owners are
accredited investors.
Because resales of securities acquired in a private offering generally are
prohibited (with the exception of offerings pursuant to Rule 144A of the 1933
Act, which expressly permits resales to certain institutional investors),
Representatives must ensure that each prospective purchaser understands the
long-term nature of the Private Placement investment, does not intend to resell
the investment and is financially able to retain the securities purchased.
<PAGE>
SCHEDULE 4
AVAILABLE FUNDS AND FUND
PORTFOLIOS
[TO BE ADDED]
<PAGE>
SCHEDULE 5
STANDARD FORM OF SALES AGREEMENT
[The draft "Selling Group Agreement" funished by First Union Securities, Inc.
is currently being reviewed by Allmerica Financial's Legal Department.
Once the form has been agreed to, it will be set forth on this Schedule 5]
<PAGE>
March 16, 2000
SCHEDULE 6
COMPENSATION SCHEDULE
ValuPlus Assurance (Retail VUL Product)
Single Life - Simplified Issue and Fully Underwritten
Premium received in years 1-4: 8.50%
Premium received in years 5-10: 4.00%
Premium received in years 11+: 2.00%
ADJUSTMENT OF COMPENSATION:
The compensation may be adjusted, either up or down, as a result of the annual
review of the actual mix of business by the Insurance Companies.
The actual results will be compared to a target return.
If results are better than the target, to the extent allowed by law:
First year commissions will be increased retroactively to share in 50% of
the Excess. Commissions will be capped at 15%.
If results are worse than the target, to the extent allowed by law:
The difference will be neutralized by:
First, reduce any of the revenue sharing in excess of 15 bps
Second, reduce, retroactively, first year compensation.
For any variable product, the Insurance Company may elect, from time to time, to
make advances of compensation to the Distributor. Any such advance shall be
deemed a loan, payable upon demand, and secured by a first lien (security
interest) upon compensation payable by the Insurance Company to the Distributor,
without he necessity of execution of any further document, and Insurance Company
shall be entitled to set off amounts owed to it by Distributor against any
amounts owed to Distributor by the Insurance Company.
<PAGE>
SCHEDULE 7
PAYMENT OF EXPENSES
(a) The Distributor will pay the following costs and expenses
related to its distribution and other services contemplated by
this Agreement:
(i) all commissions and other compensation payable to
Broker-Dealers and their Representatives, related to
the sale and servicing of the Variable Products, as
provided in the Selling Group Agreement between the
Distributor and the Broker-Dealer;
(ii) the compensation, if any, of the Distributor's
employees, agents and registered representatives;
(iii) expenses associated with the licensing and
appointment, if any, and training of the
Distributor's employees, agents and representatives
involved in the distribution activities contemplated
by this Agreement;
(iv) the cost and expense of the mailing of any
promotional and advertising material and marketing
kits in connection with the distribution of the
Policies and Contracts;
(v) fulfillment of marketing materials and forms (not
including Applications and other insurance forms) to
Broker-Dealers;
(vi) any additions, inserts, or packaging enhancements to
the Insurance Companies' basic "Welcome Package";
(vii) expenses associated with telecommunications with the
Insurance Companies at the sites of the Distributor
or the Distributor Agency Affiliates, including site
installations and purchases, leases or rentals of
modems, terminals and other hardware, and lease line
telephone charges; and
(viii) any other expenses incurred by the Distributor or the
Distributor Agency Affiliates, except those set forth
in Section (b) of this Schedule and except as
provided in Section (c) of this Schedule, for the
purpose of carrying out the obligations of the
Distributor hereunder.
<PAGE>
(b) The Insurance Companies will pay all costs and expenses in
connection with:
(i) the preparation and filing with appropriate
governmental or regulatory agencies of the
Registration Statements and each preliminary
Prospectus and definitive Prospectus;
(ii) the preparation and issuance of the Policies and
Contracts, including the Companies' basic "Welcome
Package" (any additions, inserts, or packaging
enhancements to the Companies' "Welcome Package"
shall be at the expense of the Distributor, as set
forth in Section (a)(vi) above);
(iii) any authorization, registration, qualification or
approval of the Policies and Contracts required under
the securities, blue-sky laws or insurance laws of
any state;
(iv) registration fees for the Policies and Contracts
payable to the Commission, the NASD or any other
governmental or regulatory agency;
(v) the mailing of Prospectuses and any supplements
thereto, as required by federal securities laws, and
periodic reports relating to the Variable Accounts to
Policy and Contract owners;
(vi) the preparation and printing of administrative forms
utilized in connection with the distribution of the
Policies and Contracts, including but not limited to
the form of Application;
(vii) the preparation of Policies and Contract owner lists
for the purposes of proxy solicitations;
(viii) compensation payable to the Distributor, as provided
in Section 10 of this Agreement, and
(ix) any other expenses related to the distribution of
Policies and contracts except those set forth in
Section (a) of this Schedule and except as provided
in Sections (c) and (d) of this Schedule.
(c) Subject to an Annual Accounting (described below), the
Insurance Companies will pay for reasonable expenses as
determined by the Insurance Companies for the following:
(i) the costs and expenses for design, development and
printing of (1) marketing kits and Variable Product
Prospectus covers in a design which is agreed upon by
the Insurance Companies and the Distributor, which
meet regulatory requirements as determined by the
Insurance Companies,
<PAGE>
and which are provided to the Insurance Companies in
a camera-ready format, and (2) promotional and
advertising materials;
(ii) to the extent not paid by a Fund, the cost and
expense for design, development and printing of the
Fund Prospectuses and semi-annual and annual reports;
(iii) the cost and expense of printing Variable Product
Prospectuses, which Prospectuses will each contain a
copy of each Fund Prospectus;
(iv) the cost and expense for design, development and
printing of Policy and Contract semi-annual and
annual reports; and
(v) any other marketing expenses incurred by the
Distributor or the Distributor Agency Affiliates,
except as provided in Section (a) of this Schedule
and except those set forth in Section (b) of this
Schedule, including, but not limited to, the costs
and expenses associated with conferences relating to
the Variable Contracts and Policies.
On each anniversary of the effective date of this Agreement,
the Insurance Companies will perform an Annual Accounting and
determine "X" and "Y", described below:
X is an amount equal to the expenses for items c(i) through
(v) above paid or incurred by the Insurance Companies during
last 12 months, and
Y is an amount equal to the product of the applicable Expense
Allowance (identified in Schedule 2 to this Agreement) and the
total Premiums and Purchase Payments received and accepted for
each Variable Contract or Policy in the last 12 months.
To the extent X exceeds Y, the Distributor shall reimburse the
Insurance Companies for such excess. To the extent Y exceeds
X, the Insurance Companies shall reimburse the Distributor for
such excess. All reimbursements must be paid within one (1)
month of the date the reimbursement amount is determined.
(d) The Insurance Companies alone shall be responsible for and
bear the cost of administration of the Contracts following
their issuance, including all Policy and Contract owner
service and communication activities, but the Distributor
shall be responsible for answering inquiries from
Broker-Dealers or Representatives regarding the investment
performance of the Policies and Contracts, as permitted by
applicable law.
<PAGE>
(e) The Insurance Companies, as agent for the Underwriter, will be
responsible for and bear the cost of confirming to each
applicant for and owner of a Policy or Contract in accordance
with Rule 10b-10 under the 1934 Act their acceptance of
Premiums and Purchase Payments and such other transactions as
are required by Rule 10b-10 or administrative interpretations
thereunder and in accordance with Release 8389 under the 1934
Act.
<PAGE>
AMENDMENT #1 TO THE
DISTRIBUTION AGREEMENT
- --------------------------------------------------------------------------------
Notwithstanding any provision of the Distribution Agreement effective, February
1, 2000, by and between Allmerica Financial Life Insurance and Annuity Company,
a Delaware insurance company ("AFLIAC"), First Allmerica Financial Life
Insurance Company, a Massachusetts insurance company ("FAFLIC" and, together
with AFLIAC, collectively, the "Insurance Companies"), Allmerica Investments,
Inc., a Massachusetts corporation (the "Underwriter") and First Union
Securities, Inc., a Delaware corporation (the "Distributor"), on its own behalf
and on behalf of the individuals and entities listed on Schedule 1 to this
Agreement (the "Distributor Agency Affiliates"), as such Schedule may be amended
from time to time, such Distribution Agreement is amended as set forth below:
1. DEFINITIONS
The following definitions are added to Section 1 of the Distribution Agreement
entitled "Additional Definitions:"
BROKER-DEALERS - Broker-dealers registered with the Securities and Exchange
Commission ("SEC") under the 1934 Act that are members of the National
Association of Securities Dealers, Inc. ("NASD") or entities that are
excluded from the definitions of "broker" or "dealer" pursuant to the
"bank" exclusion under Section 3(a)(4) and Section 3(a)(5) of the 1934 Act.
Notwithstanding the fact that a bank is not a Broker-Dealer, a bank that is
exempt from registration with the SEC under the 1934 Act but is otherwise
permitted to sell the Contracts and Policies until May 12, 2001 will be
treated and defined as a Broker-Dealer for the purpose of this Agreement
until May 12, 2001.
REPRESENTATIVES - Individuals affiliated with a Broker-Dealer who are
licensed as life insurance agents in those jurisdictions in which
applications for the sale of the Contracts and Policies are to be solicited
and who are also duly registered with the NASD in compliance with the 1934
Act. Notwithstanding the fact that Bank employees may not be
Representatives, bank employees who are licensed as life insurance agents
in those jurisdictions in which applications for the sale of the Contracts
and Policies are to be solicited and who are authorized to sell until May
12, 2001, will be treated and defined as Representatives for the purpose of
this Agreement until May 12, 2001.
1
<PAGE>
2. EXCLUSIVITY
The following provision is added to the Distribution Agreement:
EXCLUSIVITY IN DISTRIBUTION OF VARIABLE PRODUCTS
The Insurance Companies grant the exclusive right to distribute the
Contracts and Policies to the Distributor, the rights and obligations of
which are set forth in this Agreement. The Insurance Companies further
agree that the Distributor shall have the exclusive authority to enter into
Selling Group Agreements with appropriately licensed, qualified or approved
Broker-Dealers.
Notwithstanding the foregoing, the Distributor understands and agrees that
the exclusive distribution rights granted hereunder shall apply only to
Contracts and Policies that are funded in whole or in part with Funds
sponsored by the Distributor or by any of its affiliates. As a result, the
Distributor understands and agrees that AFLIAC Policy form 1036-99 or any
other Contract or Policy form that may be added to Schedule 2 is not
subject to the exclusive distribution rights granted to the Distributor
hereunder in situations where AFLIAC or FAFLIC utilizes any such Contract
or Policy form with funds other than funds sponsored by the Distributor or
any of its affiliates.
3. NETTING COMMISSION
The following provision is added to the Distribution Agreement:
NETTING COMMISSIONS
The Distributor shall be entitled to deduct from payments it receives for
certain Contracts and Policies such commissions to which it may be entitled
under the terms of the Distribution Agreement and Schedule(s) attached
thereto, subject to the following terms and conditions.
SECTION 1 - POLICIES TO WHICH NETTING COMMISSIONS PROVISION APPLIES
Unless the Insurance Companies otherwise agree in writing, the Contracts
and Policies to which this provision applies include the following:
2
<PAGE>
- Form 1036-99, but only in situations where the simplified underwriting
process is utilized.
SECTION 2 - AMOUNTS DEDUCTIBLE
Amounts which the Distributor shall be entitled to deduct pursuant to this
provision shall include only the up-front portion of any compensation due,
and shall not include trail amounts earned or to be earned, if any.
SECTION 3 - PROCEDURES
The Distributor agrees to adhere to and continue to follow procedures for
administration of Netting Commissions, as established and updated by the
Insurance Companies from time to time.
SECTION 4 - EFFECT ON PRICING
The Distributor shall accept from the client as the full initial purchase
payment for the Contracts and Policies to which this provision applies,
neither more nor less than the exact amount of the initial purchase payment
stated in the application or enrollment form signed by the Contract or
Policy owner/applicant.
SECTION 5 - CHANGES TO COMMISSION NETTING SCHEDULE
Any change to this provision will become effective as to any applications
or enrollment forms received by the Insurance Companies on or after the
later of (a) the date specified in a new or revised Addendum, or (b) the
tenth (10) day after the date of mailing of the new or revised Addendum to
the Distributor.
SECTION 6 - CONSIDERATION
The Distributor's continued deduction and retention of compensation under
this provision shall signify acceptance of and shall be the consideration
for changes to the section of this Addendum which addresses netting.
3
<PAGE>
SECTION 7 - COMMISSION REFUNDS
Any commission refunds specified in the Distribution Agreement shall be
paid to the appropriate Insurance Company within 10 days of receipt of a
request for repayment.
SECTION 8 - OFFSET
The Insurance Companies shall be entitled to offset any indebtedness of the
Distributor under this provision against any other moneys owed to the
Distributor by the Insurance Companies.
SECTION 9 - COSTS OF COLLECTION
The Distributor shall pay any costs of collection, including attorneys=
fees, court costs and costs of investigation, associated with the
collection of any overdue receivables under this provision. Prior to
incurring any such additional costs of collection, the Insurance Companies
shall terminate this provision and make written demand for such overdue
amounts. Such written demand shall be mailed to the Distributor at its last
known address as shown on the records of the Insurance Companies.
4. TERMINATION
The Insurance Companies reserve the right to terminate this Addendum at any
time, with or without cause. Termination of this Addendum does not necessarily
terminate the Distribution Agreement.
(a) If the Insurance Companies terminate this Addendum without cause, the
Distributor shall be entitled to ten (10) days= written notice of such
termination during the first year the Distribution Agreement is in
force
4
<PAGE>
and to thirty (30) days= written notice of any such termination to
occur thereafter.
(b) If the Insurance Companies terminate this Addendum for cause, such
termination shall be effective immediately without prior notice, and
all amounts owed by the Distributor to the Insurance Companies shall
become immediately due and payable.
(c) Cause for immediate termination of this Addendum shall include, but
not be limited to:
(i) breach of any provision of this Addendum or the Distribution
Agreement by the Distributor; or
(ii) the Distributor's insolvency, bankruptcy, or evidence of
insolvency.
5. CAPTIONS
Captions are used for informational purposes only and no caption shall be
construed to affect the substance of any provision of this Addendum.
6. ENTIRE CONTRACT
The Distribution Agreement, as modified by this Addendum, contains the entire
Contract between the parties. The Distribution Agreement, as modified by this
Addendum, replaces all previous agreements between the parties relating to the
solicitation of Contracts. It is hereby understood and agreed that any other
agreement or representation, commitment, promise or statement of any nature,
whether oral or
5
<PAGE>
written, relating to or purporting to relate to the relationship of the parties
is hereby rendered null and void.
7. WAIVER
Waiver by the Insurance Companies of any conditions or terms of this Addendum
shall not be considered to be a subsequent waiver of such conditions or terms.
8. EFFECTIVE DATE
This Addendum shall be effective ___________________, upon execution of all
parties hereto.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be executed
as of the date first above written.
FIRST UNION SECURITIES, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
6
<PAGE>
FIRST ALLMERICA FINANCIAL LIFE INSURANCE
COMPANY
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
ALLMERICA INVESTMENTS, INC.
By:
-----------------------------
Name:
---------------------------
Title:
--------------------------
Date:
---------------------------
7
<PAGE>
PARTICIPATION AGREEMENT
AMONG
ALLMERICA INVESTMENT TRUST
ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC.
AND
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
DATED
MARCH ___, 2000
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I Purchase of Fund Shares 4
ARTICLE II Representations and Warranties 5
ARTICLE III Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV Sales Material and Information 8
ARTICLE V Fees and Expenses 9
ARTICLE VI Diversification 9
ARTICLE VII Potential Conflicts 10
ARTICLE VIII Indemnification 11
ARTICLE IX Applicable Law 15
ARTICLE X Termination 15
ARTICLE XI Notices 16
ARTICLE XII Miscellaneous 17
SCHEDULE A Separate Accounts and Variable Products A-1
SCHEDULE B Portfolios of Allmerica Investment Trust B-1
SCHEDULE C Proxy Voting Procedures C-1
2
<PAGE>
THIS AGREEMENT, made and entered into as of the ____ day of March, 2000 by and
among: ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY (hereinafter the
"Company"), a Delaware corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto, as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); ALLMERICA INVESTMENT TRUST, an unincorporated Massachusetts business
trust (hereinafter the "Fund"), and ALLMERICA FINANCIAL INVESTMENT MANAGEMENT
SERVICES, INC. (hereinafter the "Adviser"), a Massachusetts corporation
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as (i) the investment vehicle for
separate accounts established by insurance companies for individual and group
life insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Products") and (ii) the investment vehicle for certain qualified
pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an
investment vehicle under their Variable Products enter into participation
agreements with the Fund and the Adviser (the "Participating Insurance
Companies");
WHEREAS, shares of the Fund are divided into several series of shares,
each representing the interest in a particular managed portfolio of securities
and other assets (each such series hereinafter referred to as a "Portfolio"),
any one or more of which may be made available under this Agreement, as may be
amended from time to time by mutual agreement of the parties hereto; and
WHEREAS, the Fund has received for an order from the Securities and
Exchange Commission, granting Participating Insurance Companies and Variable
Insurance Product separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by separate accounts of both affiliated and unaffiliated life insurance
companies and Qualified Plans (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under
the Investment Advisers Act of 1940, as amended, and any applicable state
securities laws and manages each of the certain portfolios of the Fund and
retains Sub-Advisers for the daily investment and reinvestment of the assets of
each portfolio; and
WHEREAS, Allmerica Investments, Inc. (the "Distributor") is registered
as a broker/dealer under the Securities Exchange Act of 1934, as amended
(hereinafter the "1934 Act"), is a member in good standing of the National
Association of Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, the Company either has registered or will register certain
Variable Products under the 1933 Act or the Contracts are not registered because
they are properly exempt from registration under Section 3(a)(2) of the 1933 Act
or will be offered exclusively in transactions that are properly exempt from
registration under Section 4(2) or Regulation D of the 1933 Act; and
3
<PAGE>
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, to set aside and invest assets attributable to the
aforesaid Variable Products, and the Company has either: (i) registered or will
register each Account as a unit investment trust under the 1940 Act; or (ii)
will not register such Account pursuant to the exemptions provided in Sections
3(c)(1) or 3(c)(7) of the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Fund is authorized
to sell such shares to each such Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the parties
hereto agree as follows:
ARTICLE I. PURCHASE OF FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company
shares of the Fund and shall execute orders placed for each Account on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of such order. For purposes of this Section 1.1, the Company shall be
the designee of the Fund for receipt of such orders from each Account and
receipt by such designee of an order prior to the close of regular trading on
the New York Stock Exchange ("NYSE") shall constitute receipt by the Fund;
provided that the Fund receives notice of such order by 10:00 a.m. Eastern time
on the next following Business Day. "Business Day" shall mean any day on which
the New York Stock Exchange is open for trading and on which the Fund calculates
its net asset value pursuant to the rules of the Securities and Exchange
Commission.
1.2. The Fund, so long as this Agreement is in effect, agrees to make
its shares available indefinitely for purchase at the applicable net asset value
per share by the Company and its Accounts on those days on which the Fund
calculates its net asset value pursuant to rules of the Securities and Exchange
Commission and the Fund shall use reasonable efforts to calculate such net asset
value on each day which the New York Stock Exchange is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Fund (hereinafter
the "Board") may refuse to permit the Fund to sell shares of any Portfolio to
any person, or suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or is, in the sole discretion of the Board acting in good faith and in light of
their fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to
Participating Insurance Companies and their separate accounts and to certain
Qualified Plans. No shares of any Portfolio will be sold to the general public.
1.4. The Fund agrees to redeem for cash, on the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.4, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee of a
request prior to the close of regular trading on the NYSE shall constitute
receipt by the Fund, provided that the Fund receives notice of such request for
redemption on the next following Business Day.
4
<PAGE>
1.5. The Company agrees that purchases and redemptions of Portfolio
shares offered by the then current prospectus of the Fund shall be made in
accordance with the provisions of such prospectus.
1.6. The Company shall pay for Fund shares no later than the next
Business Day after an order to purchase Fund shares is made in accordance with
the provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire.
1.7. Issuance and transfer of the Fund's shares will be by book entry
only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.8. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.9. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Eastern time) and shall use its best efforts to make such net asset value
per share available by 7:00 p.m. Eastern time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Variable Products
either (i) are or will be registered under the 1933 Act; or (ii) are not
registered because they are properly exempt from registration under Section
3(a)(2) of the 1933 Act or will be offered exclusively in transactions that are
properly exempt from registration under Section 4(2) or Regulation D of the 1933
Act, in which case the Company will make every effort to maintain such exemption
and will notify the Fund immediately upon having a reasonable basis for
believing that such exemption no longer applies or might not apply in the
future.
2.2. The Company represents and warrants that with respect to any
Accounts which are exempt from registration under the 1940 Act in reliance on
3(c)(1) or 3(c)(7) thereof: (i) the principle underwriter for each such Account
and any sub-accounts thereof is a registered broker-dealer with the SEC under
the 1934 Act; (ii) the shares of the Portfolios of the Trust are an will
continue to be the only investment securities held by the corresponding
sub-accounts; and (iii) with regard to each Portfolio, the Company, on behalf of
the corresponding sub-account.
2.3. The Company represents and warrants that the Variable Products
will be issued and sold in compliance in all material respects with all
applicable federal and state laws, and that the sale of the Variable Products
shall comply in all material respects with state insurance suitability
requirements. The Company further represents and warrants that it is an
insurance company duly organized and in good standing under applicable law, that
it has legally and validly established each Account as a segregated asset
account under Section 2932 of Delaware Insurance Code, and each Account either
(i) has been registered or, prior to any issuance or sale of the Contracts, will
be registered as a unit investment trust under the 1940 Act to serve as a
segregated investment account for the Variable Products; or (ii) has not
5
<PAGE>
been so registered in proper reliance upon an exemption from registration under
Section 3(c) of the 1940 Act.
2.4. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws, and that the
Fund is and shall make every effort to remain registered under the 1940 Act. The
Fund shall amend the registration statement for its shares under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund.
2.5. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"), and that it will make every effort to maintain such
qualification (under Subchapter M or any successor or similar provision) and
that it will notify the Company promptly upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.6. The Company represents that the Variable Products are currently
treated as life insurance policies or annuity contracts under applicable
provisions of the Code, that it will make every effort to maintain such
treatment, and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Variable Products have ceased to be so treated or
that they might not be so treated in the future.
2.7. The Fund represents that to the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act, the Fund
undertakes to have its board of Trustees, a majority of whom are not interested
persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
2.8. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
2.9. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.10. The Adviser represents and warrants that it is and shall remain
duly registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.11. The Fund represents and warrants that its Trustees, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
6
<PAGE>
2.12. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount not less $5 million. The aforesaid, which
includes coverage for larceny and embezzlement, shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Fund and the Distributor promptly in writing in the event
that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus and statement of additional
information as the Company may reasonably request. If requested by the Company,
in lieu of providing printed copies, the Fund shall provide camera-ready film or
computer diskettes containing the Fund's prospectus and statement of additional
information, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus and/or
statement of additional information for the Fund is amended during the year) to
have the prospectus for the Variable Products and the Fund's prospectus printed
together in one document, and to have the statement of additional information
for the Fund and the statement of additional information for the Variable
Products printed together in one document. Alternatively, the Company may print
the Fund's prospectus and/or its statement of additional information in
combination with other fund companies' prospectuses and statements of additional
information.
3.2. Except as provided in this Section 3.2., all expenses of printing
and distributing Fund prospectuses and statements of additional information
shall be the expense of the Company. For any prospectuses and statements of
additional information provided by the Company to the existing owners of
Variable Products who currently own shares of one or more of the Fund's
Portfolios, in order to update disclosure as required by the 1933 Act and/or the
1940 Act, the cost of printing shall be borne by the Fund. If the Company
chooses to receive camera-ready film or computer diskettes in lieu of receiving
printed copies of the Fund's prospectus, the Fund will reimburse the Company in
an amount equal to the product of x and y where x is the number of such
prospectuses distributed to owners of the Variable Products who currently own
shares of one or more of the Fund's Portfolios, and y is the Fund's per unit
cost of typesetting and printing the Fund's prospectus. The same procedures
shall be followed with respect to the Fund's statement of additional
information. The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or statements of
additional information other than those actually distributed to existing owners
of the Variable Products.
3.3. The Fund's statement of additional information shall be obtainable
from the Fund, the Company or such other person as the Fund may designate, as
agreed upon by the parties.
3.4. The Fund, at its expense, shall provide the Company with copies of
its proxy statements, reports to shareholders, and other communications (except
for prospectuses and statements of additional information, which are covered in
section 3.1) to shareholders in such quantity as the Company shall reasonably
require for distribution to contract owners. The Fund or its designee shall bear
the cost of printing, duplicating, and mailing these documents to current
contract owners, and the Company shall bear the cost for such documents used for
purposes other than distribution to current contract owners.
7
<PAGE>
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contract owners;
(ii) vote the Fund shares in accordance with instructions
received from contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such Portfolio for which instructions have been
received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies, if any.
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, including Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect to
periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund
prospectuses, reports to shareholders, proxy materials and other Fund
communications (or camera-ready equivalents) to the Company sufficiently in
advance of the Company's mailing dates to enable the Company to complete, at
reasonable cost, the printing, assembling and/or distribution of the
communications in accordance with applicable laws and regulations.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Variable Products other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee, except with the permission of the Fund.
8
<PAGE>
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least fifteen Business Days prior to its use. No such material shall
be used if the Company or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account, or the Variable Products, other than the information or representations
contained in a registration statement, prospectus or private placement
memorandum for the Variable Products, as such registration statement, prospectus
and private placement memorandum may be amended or supplemented from time to
time, or in published reports for each Account which are in the public domain or
approved by the Company for distribution to contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete copy of
all registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, which are relevant
to the Company or the Variable Products.
4.6. The Company will provide to the Fund at least one complete copy of
all registration statements, prospectuses, statements of additional information,
private placement memorandums, reports, solicitations for voting instructions,
sales literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above, that
relate to the investment in the Fund under the Variable Products.
4.7. For purposes of this Article IV, the phrase "sales literature or
other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, statements of additional information, private placement
memorandums, shareholder reports, and proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund shall pay no fee or other compensation to the Company
under this Agreement, except that if the Fund or any Portfolio adopts and
implements a plan pursuant to Rule 12b-1 to finance distribution expenses, then
the Distributor may make payments to the Company or to the distributor for the
Variable Products if and in amounts agreed to by the Distributor in writing.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund, other than expenses assumed by the Adviser
under the Management Agreement between the Fund
9
<PAGE>
and the Adviser or by another party. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Variable Products
in such a manner as to ensure that the Variable Products will be treated as
variable contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Variable Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an irreconcilable
material conflict exists and the implications thereof.
7.2. Each of the Company and the Adviser will report any potential or
existing conflicts of which it is aware to the Board. Each of the Company and
the Adviser will assist the Board in carrying out its responsibilities under SEC
rules and regulations. The Adviser, and the participating insurance companies
and participating qualified plans will at least annually submit to the Board
such reports, materials, or data as the Board may reasonably request so that the
Board may fully carry out the obligations imposed upon by the conditions
contained in the Shared Funding Exemptive Order, and said reports, materials,
and data will be submitted more frequently if deemed appropriate by the Board.
The responsibilities to report such information and conflicts and to assist the
Board will be carried out with a view only to the interests of contract owners
and plan participants, as applicable.
7.3. If it is determined by a majority of the Board, or a majority of
its members who are not "interested persons" of the Fund, the Adviser or the
Company as that term is defined in the 1940 Act (hereinafter "disinterested
members"), that a material irreconcilable conflict exists, the Company and other
Participating Insurance Companies shall, at their expense and to the extent
reasonably practicable (as determined by a majority of the disinterested
directors), take whatever steps are necessary to remedy
10
<PAGE>
or eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision
by the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account within six months after the Board informs the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Until the end of the foregoing six month period, the Distributor and Fund shall
continue to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Variable Products. The Company shall not be required by Section 7.3 to establish
a new funding medium for the Variable Products if an offer to do so has been
declined by vote of a majority of contract owners materially adversely affected
by the irreconcilable material conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding, or if the Fund obtains a Shared Exemptive Order which requires
provisions that are materially different from the provisions of this Agreement,
then (a) the Fund and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, or to the terms of the Shared Exemptive
Order, to the extent applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
11
<PAGE>
8.1(a) The Company agrees to indemnify and hold harmless the Fund and
the Adviser, each of their respective officers, employees, and Trustees or
Directors, and each person, if any, who controls the Fund or the Adviser within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Variable Products and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the registration
statement, prospectus or private placement memorandum for the Variable
Products or contained in the Variable Products or sales literature for
the Variable Products (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,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund for
use in the registration statement, prospectus or private placement
memorandum for the Variable Products or in the Variable Products or
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Variable Products or Fund shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the registration
statement, prospectus or sales literature of the Fund not supplied by
the Company, or persons under its control and other than statements or
representations authorized by the Fund or an Adviser) or unlawful
conduct of the Company or persons under its control, with respect to
the sale or distribution of the Variable Products or Fund shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature of the Fund or any amendment
thereof or supplement thereto or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if such a
statement or omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company, as limited by and in accordance with the provisions of
Sections 8.1(b) and 8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
12
<PAGE>
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Products or the
operation of the Fund.
8.2. INDEMNIFICATION BY THE ADVISER
8.2(a). The Adviser agrees, with respect to each Portfolio that it
manages, to indemnify and hold harmless the Company, each of its directors,
officers, and employees, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Adviser) or litigation
(including legal and other expenses) to which the Indemnified Parties may become
subject under any statute, regulation, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of shares of the
Portfolio that it manages or the Variable Products and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or prospectus or sales literature of 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, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement
or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Fund by or on
behalf of the Company for use in the registration statement or
prospectus for the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Variable Products or Portfolio shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the registration
statement, prospectus or sales literature for the Variable Products not
supplied by the Fund or persons under its control and other than
statements
13
<PAGE>
or representations authorized by the Company) or unlawful conduct of
the Fund, Adviser(s) or Distributor or persons under their control,
with respect to the sale or distribution of the Variable Products or
Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged
untrue statement of a material fact contained in a registration
statement, prospectus, or sales literature covering the Variable
Products, or any amendment thereof or supplement thereto, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statement or statements
therein not misleading, if such statement or omission was made in
reliance upon information furnished to the Company by or on behalf of
the Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Adviser in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Adviser; as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Products or
the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for
14
<PAGE>
purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), litigation or settlements result from
the gross negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement;
or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Fund, as limited and in accordance with the provisions of
Sections 8.3(b) and 8.3(a);
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as may arise from such
Indemnified Party's gross negligence, bad faith, or willful misconduct the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the
commencement of any litigation or proceedings against it or any of its
respective officers or directors in connection with this Agreement, the issuance
or sale of the Variable Products, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
15
<PAGE>
Shared Funding Exemptive Order) and the terms hereof shall be interpreted
and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
10.1(a) termination by any party for any reason by at least sixty (60)
days advance written notice delivered to the other parties; or
10.1(b) termination by the Company by written notice to the Fund and
the Adviser with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Variable Products; or
10.1(c) termination by the Company by written notice to the Fund and
the Adviser with respect to any Portfolio in the event any of the Portfolio's
shares are not registered, issued or sold in accordance with applicable state
and/or federal law or such law precludes the use of such shares as the
underlying investment media of the Variable Products issued or to be issued by
the Company; or
10.1(d) termination by the Company by written notice to the Fund and
the Adviser with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of the
Code or under any successor or similar provision, or if the Company reasonably
believes that the Fund may fail to so qualify; or
10.1(e) termination by the Company by written notice to the Fund and
the Adviser with respect to any Portfolio in the event that such Portfolio fails
to meet the diversification requirements specified in Article VI hereof; or
10.1(f) termination by the Fund by written notice to the Company if the
Fund shall determine, in its sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material adverse change
in its business, operations, financial condition or prospects since the date of
this Agreement or is the subject of material adverse publicity, or
10.1(g) termination by the Company by written notice to the Fund and
the Adviser, if the Company shall determine, in its sole judgment exercised in
good faith, that either the Fund or the Adviser has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
10.1(h) termination by either the Company or the Fund if the exemption
from registration under Section 3(c) of the 1940 Act no longer applies, or might
not apply in the future, to the unregistered Accounts, or that the exemption
from registration under Section 4(2) or Regulation D promulgated under the 1933
Act no longer applies or might not apply in the future, to interests under the
unregistered Contracts.
10.2. Notwithstanding any termination of this Agreement, the Fund
shall, at the option of the Company, continue to make available additional
shares of the Fund pursuant to the terms and conditions of this Agreement, for
all Variable Products in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Variable Products").
Specifically, without limitation, the owners of the Existing Variable Products
shall be permitted to direct reallocation of investments in the
16
<PAGE>
Portfolios of the Fund, redemption of investments in the Portfolios of the Fund
and/or investment in the Portfolios of the Fund upon the making of additional
purchase payments under the Existing Variable Products. The parties agree that
this Section 10.2 shall not apply to any termination under Article VII and the
effect of such Article VII termination shall be governed by Article VII of this
Agreement.
10.3. The provisions of Article VIII Indemnification shall survive any
termination of this Agreement pursuant to this Article X Termination.
10.4. The Company shall not redeem Fund shares attributable to the
Variable Products (as distinct from Fund shares attributable to the Company's
assets held in the Account) except (i) as necessary to implement contract owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Fund the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Variable Products, the Company
shall not prevent contract owners from allocating payments to a Portfolio that
was otherwise available under the Variable Products without first giving the
Fund 90 days prior written notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when hand delivered or sent by
registered or certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
Allmerica Investment Trust
440 Lincoln Street
Worcester, MA 01653
Attention: George M. Boyd, Esq.
If to Adviser:
Allmerica Financial Investment Management Services, Inc.
440 Lincoln Street
Worcester, MA 01653
Attention: George M. Boyd, Esq.
If to the Company:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Richard M. Reilly, President
ARTICLE XII. MISCELLANEOUS
17
<PAGE>
12.1. A copy of the Fund's Agreement and Declaration of Trust, as may
be amended from time to time, is on file with the Secretary of the Commonwealth
of Massachusetts. Notice is hereby given that this instrument is executed by the
Fund's Trustees as Trustees and not individually, and the Fund's obligations
under this Agreement are not binding upon any of the Trustees or Shareholders of
the Fund, but are binding only upon the assets and property of the Fund.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Variable Products and all information reasonably identified
as confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may
not be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company controlled by or
under common control with the Adviser, if such assignee is duly licensed and
registered to perform the obligations of the Adviser under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified above.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
18
<PAGE>
By:
----------------------------------
NAME:
TITLE:
ALLMERICA INVESTMENT TRUST
By:
----------------------------------
NAME:
TITLE:
ALLMERICA FINANCIAL INVESTMENT MANAGEMENT SERVICES, INC.
By:
----------------------------------
NAME:
TITLE:
19
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
SEPARATE ACCOUNTS AND VARIABLE PRODUCTS
-------------------------------------------------------------------------------------------------------
VARIABLE LIFE PRODUCTS
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
---------------- ------------ ---------- --------
<S> <C> <C> <C>
VEL VEL (>87) 33-14672 811-5183
VEL VEL (>91) 33-90320 811-5183
VEL II VEL (>93) 33-57792 811-7466
VEL VEL (Plus) 33-42687 811-5183
Inheiritage Inheiritage 33-70948 811-8120
Select Inheiritage
Allmerica Select Separate Account II Select Life 33-83604 811-8746
Group Vel Group VEL 33-82658 811-08704
Fulcrum Variable Life Separate Account SPVUL 333-15569 811-07913
FUVUL Separate Account ValuePlus Assurance 333-93013 811-09731
[To Be Determined] [PremierFocus] N/A N/A
<CAPTION>
VARIABLE ANNUITY PRODUCTS
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
---------------- ------------ ---------- --------
<S> <C> <C> <C>
VA-K ExecAnnuity Plus 91 33-39702 811-6293
ExecAnnuity Plus 93
Allmerica Advantage
Allmerica Select Separate Account Allmerica Select Resource I 33-47216 811-6632
Allmerica Select Resource II
Separate Accounts VA-A, VA-B, VA-C, Variable Annuities (discontinued)
VA-G, VA-H
-------------------------------------------------------------------------------------------------------
Fulcrum Separate Account Fulcrum 333-11377 711-7799
-------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
PORTFOLIOS OF
ALLMERICA INVESTMENT TRUST
Select Emerging Markets Fund
Select International Equity Fund
Select Aggressive Growth Fund
Select Capital Appreciation Fund
Select Value Opportunity Fund
Select Strategic Growth Fund
Select Growth Fund
Core Equity Fund (formerly Growth Fund)
Equity Index Fund
Select Growth and Income Fund
Select Income Fund
Select Investment Grade Income Fund
(formerly Investment Grade Income Fund)
Government Bond Fund
Money Market Fund
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
- - The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Variable Products and to
facilitate the establishment of tabulation procedures. At this time the
Fund will inform the Company of the Record, Mailing and Meeting dates.
This will be done verbally approximately two months before meeting.
- - Promptly after the Record Date, the Company will perform a "tape run,"
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described above. The Company will use its best efforts to call in the
number of Customers to the Fund , as soon as possible, but no later
than two weeks after the Record Date.
- - The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.43 of
the Agreement to which this Schedule relates.
- - The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
- name (legal name as found on account registration)
- address
- fund or account number
- coding to state number of units
- individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
<PAGE>
- - During this time, the Fund will develop, produce and pay for the Notice
of Proxy and the Proxy Statement (one document). Printed and folded
notices and statements will be sent to Company for insertion into
envelopes (envelopes and return envelopes are provided and paid for by
the Company). Contents of envelope sent to Customers by the Company
will include:
- Voting Instruction Card(s)
- One proxy notice and statement (one document)
- return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
- "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
- cover letter - optional, supplied by Company and reviewed and
approved in advance by the Fund.
- - The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to the Fund.
- - Package mailed by the Company.
The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but NOT including,) the meeting,
counting backwards.
- - Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark
information would be due to an insurance company's internal procedure
and has not been required by the Fund in the past.
- - Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
- - If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are sent back to Customer with an explanatory
letter and a new Card and return envelope. The mutilated or illegible
Card is disregarded and considered to be NOT RECEIVED for purposes of
vote tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
- - There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to sort
the Cards as they first arrive into categories depending upon their
vote; an estimate of how the vote is progressing may then be
calculated. If
<PAGE>
the initial estimates and the actual vote do not coincide, then an
internal audit of that vote should occur. This may entail a recount.
- - The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of SHARES.) The Fund
must review and approve tabulation format.
- - Final tabulation in shares is verbally given by the Company to the Fund
on the morning of the meeting not later than 10:00 a.m. Eastern time.
The Fund may request an earlier deadline if reasonable and if required
to calculate the vote in time for the meeting.
- - A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. The Fund will provide a standard form for each Certification.
- - The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will
be permitted reasonable access to such Cards.
- - All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
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FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 17 day of February, 2000, by and between
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY ("AFLIAC") (the
"Insurer"), a life insurance company domiciled in DELAWARE, on its behalf and on
behalf of the segregated asset accounts of the Insurer listed on Exhibit A to
this Agreement (the "Separate Accounts"); Insurance Series (the "Fund"), a
Massachusetts business trust; and Federated Securities Corp. (the
"Distributor"), a Pennsylvania corporation.
W I T N E S S E T H
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interest ("shares"), each representing
an interest in a separate portfolio of assets known as a "portfolio" and each
portfolio has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its
portfolios to separate accounts of insurance companies that fund variable
annuity and variable life insurance contracts ("Variable Contracts") and to
serve as an investment medium for Variable Contracts offered by insurance
companies that have entered into participation agreements substantially similar
to this agreement ("Participating Insurance Companies"), and
WHEREAS, the Fund is currently comprised of eleven separate portfolios, and
other portfolios may be established in the future; and
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WHEREAS, the Fund has obtained an order from the SEC dated December 29,
1993 (File No. 812-8620), granting Participating Insurance Companies and
variable annuity and variable life insurance separate accounts exemptions from
the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, to the extent necessary to
permit shares of the Fund to be sold to and held by variable annuity and
variable life insurance separate accounts of life insurance companies that may
or may not be affiliated with one another (hereinafter the "Mixed and Shared
Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Insurer wishes to purchase shares of one or more of the Fund's
portfolios on behalf of its Separate Accounts to serve as an investment medium
for Variable Contracts funded by the Separate Accounts, and the Distributor is
authorized to sell shares of the Fund's portfolios;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1 The Distributor agrees to sell to the Insurer those shares of the
portfolios offered and made available by the Fund and identified on Exhibit B
("Portfolios") that
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the Insurer orders on behalf of its Separate Accounts, and agrees to execute
such orders on each day on which the Fund calculates its net asset value
pursuant to rules of the SEC ("business day") at the net asset value next
computed after receipt and acceptance by the Fund or its agent of the order for
the shares of the Fund.
1.2 The Fund agrees to make available on each business day shares of the
Portfolios for purchase at the applicable net asset value per share by the
Insurer on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio, if such action
is required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Portfolio.
1.3 The Fund and the Distributor agree that shares of the Portfolios
of the Fund will be sold only to Participating Insurance Companies, their
separate accounts, and other persons consistent with each Portfolio being
adequately diversified pursuant to Section 817(h) of the Internal Revenue
Code of 1986, as amended ("Code"), and the regulations thereunder. No shares
of any Portfolio will be sold directly to the general public to the extent
not permitted by applicable tax law.
1.4 The Fund and the Distributor will not sell shares of the
Portfolios to any insurance company or separate account unless an agreement
containing provisions substantially the same as the provisions in Article IV
of this Agreement is in effect to govern such sales.
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<PAGE>
1.5 Upon receipt of a request for redemption in proper form from the
Insurer, the Fund agrees to redeem any full or fractional shares of the
Portfolios held by the Insurer, ordinarily executing such requests on each
business day at the net asset value next computed after receipt and acceptance
by the Fund or its agent of the request for redemption, except that the Fund
reserves the right to suspend the right of redemption, consistent with Section
22(e) of the 1940 Act and any rules thereunder. Such redemption shall be paid
consistent with applicable rules of the SEC and procedures and policies of the
Fund as described in the current prospectus.
1.6 For purposes of Sections 1.2 and 1.5, the Insurer shall be the
agent of the Fund for the limited purpose of receiving and accepting purchase
and redemption orders from each Separate Account and receipt of such orders
by 4:00 p.m. Eastern time by the Insurer shall be deemed to be receipt by the
Fund for purposes of Rule 22c-1 of the 1940 Act; provided that the Fund
receives notice of such orders on the next following business day prior to
4:00 p.m. Eastern time on such day, although the Insurer will use its best
efforts to provide such notice by 9:00 a.m. Eastern time.
1.7 The Insurer agrees to purchase and redeem the shares of each
Portfolio in accordance with the provisions of the current prospectus for the
Fund.
1.8 The Insurer shall pay for shares of the Portfolio on the next
business day after it places an order to purchase shares of the Portfolio.
Payment shall be in federal funds transmitted by wire.
1.9 Issuance and transfer of shares of the Portfolios will be by book
entry only unless otherwise agreed by the Fund. Stock certificates will not
be issued to the Insurer or the Separate Accounts unless otherwise agreed by
the Fund. Shares ordered
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<PAGE>
from the Fund will be recorded in an appropriate title for the Separate
Accounts or the appropriate subaccounts of the Separate Accounts.
1.10 The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Insurer of any income dividends or
capital gain distributions payable on the shares of the Portfolios. The
Insurer hereby elects to reinvest in the Portfolio all such dividends and
distributions as are payable on a Portfolio's shares and to receive such
dividends and distributions in additional shares of that Portfolio. The
Insurer reserves the right to revoke this election in writing and to receive
all such dividends and distributions in cash. The Fund shall notify the
Insurer of the number of shares so issued as payment of such dividends and
distributions.
1.11 The Fund shall instruct its recordkeeping agent to advise the
Insurer on each business day of the net asset value per share for each
Portfolio as soon as reasonably practical after the net asset value per share
is calculated and shall use its best efforts to make such net asset value per
share available by 7:00 p.m. Eastern time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Insurer represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2 The Insurer represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the Delaware Insurance Code, and that each of the Separate Accounts is a validly
existing segregated asset account under applicable federal and state law.
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<PAGE>
2.3 The Insurer represents and warrants that the Variable Contracts
issued by the Insurer or interests in the Separate Accounts under such
Variable Contracts (1) are or, prior to issuance, will be registered as
securities under the Securities Act of 1933 ("1933 Act") or, alternatively,
(2) are not registered because they are properly exempt from registration
under the 1933 Act or will be offered exclusively in transactions that are
properly exempt from registration under the 1933 Act.
2.4 The Insurer represents and warrants that each of the Separate
Accounts (1) has been registered as a unit investment trust in accordance
with the provisions of the 1940 Act or, alternatively, (2) has not been
registered in proper reliance upon an exclusion from registration under the
1940 Act.
2.5 The Insurer represents that it believes, in good faith, that the
Variable Contracts issued by the Insurer are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6 The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.7 The Fund represents and warrants that the shares of the Portfolios
are duly authorized for issuance in accordance with applicable law and that
the Fund is registered as an open-end management investment company under the
1940 Act.
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<PAGE>
2.8 The Fund represents that it believes, in good faith, that the
Portfolios currently comply with the diversification provisions of Section
817(h) of the Code and the regulations issued thereunder relating to the
diversification requirements for variable life insurance policies and variable
annuity contracts.
2.9 The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. GENERAL DUTIES
3.1 The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Portfolio to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Portfolios sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of the
shares of the Portfolios. The Fund shall register and qualify the shares for
sale in accordance with the laws of the various states to the extent deemed
necessary by the Fund or the Distributor.
3.2 The Fund shall make every effort to maintain qualification of each
Portfolio as a Regulated Investment Company under Subchapter M of the Code (or
any successor or similar provision) and shall notify the Insurer immediately
upon having a reasonable basis for believing that a Portfolio has ceased to so
qualify or that it might not so qualify in the future.
7
<PAGE>
3.3 The Fund shall make every effort to enable each Portfolio to comply
with the diversification provisions of Section 817(h) of the Code and the
regulations issued thereunder relating to the diversification requirements for
variable life insurance policies and variable annuity contracts and any
prospective amendments or other modifications to Section 817 or regulations
thereunder, and shall notify the Insurer immediately upon having a reasonable
basis for believing that any Portfolio has ceased to comply.
3.4 The Insurer shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Insurer, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.5 The Insurer shall make every effort to maintain the treatment of the
Variable Contracts issued by the Insurer as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code, and
shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future.
3.6 The Insurer shall offer and sell the Variable Contracts issued by the
Insurer in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
8
<PAGE>
3.7 The Distributor shall sell and distribute the shares of the
Portfolios of the Fund in accordance with the applicable provisions of the
1933 Act, the 1934 Act, the 1940 Act, the NASD Rules of Fair Practice, and
state law.
3.8 During such time as the Fund engages in Mixed Funding or Shared
Funding, a majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act and the rules thereunder, and as
modified by any applicable orders of the SEC, except that if this provision of
this Section 3.8 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.9 The Insurer and its agents will not in any way recommend any proposal
or oppose or interfere with any reasonable proposal submitted by the Fund at a
meeting of owners of Variable Contracts or shareholders of the Fund, and will in
no way recommend, oppose, or interfere with the solicitation of proxies for Fund
shares held by Contract Owners, without the prior written consent of the Fund,
which consent may be withheld in the Fund's sole discretion.
3.10 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities
9
<PAGE>
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
ARTICLE IV. POTENTIAL CONFLICTS
4.1 During such time as the Fund engages in Mixed Funding or Shared
Funding, the parties hereto shall comply with the conditions in this Article IV.
4.2 The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Life Insurance Companies that invest in the
Fund. A material irreconcilable conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio of
the Fund are being managed; (e) a difference in voting instructions given by
variable annuity and variable life insurance contract owners; or (f) a decision
by a Participating Insurance Company to disregard the voting instructions of
Variable Contract Owners.
4.3 The Insurer agrees that it shall report any potential or existing
conflicts of which it is aware to the Fund's Board of Trustees. The Insurer will
be responsible for assisting the Board of Trustees of the Fund in carrying out
its responsibilities under the Mixed and Shared Funding Exemptive Order, or, if
the Fund is engaged in Mixed
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<PAGE>
Funding or Shared Funding in reliance on Rule 6e-2, 6e-3(T), or any other
regulation under the 1940 Act, the Insurer will be responsible for assisting the
Board of Trustees of the Fund in carrying out its responsibilities under such
regulation, by providing the Board with all information reasonably necessary for
the Board to consider any issues raised. This includes, but is not limited to,
an obligation by the Insurer to inform the Board whenever Variable Contract
Owner voting instructions are disregarded. The Insurer shall carry out its
responsibility under this Section 4.3 with a view only to the interests of the
Variable Contract Owners.
4.4 The Insurer agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Insurer shall, at its expense and to the extent reasonably practicable (as
determined by a majority of the disinterested Trustees of the Board of the
Fund), take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, up to and including: (1) withdrawing the
assets allocable to some or all of the Separate Accounts from the Fund or any
Portfolio and reinvesting such assets in a different investment medium,
including another portfolio of the Fund, or submitting the question as to
whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (I.E., annuity contract owners or life insurance contract
owners of contracts issued by one or more Participating Insurance Companies),
that votes in favor of such segregation, or offering to the affected Variable
Contract Owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account. If a
material irreconcilable conflict arises because of the Insurer's decision to
disregard Variable Contract Owners' voting instructions and that decision
represents a minority position or would preclude a majority vote, the Insurer
shall be required, at the Fund's
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<PAGE>
election, to withdraw the Separate Accounts' investment in the Fund, provided,
however, that such withdrawal and termination shall be limited to the extent
required by the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees, and no charge or penalty will be imposed
as a result of such withdrawal. These responsibilities shall be carried out with
a view only to the interests of the Variable Contract Owners. A majority of the
disinterested Trustees of the Fund shall determine whether or not any proposed
action adequately remedies any material irreconcilable conflict, but in no event
will the Fund or its investment adviser or the Distributor be required to
establish a new funding medium for any Variable Contract. The Insurer shall not
be required by this Section 4.4 to establish a new funding medium for any
Variable Contract if any offer to do so has been declined by vote of a majority
of Variable Contract Owners materially adversely affected by the material
irreconcilable conflict.
4.5 The Insurer, at least annually, shall submit to the Fund's Board of
Trustees such reports, materials, or data as the Board reasonably may request so
that the Trustees of the Fund may fully carry out the obligations imposed upon
the Board by the conditions contained in the application for the Mixed and
Shared Funding Exemptive Order and said reports, materials, and data shall be
submitted more frequently if deemed appropriate by the Board.
4.6 All reports of potential or existing conflicts received by the Fund's
Board of Trustees, and all Board action with regard to determining the existence
of a conflict, notifying Participating Insurance Companies of a conflict, and
determining whether any proposed action adequately remedies a conflict, shall be
properly recorded in the minutes of the Board of Trustees of the Fund or other
appropriate records, and such minutes or other records shall be made available
to the SEC upon request.
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4.7 The Board of Trustees of the Fund shall promptly notify the
Insurer in writing of its determination of the existence of an irreconcilable
material conflict and its implications.
ARTICLE V. PROSPECTUSES AND PROXY STATEMENTS; VOTING
5.1 The Insurer shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Insurer as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2 The Distributor shall provide the Insurer with as many copies of the
current prospectus of the Fund as the Insurer may reasonably request. If
requested by the Insurer in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy or electronically) and other assistance as is reasonably
necessary in order for the Insurer to either print a stand-alone document or
print together in one document the current prospectus for the Variable Contracts
issued by the Insurer and the current prospectus for the Fund, or a document
combining the Fund prospectus with prospectuses of other funds in which the
Variable Contracts may be invested. The Fund shall bear the expense of printing
copies of its current prospectus that will be distributed to existing Variable
Contract Owners, and the Insurer shall bear the expense of printing copies of
the Fund's prospectus that are used in connection with offering the Variable
Contracts issued by the Insurer.
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5.3 The Fund and the Distributor shall provide, at the Fund's expense,
such copies of the Fund's current Statement of Additional Information ("SAI")
as may reasonably be requested, to the Insurer and to any owner of a Variable
Contract issued by the Insurer who requests such SAI.
5.4 The Fund, at its expense, shall provide the Insurer with copies of
its proxy statements, periodic reports to shareholders, and other
communications to shareholders in such quantity as the Insurer shall
reasonably require for purposes of distributing to owners of Variable
Contracts issued by the Insurer. The Fund, at the Insurer's expense, shall
provide the Insurer with copies of its periodic reports to shareholders and
other communications to shareholders in such quantity as the Insurer shall
reasonably request for use in connection with offering the Variable Contracts
issued by the Insurer. If requested by the Insurer in lieu thereof, the Fund
shall provide such documentation (including a final copy of the Fund's proxy
statements, periodic reports to shareholders, and other communications to
shareholders, as set in type or in camera-ready copy or electronically) and
other assistance as reasonably necessary in order for the Insurer to print
such shareholder communications for distribution to owners of Variable
Contracts issued by the Insurer.
5.5 For so long as the SEC interprets the 1940 Act to require
pass-through voting by Participating Insurance Companies whose Separate
Accounts are registered as investment companies under the 1940 Act, the
Insurer shall vote shares of each Portfolio of the Fund held in a Separate
Account or a subaccount thereof, whether or not registered under the 1940
Act, at regular and special meetings of the Fund in accordance with
instructions timely received by the Insurer (or its designated agent) from
owners of Variable Contracts funded by such Separate Account or subaccount
thereof having a voting interest in the Portfolio. The Insurer shall vote
shares of a
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<PAGE>
Portfolio of the Fund held in a Separate Account or a subaccount thereof that
are attributable to the Variable Contracts as to which no timely instructions
are received, as well as shares held in such Separate Account or subaccount
thereof that are not attributable to the Variable Contracts and owned
beneficially by the Insurer (resulting from charges against the Variable
Contracts or otherwise), in the same proportion as the votes cast by owners of
the Variable Contracts funded by that Separate Account or subaccount thereof
having a voting interest in the Portfolio from whom instructions have been
timely received. The Insurer shall vote shares of each Portfolio of the Fund
held in its general account, if any, in the same proportion as the votes cast
with respect to shares of the Portfolio held in all Separate Accounts of the
Insurer or subaccounts thereof, in the aggregate.
5.6 During such time as the Fund engages in Mixed Funding or Shared
Funding, the Fund shall disclose in its prospectus that (1) the Fund is intended
to be a funding vehicle for variable annuity and variable life insurance
contracts offered by various insurance companies, (2) material irreconcilable
conflicts possibly may arise, and (3) the Board of Trustees of the Fund will
monitor events in order to identify the existence of any material irreconcilable
conflicts and to determine what action, if any, should be taken in response to
any such conflict. The Fund hereby notifies the Insurer that prospectus
disclosure may be appropriate regarding potential risks of offering shares of
the Fund to separate accounts funding both variable annuity contracts and
variable life insurance policies and to separate accounts funding Variable
Contracts of unaffiliated life insurance companies.
ARTICLE VI. SALES MATERIAL AND INFORMATION
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6.1 The Insurer shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund (or any Portfolio thereof) or its investment
adviser or the Distributor is named at least 15 days prior to the anticipated
use of such material, and no such sales literature or other promotional
material shall be used unless the Fund and the Distributor or the designee of
either approve the material or do not respond with comments on the material
within 15 days from receipt of the material.
6.2 The Insurer agrees that neither it nor any of its affiliates or
agents shall give any information or make any representations or statements
on behalf of the Fund or concerning the Fund other than the information or
representations contained in the Registration Statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the
Fund, or in sales literature or other promotional material approved by the
Fund or its designee and by the Distributor or its designee, except with the
permission of the Fund or its designee and the Distributor or its designee.
6.3 The Fund or the Distributor or the designee of either shall
furnish to the Insurer or its designee, each piece of sales literature or
other promotional material in which the Insurer or its Separate Accounts are
named at least 15 days prior to the anticipated use of such material, and no
such material shall be used unless the Insurer or its designee approves the
material or does not respond with comments on the material within 15 days
from receipt of the material.
6.4 The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Insurer or concerning the Insurer, the Separate Accounts, or the
Variable Contracts
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<PAGE>
issued by the Insurer, other than the information or representations contained
in a registration statement or prospectus for such Variable Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in reports for the Separate Accounts or prepared for distribution to
owners of such Variable Contracts, or in sales literature or other promotional
material approved by the Insurer or its designee, except with the permission of
the Insurer.
6.5 The Fund will provide to the Insurer at least one complete copy of
the Mixed and Shared Funding Exemptive Application and any amendments
thereto, all prospectuses, Statements of Additional Information, reports,
proxy statements and other voting solicitation materials, and all amendments
and supplements to any of the above, that relate to the Fund or its shares,
promptly after the filing of such document with the SEC or other regulatory
authorities.
6.6 The Insurer will provide to the Fund all prospectuses (which shall
include an offering memorandum if the Variable Contracts issued by the Insurer
or interests therein are not registered under the 1933 Act), Statements of
Additional Information, reports, solicitations for voting instructions relating
to the Fund, and all amendments or supplements to any of the above that relate
to the Variable Contracts issued by the Insurer or the Separate Accounts which
utilize the Fund as an underlying investment medium, promptly after the filing
of such document with the SEC or other regulatory authority.
6.7 For purposes of this Article VI, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine,
or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion
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pictures, computerized media, or other public media), sales literature (I.E.,
any written communication distributed or made generally available to customers
or the public, including brochures, circulars, research reports, market letters,
form letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials or
other communications distributed or made generally available to some or all
agents or employees.
ARTICLE VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY THE INSURER
7.1(a) The Insurer agrees to indemnify and hold harmless the Fund,
each of its Trustees and officers, any affiliated person of the Fund within
the meaning of Section 2(a)(3) of the 1940 Act, and the Distributor
(collectively, the "Indemnified Parties" for purposes of this Section 7.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Insurer) or litigation
expenses (including legal and other expenses), to which the Indemnified
Parties may become subject under any statute or regulation, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
litigation expenses are related to the sale or acquisition of the Fund's
shares or the Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus (which shall include an
offering memorandum) for the Variable Contracts issued by the
Insurer or sales literature for such Variable Contracts (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, provided that this agreement
to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made
in reliance upon and in conformity with information furnished to
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the Insurer by or on behalf of the Fund for use in the registration
statement or prospectus for the Variable Contracts issued by the
Insurer or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of such Variable
Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations contained
in the registration statement, prospectus or sales literature of the
Fund not supplied by the Insurer or persons under its control) or
wrongful conduct of the Insurer or any of its affiliates, employees
or agents with respect to the sale or distribution of the Variable
Contracts issued by the Insurer or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof
or supplement thereto or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading if such a statement or
omission was made in reliance upon information furnished to the Fund
by or on behalf of the Insurer; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Insurer in this Agreement
or arise out of or result from any other material breach of this
Agreement by the Insurer;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b) The Insurer shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Fund.
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7.1(c) The Insurer shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Insurer in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Party shall have received notice of such service on any designated agent), but
failure to notify the Insurer of any such claim shall not relieve the Insurer
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Insurer
shall be entitled to participate, at its own expense, in the defense of such
action. The Insurer also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Insurer to such party of the Insurer's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Insurer will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
7.1(d) The Indemnified Parties shall promptly notify the Insurer of
the commencement of any litigation or proceedings against them in connection
with the issuance or sale of the Fund shares or the Variable Contracts issued by
the Insurer or the operation of the Fund.
7.2 INDEMNIFICATION BY THE DISTRIBUTOR
7.2(a) The Distributor agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable Contracts, and
each of their directors and officers and any affiliated person of the Insurer
within the meaning
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of Section 2(a)(3) of the 1940 Act (collectively, the "Indemnified Parties" for
purposes of this Section 7.2) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Distributor) or litigation expenses (including legal and other expenses) to
which the Indemnified Parties may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims, damages,
liabilities or litigation expenses are related to the sale or acquisition of the
Fund's shares or the Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of 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, provided
that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished to the Distributor or the Fund or the
designee of either by or on behalf of the Insurer for use in the
registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use in
the registration statement or prospectus for the Fund or in sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Variable Contracts issued by the
Insurer or Fund shares; or
(ii) arise out of or as a result of any statement or
representations (other than statements or representations contained
in the registration statement, prospectus or sales literature for
the Variable Contracts not supplied by the Distributor or any
employees or agents thereof) or wrongful conduct of the Fund or
Distributor, or the affiliates, employees, or agents of the Fund or
the Distributor with respect to the sale or distribution of the
Variable Contracts issued by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Contracts
issued by the Insurer, or any amendment thereof or supplement
thereto, or the omission or alleged
21
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omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor in this
Agreement or arise out of or result from any other material breach
of this Agreement by the Distributor;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b) The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
7.2(c) The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at is own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from
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<PAGE>
the Distributor to such party of the Distributor's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Distributor will not be liable to
such party under this Agreement for any legal or other expense subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
7.2(d) The Insurer shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the operation of the Separate Accounts.
7.3 INDEMNIFICATION BY THE FUND
7.3(a) The Fund agrees to indemnify and hold harmless the
Insurer, its affiliated principal underwriter of the Variable
Contracts, and each of their directors and officers and any
affiliated person of the Insurer within the meaning of Section
2(a)(3) of the 1940 Act (collectively, the "Indemnified Parties" for
purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the
written consent of the Fund) or litigation expenses (including legal
and other expenses) to which the Indemnified Parties may become
subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or litigation
expenses are related to the sale or acquisition of the Fund's shares
or the Variable Contracts issued by the Insurer and:
(i) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the registration statement or prospectus or sales literature
of 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, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement
23
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or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished to
the Distributor or the Fund or the designee of either by or on
behalf of the Insurer for use in the registration statement or
prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Variable Contracts issued by the Insurer
or Fund shares; or
(ii) arise out of or as a result of any statement or
representation (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful
conduct of the Fund, or the affiliates, employees, or agents
of the Fund, with respect to the sale or distribution of the
Variable Contracts issued by the Insurer or Fund shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a
registration statement, prospectus or sales literature
covering the Variable Contracts issued by the Insurer, or any
amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to
the Insurer by or on behalf of the Fund; or
(iv) arise out of or result from any material breach of
any representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
except to the extent provided in Sections 7.3(b) and 7.3(c) hereof.
7.3(b) The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Indemnified Party's duties or by reason of the Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to the Insurer or the
Separate Accounts.
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7.3(c) The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such party shall have notified the Fund in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Party shall have received notice of such service on any designated agent), but
failure to notify the Fund of any such claim shall not relieve the Fund from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The Fund
also shall be entitled to assume the defense thereof, with counsel satisfactory
to the party named in the action. After notice from the Fund to such party of
the Fund's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Fund will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.3(d) The Insurer shall promptly notify the Fund of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Contracts
issued by the Insurer or the sale of the Fund's shares.
ARTICLE VIII. APPLICABLE LAW
8.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Pennsylvania.
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8.2 This Agreement shall be subject to the provisions of the 1933,
1934, and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant (including, but not limited to, the Mixed and Shared Funding Exemptive
Order), and the terms hereof shall be interpreted and construed in accordance
therewith.
ARTICLE IX. TERMINATION
9.1 This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written
notice to the other parties; or
(b) at the option of the Insurer if shares of the Portfolios
are not reasonably available to meet the requirements of the Variable Contracts
issued by the Insurer, as determined by the Insurer, and upon prompt notice by
the Insurer to the other parties; or
(c) at the option of the Fund or the Distributor upon institution
of formal proceedings against the Insurer or its agent by the NASD, the SEC, or
any state securities or insurance department or any other regulatory body
regarding the Insurer's duties under this Agreement or related to the sale of
the Variable Contracts issued by the Insurer, the operation of the Separate
Accounts, or the purchase of the Fund shares; or
26
<PAGE>
(d) at the option of the Insurer upon institution of formal
proceedings against the Fund or the Distributor by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having
an interest in the Separate Accounts (or any subaccounts thereof) to substitute
the shares of another investment company for the corresponding shares of the
Fund or a Portfolio in accordance with the terms of the Variable Contracts for
which those shares had been selected or serve as the underlying investment
media; or
(f) in the event any of the shares of a Portfolio are not
registered, issued or sold in accordance with applicable state and/or federal
law, or such law precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the Insurer; or
(g) by any party to the Agreement upon a determination by a
majority of the Trustees of the Fund, or a majority of its disinterested
Trustees, that an irreconcilable conflict, as described in Article IV hereof,
exists; or
(h) at the option of the Insurer if the Fund or a Portfolio
fails to meet the requirements under Subchapter M of the Code for qualification
as a Regulated Investment Company specified in Section 3.2 hereof or the
diversification requirements specified in Section 3.3 hereof.
9.2 Each party to this Agreement shall promptly notify the other
parties to the Agreement of the institution against such party of any such
formal proceedings as described in Sections 9.1(c) and (d) hereof. The Insurer
shall give 60 days prior
27
<PAGE>
written notice to the Fund of the date of any proposed vote of Variable Contract
Owners to replace the Fund's shares as described in Section 9.1(e) hereof.
9.3 Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Insurer
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Insurer (as opposed to Fund shares attributable to the Insurer's assets held
in the Separate Accounts), and the Insurer shall not prevent Variable Contract
Owners from allocating payments to a Portfolio, until 60 days after the Insurer
shall have notified the Fund or Distributor of its intention to do so.
9.4 Notwithstanding any termination of this Agreement, the Fund and the
Distributor shall at the option of the Insurer continue to make available
additional shares of the Fund pursuant to the terms and conditions of this
Agreement, for all Variable Contracts in effect on the effective date of
termination of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, based upon instructions from the owners of the
Existing Contracts, the Separate Accounts shall be permitted to reallocate
investments in the Portfolios of the Fund and redeem investments in the
Portfolios, and shall be permitted to invest in the Portfolios in the event that
owners of the Existing Contracts make additional purchase payments under the
Existing Contracts. If this Agreement terminates, the parties agree that
Sections 3.10, 7.1, 7.2, 7.3, 8.1, and 8.2, and, to the extent that all or a
portion of the assets of the Separate Accounts continue to be invested in the
Fund or any Portfolio of the Fund, Articles I, II, and IV and Sections 5.5 and
5.6 will remain in effect after termination.
ARTICLE X. NOTICES
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Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
Insurance Series
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Distributor:
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Attn.: John W. McGonigle
If to the Insurer:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
Attention: Richard M. Reilly, President
ARTICLE XI: MISCELLANEOUS
11.1 The Fund and the Insurer agree that if and to the extent Rule
6e-2 or Rule 6e-3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in
final form, to the extent applicable, the Fund and the Insurer shall each take
such steps as may be necessary to comply with the Rule as amended or adopted in
final form.
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11.2 A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that any agreements that are executed on behalf of the Fund by any Trustee
or officer of the Fund are executed in his or her capacity as Trustee or officer
and not individually. The obligations of this Agreement shall only be binding
upon the assets and property of the Fund and shall not be binding upon any
Trustee, officer or shareholder of the Fund individually.
11.3 Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Portfolios from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Insurer upon request.
11.4 Administrative services to Variable Contract Owners shall be the
responsibility of Insurer. Insurer, on behalf of its separate accounts will be
the sole shareholder of record of Fund shares. Fund and Distributor recognize
that they will derive a substantial savings in administrative expense by virtue
of having a sole shareholder rather than multiple shareholders. In consideration
of the administrative savings resulting from having a sole shareholder rather
than multiple shareholders, Distributor agrees to pay to Insurer an amount
computed at an annual rate of .25 of 1% of the average daily net asset value of
shares held in subaccounts for which Insurer provides administrative services.
Distributor's payments to Insurer are for administrative services only and do
not constitute payment in any manner for investment advisory services.
11.5 It is understood that the name "Federated" or any derivative
thereof or logo associated with that name is the valuable property of the
Distributor and its
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affiliates, and that the Insurer has the right to use such
name (or derivative or logo) only so long as this Agreement is in effect. Upon
termination of this Agreement the Insurer shall forthwith cease to use such name
(or derivative or logo).
11.6 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.7 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.8 If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.9 This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
INSURANCE SERIES
ATTEST: /s/ Amanda J. Reed BY: /s/ John W. McGonigle
Name: Amanda J. Reed Name: John W. McGonigle
------------------- ----------------------
Title: Associate Corporate Counsel Title: Executive Vice Resident
--------------------------- ----------------------
FEDERATED SECURITIES CORP.
ATTEST: /s/ Amanda J. Reed BY:/s/ Richard B. Fisher
Name: Amanda J. Reed Name: Richard B. Fisher
---------------------------- -----------------------
Title: Associate Corporate Counsel Title: Chairman
---------------------------- ----------------------
ALLMERICA FINANCIAL LIFE
INSURANCE AND ANNUITY
COMPANY
ATTEST: /s/ Thomas A. Pierce Jr. BY:/s/ Richard M. Reilly
--------------------------- --------------------------
Name: Thomas A. Pierce Jr. Name: Richard M. Reilly
---------------------------- ----------------------
Title: Assistant Vice President And Counsel Title: President
------------------------------------ ----------------------
32
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EXHIBIT A
FUVUL Separate Account
33
<PAGE>
EXHIBIT B
American Leaders Fund II
High Income Bond Fund II
Prime Money Fund II
34
<PAGE>
PARTICIPATION AGREEMENT
as of March 1, 2000
Franklin Templeton Variable Insurance Products Trust
Templeton Variable Products Series Fund
Franklin Templeton Distributors, Inc.
Allmerica Financial Life Insurance and Annuity Company
First Allmerica Financial Life Insurance Company
CONTENTS
PARAGRAPH SUBJECT MATTER
1. Parties and Purpose
2. Representations and Warranties
3. Purchase and Redemption of Trust Portfolio Shares
4. Fees, Expenses, Prospectuses, Proxy Materials and Reports
5. Voting
6. Sales Material, Information and Trademarks
7. Indemnification
8. Notices
9. Termination
10. Miscellaneous
SCHEDULES TO THIS AGREEMENT
A. The Company
B. Accounts of the Company
C. Available Portfolios and Classes of Shares of the Trust; Investment
Advisers
D. Contracts of the Company
E. Other Portfolios Available under the Contracts
F. Rule 12b-1 Plans of the Trust
G. Addresses for Notices
H. Shared Funding Order
1. PARTIES AND PURPOSE
This agreement (the "Agreement") is between Franklin Templeton Variable
Insurance Products Trust, an open-end management investment company organized as
a business trust under Massachusetts law ("FTVIP"), Templeton Variable Products
Series Fund, an open-end management investment company organized as a business
trust under Massachusetts law ("TVP," referred to in this Agreement together
with FTVIP as the "Trust"), Franklin Templeton
<PAGE>
Distributors, Inc., a California corporation which is the principal underwriter
for the Trust (the "Underwriter," and together with the Trust, "we" or "us") and
the insurance company identified on Schedule A ("you"), on your own behalf and
on behalf of each segregated asset account maintained by you that is listed on
Schedule B, as that schedule may be amended from time to time ("Account" or
"Accounts").
On October 21 and 22, 1999, the FTVIP and TVP Boards of Trustees approved a
proposal to merge the funds of TVP into the corresponding funds of FTVIP (the
"Reorganization"). If approved by TVP shareholders, the Reorganization is
expected to be completed around May 1, 2000, after which it is anticipated that
TVP will deregister as an investment company and dissolve as a business trust.
You and we agree that, after the completion of the Reorganization, TVP will no
longer be a party to this Agreement and the representations and warranties of
the Trust provided in this Agreement will no longer be made by TVP and will be
made solely by FTVIP.
The purpose of this Agreement is to entitle you, on behalf of the Accounts,
to purchase the shares, and classes of shares, of portfolios of the Trust
("Portfolios") that are identified on Schedule C, solely for the purpose of
funding benefits of your variable life insurance policies or variable annuity
contracts ("Contracts") that are identified on Schedule D. This Agreement does
not authorize any other purchases or redemptions of shares of the Trust.
2. REPRESENTATIONS AND WARRANTIES
(A) REPRESENTATIONS AND WARRANTIES BY YOU
You represent and warrant that:
1. You are an insurance company duly organized and in good
standing under the laws of your state of incorporation.
2. All of your directors, officers, employees, and other
individuals or entities dealing with the money and/or securities of the Trust
are and shall be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust, in an amount not less than $5 million.
Such bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. You agree to make all reasonable efforts
to see that this bond or another bond containing such provisions is always in
effect, and you agree to notify us in the event that such coverage no longer
applies.
3. Each Account is a duly organized, validly existing segregated
asset account under applicable insurance law and interests in each Account are
offered exclusively through the purchase of or transfer into a "variable
contract" within the meaning of such terms under Section 817 of the Internal
Revenue Code of 1986, as amended ("Code") and the regulations thereunder. You
will use your best efforts to continue to meet such definitional requirements,
and will notify us immediately upon having a reasonable basis for believing that
such requirements have ceased to be met or that they might not be met in the
future.
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<PAGE>
4. Each Account either: (i) has been registered or, prior to any
issuance or sale of the Contracts, will be registered as a unit investment trust
under the Investment Company Act of 1940 ("1940 Act"); or (ii) has not been so
registered in proper reliance upon an exemption from registration under Section
3(c) of the 1940 Act; if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, you will make every
effort to maintain such exemption and will notify us immediately upon having a
reasonable basis for believing that such exemption no longer applies or might
not apply in the future.
5. The Contracts or interests in the Accounts: (i) are or,
prior to any issuance or sale will be, registered as securities under the
Securities Act of 1933, as amended (the "1933 Act"); or (ii) are not registered
because they are properly exempt from registration under Section 3(a)(2) of the
1933 Act or will be offered exclusively in transactions that are properly exempt
from registration under Section 4(2) or Regulation D of the 1933 Act, in which
case you will make every effort to maintain such exemption and will notify us
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future.
6. The Contracts: (i) will be sold by broker-dealers, or their
registered representatives, who are registered with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934, as amended
(the "1934 Act") and who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); (ii) will be issued and
sold in compliance in all material respects with all applicable federal and
state laws; and (iii) will be sold in compliance in all material respects with
state insurance suitability requirements and NASD suitability guidelines.
7. The Contracts currently are and will be treated as annuity
contracts or life insurance contracts under applicable provisions of the Code
and you will use your best efforts to maintain such treatment; you will notify
us immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future.
8. The fees and charges deducted under each Contract, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by you.
9. You will use shares of the Trust only for the purpose of
funding benefits of the Contracts through the Accounts.
10. Contracts will not be sold outside of the United States.
11. With respect to any Accounts which are exempt from
registration under the 1940 Act in reliance on 3(c)(1) or Section 3(c)(7)
thereof:
a. the principal underwriter for each such Account and any
subaccounts thereof is a registered broker-dealer with
the SEC under the 1934 Act;
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b. the shares of the Portfolios of the Trust are and will
continue to be the only investment securities held by
the corresponding subaccounts; and
c. with regard to each Portfolio, you, on behalf of the
corresponding subaccount; will:
(i) vote such shares held by it in the same
proportion as the vote of all other holders of
such shares; and
(ii) refrain from substituting shares of another
security for such shares unless the SEC has
approved such substitution in the manner
provided in Section 26 of the 1940 Act.
(B) REPRESENTATIONS AND WARRANTIES BY THE TRUST
The Trust represents and warrants that:
1. It is duly organized and in good standing under the laws of
the State of Massachusetts.
2. All of its directors, officers, employees and others dealing
with the money and/or securities of a Portfolio are and shall be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Trust in an amount not less that the minimum coverage required by Rule 17g-1 or
other regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3. It is registered as an open-end management investment company
under the 1940 Act.
4. Each class of shares of the Portfolios of the Trust is
registered under the 1933 Act.
5. It will amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares.
6. It will comply, in all material respects, with the 1933 and
1940 Acts and the rules and regulations thereunder.
7. It is currently qualified as a "regulated investment company"
under Subchapter M of the Code, it will make every effort to maintain such
qualification, and will notify you immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
8. The investments of each Portfolio will comply with the
diversification requirements for variable annuity, endowment or life insurance
contracts set forth in
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Section 817(h) of the Code, and the rules and regulations thereunder, including
without limitation Treasury Regulation 1.817-5. Upon having a reasonable basis
for believing any Portfolio has ceased to comply and will not be able to comply
within the grace period afforded by Regulation 1.817-5, the Trust will notify
you immediately and will take all reasonable steps to adequately diversify the
Portfolio to achieve compliance.
9. It currently intends for one or more classes of shares (each,
a "Class") to make payments to finance its distribution expenses, including
service fees, pursuant to a plan ("Plan") adopted under rule 12b-1 under the
1940 Act ("Rule 12b-1"), although it may determine to discontinue such practice
in the future. To the extent that any Class of the Trust finances its
distribution expenses pursuant to a Plan adopted under rule 12b-1, the Trust
undertakes to comply with any then current SEC interpretations concerning rule
12b-1 or any successor provisions.
(C) REPRESENTATIONS AND WARRANTIES BY THE UNDERWRITER
The Underwriter represents and warrants that:
1. It is registered as a broker dealer with the SEC under the
1934 Act, and is a member in good standing of the NASD.
2. Each investment adviser listed on Schedule C (each, an
"Adviser") is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and any applicable state securities law.
(D) WARRANTY AND AGREEMENT BY BOTH YOU AND US
We received an order from the SEC dated November 16, 1993 (file no.
812-8546), which was amended by a notice and an order we received on September
17, 1999 and October 13, 1999, respectively (file no. 812-11698) (collectively,
the "Shared Funding Order," attached to this Agreement as Schedule H). The
Shared Funding Order grants exemptions from certain provisions of the 1940 Act
and the regulations thereunder to the extent necessary to permit shares of the
Trust to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
and qualified pension and retirement plans outside the separate account context.
You and we both warrant and agree that both you and we will comply with the
"Applicants' Conditions" prescribed in the Shared Funding Order as though such
conditions were set forth verbatim in this Agreement, including, without
limitation, the provisions regarding potential conflicts of interest between the
separate accounts which invest in the Trust and regarding contract owner voting
privileges.
3. PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
(a) We will make shares of the Portfolios available to the Accounts for
the benefit of the Contracts. The shares will be available for purchase at the
net asset value per share next computed after we (or our agent) receive a
purchase order, as established in accordance with the
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provisions of the then current prospectus of the Trust. Notwithstanding the
foregoing, the Trust's Board of Trustees ("Trustees") may refuse to sell shares
of any Portfolio to any person, or may suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or if, in the sole discretion of the Trustees,
they deem such action to be in the best interests of the shareholders of such
Portfolio. Without limiting the foregoing, the Trustees have determined that
there is a significant risk that the Trust and its shareholders may be adversely
affected by investors whose purchase and redemption activity follows a market
timing pattern, and have authorized the Trust, the Underwriter and the Trust's
transfer agent to adopt procedures and take other action (including, without
limitation, rejecting specific purchase orders) as they deem necessary to
reduce, discourage or eliminate market timing activity. You agree to cooperate
with us to assist us in implementing the Trust's restrictions on purchase and
redemption activity that follows a market timing pattern.
(b) We agree that shares of the Trust will be sold only to life
insurance companies which have entered into fund participation agreements with
the Trust ("Participating Insurance Companies") and their separate accounts or
to qualified pension and retirement plans in accordance with the terms of the
Shared Funding Order. No shares of any Portfolio will be sold to the general
public.
(c) You agree that all net amounts available under the Contracts shall
be invested in the Trust or in your general account. Net amounts available under
the Contracts may also be invested in an investment company other than the Trust
if: (i) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of the Portfolios; or (ii) you give us forty-five (45)
days written notice of your intention to make such other investment company
available as a funding vehicle for the Contracts; or (iii) such other investment
company is available as a funding vehicle for the Contracts at the date of this
Agreement and you so inform us prior to our signing this Agreement (a list of
such investment companies appears on Schedule E to this Agreement); or (iv) we
consent in writing to the use of such other investment company.
(d) You shall be the designee for us for receipt of purchase orders and
requests for redemption resulting from investment in and payments under the
Contracts ("Instructions"). The Business Day on which such Instructions are
received in proper form by you and time stamped by the close of trading will be
the date as of which Portfolio shares shall be deemed purchased, exchanged, or
redeemed as a result of such Instructions. Instructions received in proper form
by you and time stamped after the close of trading on any given Business Day
shall be treated as if received on the next following Business Day. You warrant
that all orders, Instructions and confirmations received by you which will be
transmitted to us for processing on a Business Day will have been received and
time stamped prior to the Close of Trading on that Business Day. Instructions we
receive after 9 a.m. Eastern Time shall be processed on the next Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Trust calculates its net asset value pursuant to
the rules of the SEC and its current prospectus.
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(e) We shall calculate the net asset value per share of each Portfolio
on each Business Day, and shall communicate these net asset values to you or
your designated agent on a daily basis as soon as reasonably practical after the
calculation is completed (normally by 6:30 p.m. Eastern time).
(f) You shall submit payment for the purchase of shares of a Portfolio
on behalf of an Account no later than the close of business on the next Business
Day after we receive the purchase order. Payment shall be made in federal funds
transmitted by wire to the Trust or to its designated custodian.
(g) We will redeem any full or fractional shares of any Portfolio, when
requested by you on behalf of an Account, at the net asset value next computed
after receipt by us (or our agent) of the request for redemption, as established
in accordance with the provisions of the then current prospectus of the Trust.
We shall make payment for such shares in the manner we establish from time to
time, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act. Payments for the purchase or redemption of shares by
you may be netted against one another on any Business Day for the purpose of
determining the amount of any wire transfer on that Business Day.
(h) Issuance and transfer of the Portfolio shares will be by book entry
only. Stock certificates will not be issued to you or the Accounts. Portfolio
shares purchased from the Trust will be recorded in the appropriate title for
each Account or the appropriate subaccount of each Account.
(i) We shall furnish, on or before the ex-dividend date, notice to you
of any income dividends or capital gain distributions payable on the shares of
any Portfolio. You hereby elect to receive all such income dividends and capital
gain distributions as are payable on shares of a Portfolio in additional shares
of that Portfolio, and you reserve the right to change this election in the
future. We will notify you of the number of shares so issued as payment of such
dividends and distributions.
4. FEES, EXPENSES, PROSPECTUSES, PROXY MATERIALS AND REPORTS
(a) We shall pay no fee or other compensation to you under this
Agreement except as provided on Schedule F, if attached.
(b) We shall prepare and be responsible for filing with the SEC, and any
state regulators requiring such filing, all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
We shall bear the costs of preparation and filing of the documents listed in the
preceding sentence, registration and qualification of the Trust's shares of the
Portfolios.
(c) We shall use reasonable efforts to provide you, on a timely basis,
with such information about the Trust, the Portfolios and each Adviser, in such
form as you may
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reasonably require, as you shall reasonably request in connection with the
preparation of disclosure documents and annual and semi-annual reports
pertaining to the Contracts.
(d) At your request, we shall provide you with camera ready copy, in a
form suitable for printing, of portions of the Trust's current prospectus,
annual report, semi-annual report and other shareholder communications,
including any amendments or supplements to any of the foregoing, pertaining
specifically to the Portfolios. We shall delete information relating to series
of the Trust other than the Portfolios to the extent practicable. We shall
provide you with a copy of the Trust's current statement of additional
information, including any amendments or supplements, in a form suitable for you
to duplicate. The expenses of furnishing such documents shall be borne by you.
You shall bear the costs of distributing prospectuses and statements of
additional information to Contract owners.
(e) We shall provide you, at our expense, with copies of any
Trust-sponsored proxy materials in such quantity as you shall reasonably require
for distribution to Contract owners who are invested in a designated subaccount.
You shall bear the costs of distributing proxy materials (or similar materials
such as voting solicitation instructions) to Contract owners.
(f) You assume sole responsibility for ensuring that the Trust's
prospectuses, shareholder reports and communications, and proxy materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.
5. VOTING
(a) All Participating Insurance Companies shall have the obligations and
responsibilities regarding pass-through voting and conflicts of interest
corresponding to those contained in the Shared Funding Order.
(b) If and to the extent required by law, you shall: (i) solicit voting
instructions from Contract owners; (ii) vote the Trust shares in accordance with
the instructions received from Contract owners; and (iii) vote Trust shares for
which no instructions have been received in the same proportion as Trust shares
of such Portfolio for which instructions have been received; so long as and to
the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners. You reserve the
right to vote Trust shares held in any Account in your own right, to the extent
permitted by law.
(c) So long as, and to the extent that, the SEC interprets the 1940 Act
to require pass-through voting privileges for Contract owners, you shall provide
pass-through voting privileges to Contract owners whose Contract values are
invested, through the Accounts, in shares of one or more Portfolios of the
Trust. We shall require all Participating Insurance Companies to calculate
voting privileges in the same manner and you shall be responsible for assuring
that the Accounts calculate voting privileges in the manner established by us.
With respect to each Account, you will vote shares of each Portfolio of the
Trust held by an Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares held by that
Account for which voting instructions are received. You and your agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to
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fund the Contracts without our prior written consent, which consent may be
withheld in our sole discretion.
6. SALES MATERIAL, INFORMATION AND TRADEMARKS
(a) For purposes of this Section 6, "Sales literature or other
Promotional material" includes, but is not limited to, portions of the following
that use any logo or other trademark related to the Trust or Underwriter or
refer to the Trust or affiliates of the Trust: advertisements (such as material
published or designed for use in a newspaper, magazine or other periodical,
radio, television, telephone or tape recording, videotape display, signs or
billboards, motion pictures, electronic communication or other public media),
sales literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts or
any other advertisement, sales literature or published article or electronic
communication), educational or training materials or other communications
distributed or made generally available to some or all agents or employees in
any media, and disclosure documents, shareholder reports and proxy materials.
(b) You shall furnish, or cause to be furnished to us or our designee,
at least one complete copy of each registration statement, prospectus, statement
of additional information, private placement memorandum, retirement plan
disclosure information or other disclosure documents or similar information, as
applicable (collectively "disclosure documents"), as well as any report,
solicitation for voting instructions, Sales literature or other Promotional
materials, and all amendments to any of the above that relate to the Contracts
or the Accounts prior to its first use. You shall furnish, or shall cause to be
furnished, to us or our designee each piece of Sales literature or other
Promotional material in which the Trust or an Adviser is named, at least fifteen
(15) Business Days prior to its proposed use. No such material shall be used
unless we or our designee approve such material and its proposed use.
(c) You and your agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser, other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Trust shares (as such registration statement and prospectus
may be amended or supplemented from time to time), annual and semi-annual
reports of the Trust, Trust-sponsored proxy statements, or in Sales literature
or other Promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.
(d) We shall not give any information or make any representations or
statements on behalf of you or concerning you, the Accounts or the Contracts
other than information or representations contained in and accurately derived
from disclosure documents for the Contracts (as such disclosure documents may be
amended or supplemented from time to time), or in materials approved by you for
distribution, including Sales literature or other Promotional materials, except
as required by legal process or regulatory authorities or with your written
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permission. We may use the names of you, the Accounts and the Contracts in our
sales literature and disclosure documents.
(e) Except as provided in Section 6(b), you shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Templeton" or any logo or other trademark relating to the Trust or the
Underwriter without prior written consent, and upon termination of this
Agreement for any reason, you shall cease all use of any such name or mark as
soon as reasonably practicable.
7. INDEMNIFICATION
(A) INDEMNIFICATION BY YOU
1. You agree to indemnify and hold harmless the Underwriter, the
Trust and each of its Trustees, officers, employees and agents and each person,
if any, who controls the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually the "Indemnified
Party" for purposes of this Section 7) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with your written
consent, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of
shares of the Trust or the Contracts and
a. arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
disclosure document for the Contracts or in the Contracts themselves
or in sales literature generated or approved by you on behalf of the
Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of this
Section 7), 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, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to you by or on behalf of
the Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
b. arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined below in Section 7(b)) or
wrongful conduct of you or persons under your control, with respect to
the sale or acquisition of the Contracts or Trust shares; or
c. arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined below in
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Section 7(b) or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of you; or
d. arise out of or result from any failure by you to provide
the services or furnish the materials required under the terms of this
Agreement;
e. arise out of or result from any material breach of any
representation and/or warranty made by you in this Agreement or arise
out of or result from any other material breach of this Agreement by
you; or
f. arise out of or result from a Contract failing to be
considered a life insurance policy or an annuity Contract, whichever
is appropriate, under applicable provisions of the Code thereby
depriving the Trust of its compliance with Section 817(h) of the Code.
2. You shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Trust or Underwriter, whichever is applicable.
You shall also not be liable under this indemnification provision with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified you in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify you of any such claim shall not relieve you from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, you shall be entitled to
participate, at your own expense, in the defense of such action. Unless the
Indemnified Party releases you from any further obligations under this Section
7(a), you also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from you to such
party of the your election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
you will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
3. The Indemnified Parties will promptly notify you of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.
(B) INDEMNIFICATION BY THE UNDERWRITER
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1. The Underwriter agrees to indemnify and hold harmless you, and
each of your directors and officers and each person, if any, who controls you
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually an "Indemnified Party" for purposes of this Section
7(b)) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Underwriter, which
consent shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim, damage,
liability or expense and reasonable legal counsel fees incurred in connection
therewith) (collectively, "Losses") to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such Losses
are related to the sale or acquisition of the shares of the Trust or the
Contracts and:
a. arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in the
Registration Statement, prospectus or sales literature of the Trust
(or any amendment or supplement to any of the foregoing)
(collectively, the "Trust Documents") 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, provided that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission of such alleged statement or omission was made in reliance
upon and in conformity with information furnished to us by or on
behalf of you for use in the Registration Statement or prospectus for
the Trust or in sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or
Trust shares; or
b. arise out of or as a result of statements or
representations (other than statements or representations contained in
the disclosure documents or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or wrongful
conduct of the Trust, Adviser or Underwriter or persons under their
control, with respect to the sale or distribution of the Contracts or
Trust shares; or
c. arise out of any untrue statement or alleged untrue
statement of a material fact contained in a disclosure document or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to you by or on behalf of the Trust; or
d. arise as a result of any failure by us to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the qualification representation specified
above in Section 2(b)(7) and the diversification requirements
specified above in Section 2(b)(8); or
e. arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this
Agreement or arise out of
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or result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions of
Sections 7(b)(2) and 7(b)(3) hereof.
2. The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to you or the Accounts, whichever
is applicable.
3. The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. Unless the Indemnified
Party releases the Underwriter from any further obligations under this Section
7(b), the Underwriter also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
4. You agree promptly to notify the Underwriter of the
commencement of any litigation or proceedings against you or the Indemnified
Parties in connection with the issuance or sale of the Contracts or the
operation of each Account.
(C) INDEMNIFICATION BY THE TRUST
1. The Trust agrees to indemnify and hold harmless you, and each
of your directors and officers and each person, if any, who controls you within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7(c)) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Trust, and arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of
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this Agreement by the Trust; as limited by and in accordance with the provisions
of Sections 7(c)(2) and 7(c)(3) hereof. It is understood and expressly
stipulated that neither the holders of shares of the Trust nor any Trustee,
officer, agent or employee of the Trust shall be personally liable hereunder,
nor shall any resort be had to other private property for the satisfaction of
any claim or obligation hereunder, but the Trust only shall be liable.
2. The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
you, the Trust, the Underwriter or each Account, whichever is applicable.
3. The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Trust of any
such claim shall not relieve the Trust from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. Unless the Indemnified Party releases
the Trust from any further obligations under this Section 7(c), the Trust also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Trust to such party of the
Trust's election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the Trust
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
4. You agree promptly to notify the Trust of the commencement
of any litigation or proceedings against you or the Indemnified Parties in
connection with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of the Account, or the sale or acquisition of shares of
the Trust.
8. NOTICES
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth in Schedule G below or
at such other address as such party may from time to time specify in writing to
the other party.
9. TERMINATION
(a) This Agreement may be terminated by any party in its entirety or
with respect to one, some or all Portfolios for any reason by sixty (60) days
advance written notice delivered to
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the other parties, and shall terminate immediately in the event of its
assignment, as that term is used in the 1940 Act.
(b) This Agreement may be terminated immediately by us upon written
notice to you if:
1. you notify the Trust or the Underwriter that the exemption
from registration under Section 3(c) of the 1940 Act no longer applies,
or might not apply in the future, to the unregistered Accounts, or that
the exemption from registration under Section 4(2) or Regulation D
promulgated under the 1933 Act no longer applies or might not apply in
the future, to interests under the unregistered Contracts; or
2. either one or both of the Trust or the Underwriter
respectively, shall determine, in their sole judgment exercised in good
faith, that you have suffered a material adverse change in your
business, operations, financial condition or prospects since the date
of this Agreement or are the subject of material adverse publicity; or
3. you give us the written notice specified above in Section
3(c) and at the same time you give us such notice there was no notice
of termination outstanding under any other provision of this Agreement;
provided, however, that any termination under this Section 9(b)(3)
shall be effective forty-five (45) days after the notice specified in
Section 3(c) was given; or
4. upon your assignment of this Agreement without our prior
written approval.
(c) If this Agreement is terminated for any reason, except as required
by the Shared Funding Order or pursuant to Section 9(b)(1), above, we shall, at
your option, continue to make available additional shares of any Portfolio and
redeem shares of any Portfolio pursuant to all of the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement. If this Agreement is terminated as required by the Shared
Funding Order, its provisions shall govern.
(d) The provisions of Sections 2 (Representations and Warranties) and
7 (Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 9(c), except that we shall have no further obligation
to sell Trust shares with respect to Contracts issued after termination.
(e) You shall not redeem Trust shares attributable to the Contracts
(as opposed to Trust shares attributable to your assets held in the Account)
except: (i) as necessary to implement Contract owner initiated or approved
transactions; (ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter referred
to as a "Legally Required Redemption"); or (iii) as permitted by an order of the
SEC pursuant to Section 26(b) of the 1940 Act. Upon request, you shall promptly
furnish to us the opinion of
15
<PAGE>
your counsel (which counsel shall be reasonably satisfactory to us) to the
effect that any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of the
Contracts, you shall not prevent Contract owners from allocating payments to a
Portfolio that was otherwise available under the Contracts without first giving
us ninety (90) days notice of your intention to do so.
10. MISCELLANEOUS
(a) The captions 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.
(b) This Agreement may be executed simultaneously in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.
(c) If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
(d) This Agreement shall be construed and its provisions interpreted
under and in accordance with the laws of the State of California. It shall also
be subject to the provisions of the federal securities laws and the rules and
regulations thereunder, to any orders of the SEC on behalf of the Trust granting
it exemptive relief, and to the conditions of such orders. We shall promptly
forward copies of any such orders to you.
(e) The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
(f) Each party to this Agreement shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
(g) Each party to this Agreement shall treat as confidential all
information reasonably identified as confidential in writing by any other party
to this Agreement, and, except as permitted by this Agreement or as required by
legal process or regulatory authorities, shall not disclose, disseminate, or use
such names and addresses and other confidential information until such time as
they may come into the public domain, without the express written consent of the
affected party. Without limiting the foregoing, no party to this Agreement shall
disclose any information that such party has been advised is proprietary, except
such information that such party is required to disclose by any appropriate
governmental authority (including, without limitation, the SEC, the NASD, and
state securities and insurance regulators).
16
<PAGE>
(h) 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.
(i) The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided above in
Section 3(c).
(j) Neither this Agreement nor any rights or obligations created by it
may be assigned by any party without the prior written approval of the other
parties.
(k) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
17
<PAGE>
IN WITNESS WHEREOF, each of the parties have caused their duly authorized
officers to execute this Agreement.
The Company: FIRST ALLMERICA FINANCIAL LIFE INSURANCE COMPANY
------------------------------------------------------
By: ___________________________________________
Name: _________________________________________
Title: __________________________________________
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
------------------------------------------------------
By: ___________________________________________
Name: _________________________________________
Title: __________________________________________
FTVIP: Franklin Templeton Variable Insurance Products Trust
------------------------------------------------------
By:
--------------------------------------------------
Name: Karen L. Skidmore
-------------------
Title: Assistant Vice President, Assistant Secretary
-----------------------------------------------
TVP: Templeton Variable Products Series Fund
---------------------------------------
By:
--------------------------------------------------
Name: Karen L. Skidmore
-------------------
Title: Assistant Vice President, Assistant Secretary
-----------------------------------------------
The Underwriter: Franklin Templeton Distributors, Inc.
--------------------------------------
18
<PAGE>
By:
--------------------------------------------------
Name: Philip J. Kearns
----------------
Title: Vice President
----------------
19
<PAGE>
SCHEDULE A
THE COMPANY
1. First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester, MA 01653
Organized as a corporation under Massachusetts law
2. Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
Organized as a corporation under Delaware law
20
<PAGE>
SCHEDULE B
ACCOUNTS OF THE COMPANY
1. Name: FUVUL Separate Account of Allmerica Financial
Life Insurance and Annuity Company
Date Established: 12.17.99
SEC Registration Number: 811-333-93031
2. Name: FUVUL Separate Account of First Allmerica
Financial Life Insurance Company
Date Established: Pending
SEC Registration Number: Pending
3. Name: Separate Account VA-P of First Allmerica
Financial Life Insurance Company
Date Established: 6.13.96
SEC Registration Number: 811-8872
4. Name: Separate Account VA-P of Allmerica Financial Life
Insurance and Annuity Company
Date Established: 6.13.96
SEC Registration Number 811-8848
5. Name: Separate Account VA-K of Allmerica Financial Life
Insurance and Annuity Company
Date Established: 6.13.96
SEC Registration Number 811-6293
6. Name: Separate Account VA-K of First Allmerica
Financial Life Insurance Company
Date Established: 6.13.96
SEC Registration Number 811-8114
7. Name: Separate Account VA-K (Delaware) of Allmerica
Financial Life Insurance and Annuity Company
Date Established: 6.13.96
SEC Registration Number 811-6293
8. Name: Separate Account VA-P of First Allmerica
Financial Life Insurance Company
Date Established: 6.13.96
SEC Registration Number 811-8114
21
<PAGE>
SCHEDULE C
PORTFOLIOS AVAILABLE
<TABLE>
<CAPTION>
- -------------------------------------------------------------- -------------------------------------------------------
PORTFOLIO NAME Advisor
- -------------------------------------------------------------- -------------------------------------------
- -------------------------------------------------------------- -------------------------------------------
<S> <C>
Templeton Asset Allocation Fund, Class 2* Templeton Investment Counsel, Inc
*As of May 1, 2000, Templeton Asset Strategy Fund
- -------------------------------------------------------------- -------------------------------------------
Templeton International Fund, Class 2** Templeton Investment Counsel, Inc
**As of May 1, 2000, Templeton International Securities Fund
- -------------------------------------------------------------- -------------------------------------------
Franklin Small Cap Fund, Class 2 Franklin Advisers, Inc.
- -------------------------------------------------------------- -------------------------------------------
Templeton International Smaller Companies Fund Class 2 Templeton Investment Counsel, Inc.
- -------------------------------------------------------------- -------------------------------------------
Templeton Global Growth Fund, Class 2*** Templeton Global Advisors Limited
***As of May 1, 2000, Templeton Growth Securities Fund
- -------------------------------------------------------------- -------------------------------------------
Franklin Mutual Shares Securities Fund, Class 2 Franklin Mutual Advisors, LLC
- -------------------------------------------------------------- -------------------------------------------
Franklin Natural Resources Securities Fund, Class 2 Franklin Advisers, Inc.
- -------------------------------------------------------------- -------------------------------------------
Templeton Developing Markets Fund Class 2**** Templeton Asset Management, Ltd.
****As of May 1, 2000, Templeton Developing Markets
Securities Fund Class 2
- -------------------------------------------------------------- -------------------------------------------
</TABLE>
22
<PAGE>
SCHEDULE D
CONTRACTS OF THE COMPANY
<TABLE>
<CAPTION>
- --------------------------- ------------------------------- -------------------------------- -------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT To Be Determined To Be Determined Pioneer Vision
NAME
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REGISTERED (Y/N) Pending Pending Y
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 333-93031 Pending 33-86664
NUMBER
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REPRESENTATIVE 1036-99 1036-99 A3025-96
FORM NUMBERS
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEPARATE ACCOUNT FUVUL Separate FUVUL Separate Separate Account VA-P
NAME/DATE Account of Allmerica Account of First of First Allmerica
ESTABLISHED Financial Life Insurance Allmerica Financial Life Financial Life Insurance
and Annuity Company / Insurance and Annuity Company / 6.13.96
12.17.99 Company / Pending
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 811-09731 Pending 811-8872
NUMBER
- --------------------------- ------------------------------- -------------------------------- -------------------------------
23
<PAGE>
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
PORTFOLIOS AND Templeton International Templeton International Franklin Small Cap
CLASSES -ADVISER Fund, Class 2 - Fund, Class 2 - Fund, Class 2 -
Templeton Investment Templeton Investment Franklin Advisers, Inc.
Counsel, Inc Counsel, Inc
(AFTER MAY 1, 2000 (AFTER MAY 1, 2000 Templeton International
Templeton International Templeton International Smaller Companies,
Securities Fund, Class 2 - Securities Fund, Class 2 Class 2 - Templeton
Templeton Investment - Templeton Investment Investment Counsel,
Counsel, Inc.) Counsel, Inc.) Inc.
Templeton Asset Templeton Asset Templeton Asset
Allocation Fund, Class 2 Allocation Fund, Class 2 Allocation Fund, Class 2
- Templeton Investment - Templeton Investment - Templeton Investment
Counsel, Inc. Counsel, Inc. Counsel, Inc.
(AFTER MAY 1, 2000 (AFTER MAY 1, 2000 (AFTER MAY 1, 2000
Templeton Asset Templeton Asset Templeton Asset
Strategy Fund, Class 2 - Strategy Fund, Class 2 - Strategy Fund, Class 2 -
Templeton Investment Templeton Investment Templeton Investment
Counsel, Inc.) Counsel, Inc.) Counsel, Inc.)
- --------------------------- ------------------------------- -------------------------------- -------------------------------
24
<PAGE>
SCHEDULE D (CONTINUED)
CONTRACTS OF THE COMPANY
<CAPTION>
- --------------------------- ------------------------------- -------------------------------- -------------------------------
CONTRACT 4 CONTRACT 5 CONTRACT 6
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Pioneer Vision Pioneer C-Vision Pioneer C-Vision
NAME
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REGISTERED (Y/N) Y Y Y
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 333-64831 333-64833 333-64831
NUMBER
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REPRESENTATIVE A3025-96 A3027-98 A3027-98
FORM NUMBERS
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEPARATE ACCOUNT Separate Account VA-P Separate Account VA-P Separate Account VA-P
NAME/DATE of Allmerica Financial of First Allmerica of Allmerica Financial
ESTABLISHED Life Insurance and Financial Life Insurance Life Insurance and
Annuity Company / Company / 6.13.96 Annuity Company /
6.13.96 6.13.96
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 811-8848 811-8872 811-8848
NUMBER
- --------------------------- ------------------------------- -------------------------------- -------------------------------
25
<PAGE>
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
PORTFOLIOS AND Franklin Small Cap Franklin Small Cap Franklin Small Cap
CLASSES - ADVISER Fund, Class 2 - Fund, Class 2 - Fund, Class 2 -
Franklin Advisers, Inc. Franklin Advisers, Inc. Franklin Advisers, Inc.
Templeton International Templeton International Templeton International
Smaller Companies, Smaller Companies, Smaller Companies,
Class 2 - Templeton Class 2 - Templeton Class 2 - Templeton
Investment Counsel, Investment Counsel, Investment Counsel,
Inc. Inc. Inc.
Templeton Asset Templeton Asset Templeton Asset
Allocation Fund, Class 2 Allocation Fund, Class 2 Allocation Fund, Class 2
- Templeton Investment - Templeton Investment - Templeton Investment
Counsel, Inc. Counsel, Inc. Counsel, Inc.
(AFTER MAY 1, 2000 (AFTER MAY 1, 2000 (AFTER MAY 1, 2000
Templeton Asset Templeton Asset Templeton Asset
Strategy Fund, Class 2 - Strategy Fund, Class 2 - Strategy Fund, Class 2 -
Templeton Investment Templeton Investment Templeton Investment
Counsel, Inc.) Counsel, Inc.) Counsel, Inc.)
- --------------------------- ------------------------------- -------------------------------- -------------------------------
26
<PAGE>
SCHEDULE D (CONTINUED)
CONTRACTS OF THE COMPANY
<CAPTION>
- --------------------------- ------------------------------- -------------------------------- -------------------------------
CONTRACT 7 CONTRACT 8 CONTRACT 9
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Pioneer XtraVision Pioneer - To Be Pioneer - To Be
NAME Determined Determined
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REGISTERED (Y/N) Y Y Y
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 333-81017 333-90535 333-90537
NUMBER
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REPRESENTATIVE A3028-99 A3030-99 A3030-99
FORM NUMBERS
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEPARATE ACCOUNT Separate Account VA-P of Separate Account VA-P Separate Account VA-P
NAME/DATE Allmerica Financial of Allmerica Financial of First Allmerica
ESTABLISHED Life Insurance and Life Insurance and Financial Life Insurance
Annuity Company / Annuity Company / Company / 6.13.96
6.13.96 6.13.96
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 811-8848 811-8848 811-8872
NUMBER
- --------------------------- ------------------------------- -------------------------------- -------------------------------
27
<PAGE>
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
PORTFOLIOS AND Franklin Small Cap Franklin Small Cap Franklin Small Cap
CLASSES - ADVISER Fund, Class 2 - Fund, Class 2 - Fund, Class 2 -
Franklin Advisers, Inc. Franklin Advisers, Inc. Franklin Advisers, Inc.
Templeton International Templeton International Templeton International
Smaller Companies, Smaller Companies, Smaller Companies,
Class 2 - Templeton Class 2 - Templeton Class 2 - Templeton
Investment Counsel, Investment Counsel, Investment Counsel,
Inc. Inc. Inc.
Templeton Asset Templeton Asset Templeton Asset
Allocation Fund, Class 2 Allocation Fund, Class 2 Allocation Fund, Class 2
- Templeton Investment - Templeton Investment - Templeton Investment
Counsel, Inc. Counsel, Inc. Counsel, Inc.
(AFTER MAY 1, 2000 (AFTER MAY 1, 2000 (AFTER MAY 1, 2000
Templeton Asset Templeton Asset Templeton Asset
Strategy Fund, Class 2 - Strategy Fund, Class 2 - Strategy Fund, Class 2 -
Templeton Investment Templeton Investment Templeton Investment
Counsel, Inc.) Counsel, Inc.) Counsel, Inc.)
- --------------------------- ------------------------------- -------------------------------- -------------------------------
28
<PAGE>
SCHEDULE D (CONTINUED)
CONTRACTS OF THE COMPANY
<CAPTION>
- --------------------------- ------------------------------- -------------------------------- -------------------------------
CONTRACT 10 CONTRACT 11 CONTRACT 12
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Agency - To Be Determined Agency - To Be Determined Agency Replacement
NAME
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REGISTERED (Y/N) Y Y Pending
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 333-87099 333-87105 Pending
NUMBER
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REPRESENTATIVE A3030-99 A3030-99 Pending
FORM NUMBERS
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEPARATE ACCOUNT Separate Account VA-K of Separate Account VA-K Separate Account VA-K
NAME/DATE Allmerica Financial of First Allmerica Financial of Allmerica Financial
ESTABLISHED Life Insurance and Life Insurance Company / Life Insurance and
Annuity Company / 6.13.96 Annuity Company /
6.13.96 6.13.96
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION 811-6293 811-8114 811-6293
NUMBER
- --------------------------- ------------------------------- -------------------------------- -------------------------------
PORTFOLIOS AND Franklin Small Cap Franklin Small Cap Franklin Natural
CLASSES - ADVISER Fund, Class 2 - Fund, Class 2 - Resources Securities
Franklin Advisers, Inc. Franklin Advisers, Inc. Fund, Class 2 - Franklin
Advisers, Inc
Templeton Developing Templeton Developing
Markets Fund Class 2- Markets Fund Class 2 -
Templeton Asset Templeton Asset
Management, Ltd Management, Ltd
(AS OF MAY 1, 2000, (AS OF MAY 1, 2000,
Templeton Developing Templeton Developing
Markets Securities Fund Markets Securities Fund
Class 2) Class 2)
- --------------------------- ------------------------------- -------------------------------- -------------------------------
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE D (CONTINUED)
CONTRACTS OF THE COMPANY
- --------------------------- ------------------------------- -------------------------------- -------------------------------
CONTRACT 13 CONTRACT 14 CONTRACT 15
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT NAME Agency Replacement Delaware Medallion Delaware Medallion
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REGISTERED (Y/N) Pending Y Y
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION NUMBER Pending 33-44830 33-71054
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REPRESENTATIVE FORM Pending A3025-99 A3025-99
NUMBERS
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEPARATE ACCOUNT Separate Account VA-K of Separate Account VA-P of Separate Account VA-P of
NAME/DATE ESTABLISHED First Allmerica Financial Allmerica Financial Life First Allmerica Financial
Life Insurance Company / Insurance and Annuity Company Life Insurance Company /
6.13.96 / 6.13.99 6.13.99
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION NUMBER 333-87105 33-44830 33-71054
30
<PAGE>
<CAPTION>
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS AND CLASSES Franklin Natural Resources Franklin Small Cap Franklin Small Cap
- -ADVISER Securities Fund, Class 2 - Fund, Class 2 - Fund, Class 2 -
Franklin Advisers, Inc Franklin Advisers, Inc. Franklin Advisers, Inc.
Franklin Mutual Shares Franklin Mutual Shares
Securities, Class 2 - Securities, Class 2 -
Franklin Mutual Franklin Mutual
Advisers, LLC Advisers, LLC
Templeton Global Templeton Global
Growth Fund, Class 2 - Growth Fund, Class 2 -
Templeton Global Templeton Global
Advisors Limited Advisors Limited
*ON MAY 1, 2000 the *ON MAY 1, 2000 the
fund's name will change fund's name will change
to Templeton Growth to Templeton Growth
Securities Fund Securities Fund
Templeton International Templeton International
Fund, Class 2 - Fund, Class 2 -
Templeton Investment Templeton Investment
Counsel, Inc Counsel, Inc
(AFTER MAY 1, 2000 (AFTER MAY 1, 2000
Templeton Investment Templeton Investment
Securities Fund, Class 2 Securities Fund, Class 2
- Templeton Investment - Templeton Investment
Counsel, Inc.) Counsel, Inc.)
- ----------------------------------------------------------------------------------------------------------------------------
31
<PAGE>
<CAPTION>
SCHEDULE D (CONTINUED)
CONTRACTS OF THE COMPANY
- --------------------------- ------------------------------- -------------------------------- -------------------------------
CONTRACT 16 CONTRACT 17 CONTRACT 18
- --------------------------- ------------------------------- -------------------------------- -------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT NAME Delaware Golden Medallion Delaware - To Be Determined Delaware - To Be Determined
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REGISTERED (Y/N) Y Y Y
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION NUMBER 333-81281 333-90543 333-90545
- --------------------------- ------------------------------- -------------------------------- -------------------------------
REPRESENTATIVE FORM A3028-98 A3030-99 A3030-99
NUMBERS
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEPARATE ACCOUNT Separate Account VA-P of Separate Account VA-P of Separate Account VA-P of
NAME/DATE ESTABLISHED Allmerica Financial Life Allmerica Financial Life First Allmerica Financial
Insurance and Annuity Company Insurance and Annuity Company Life Insurance Company /
/ 6.13.99 / 6.13.99 6.13.99
- --------------------------- ------------------------------- -------------------------------- -------------------------------
SEC REGISTRATION NUMBER 33-44830 33-44830 33-71054
- --------------------------- ------------------------------- -------------------------------- -------------------------------
32
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTFOLIOS AND CLASSES Franklin Small Cap Franklin Small Cap Franklin Small Cap
- -ADVISER Fund, Class 2 - Fund, Class 2 - Fund, Class 2 -
Franklin Advisers, Inc. Franklin Advisers, Inc. Franklin Advisers, Inc.
Franklin Mutual Shares Franklin Mutual Shares Franklin Mutual Shares
Securities, Class 2 - Securities, Class 2 - Securities, Class 2 -
Franklin Mutual Franklin Mutual Franklin Mutual
Advisers, LLC Advisers, LLC Advisers, LLC
Templeton Global Templeton Global Templeton Global
Growth Fund, Class 2 - Growth Fund, Class 2 - Growth Fund, Class 2 -
Templeton Global Templeton Global Templeton Global
Advisors Limited Advisors Limited Advisors Limited
*ON MAY 1, 2000 the *ON MAY 1, 2000 the *ON MAY 1, 2000 the
fund's name will change fund's name will change fund's name will change
to Templeton Growth to Templeton Growth to Templeton Growth
Securities Fund Securities Fund Securities Fund
Templeton International Templeton International Templeton International
Fund, Class 2 - Fund, Class 2 - Fund, Class 2 -
Templeton Investment Templeton Investment Templeton Investment
Counsel, Inc Counsel, Inc Counsel, Inc
(AFTER MAY 1, 2000 (AFTER MAY 1, 2000 (AFTER MAY 1, 2000
Templeton Investment Templeton Investment Templeton Investment
Securities Fund, Class 2 Securities Fund, Class 2 Securities Fund, Class 2
- Templeton Investment - Templeton Investment - Templeton Investment
Counsel, Inc.) Counsel, Inc.) Counsel, Inc.)
- --------------------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE>
SCHEDULE E
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
[names of other portfolios]
To Be Determined
34
<PAGE>
SCHEDULE F
RULE 12b-1 PLANS
COMPENSATION SCHEDULE
Each Portfolio named below shall pay the following amounts pursuant to the terms
and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan,
stated as a percentage per year of Class 2's average daily net assets
represented by shares of Class 2.
<TABLE>
<CAPTION>
Portfolio Name Maximum Annual Payment Rate
-------------- ---------------------------
<S> <C>
Templeton Asset Allocation Fund* 0.25%
*As of May 1, 2000, Templeton Asset Strategy Fund
Templeton International Fund** 0.25%
**As of May 1, 2000, Templeton International Securities Fund
Franklin Small Cap Fund 0.25%
Templeton International Smaller Companies Fund 0.25%
Templeton Global Growth Fund*** 0.25%
***As of May 1, 2000, Templeton Growth Securities Fund
Mutual Shares Securities Fund 0.25%
Franklin Natural Resources Securities Fund 0.25%
Templeton Developing Markets Fund**** 0.25%
****As of May 1, 2000, Templeton Developing Markets Securities Fund
</TABLE>
AGREEMENT PROVISIONS
If the Company, on behalf of any Account, purchases Trust Portfolio shares
("Eligible Shares") which are subject to a Rule 12b-1 plan adopted under the
1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees
(collectively "you") provide administrative and other services which assist in
the promotion and distribution of Eligible Shares or variable contracts offering
Eligible Shares, the Underwriter, the Trust or their affiliates (collectively,
"we") may pay you a Rule 12b-1 fee. "Administrative and other services" may
include, but are not limited to, furnishing personal services to owners of
Contracts which may invest in Eligible Shares ("Contract Owners"), answering
routine inquiries regarding a Portfolio, coordinating responses to Contract
Owner inquiries regarding the Portfolios, maintaining such accounts or providing
such other enhanced services as a Trust Portfolio or Contract may require, or
providing other services eligible for service fees as defined under NASD rules.
Your acceptance of such compensation is your acknowledgment that eligible
services have been rendered. All Rule 12b-1 fees, shall be based on the value of
Eligible Shares owned by the Company on behalf of its Accounts, and shall be
calculated on the basis and at the rates set forth in the Compensation
35
<PAGE>
Schedule stated above. The aggregate annual fees paid pursuant to each Plan
shall not exceed the amounts stated as the "annual maximums" in the Portfolio's
prospectus, unless an increase is approved by shareholders as provided in the
Plan. These maximums shall be a specified percent of the value of a Portfolio's
net assets attributable to Eligible Shares owned by the Company on behalf of its
Accounts (determined in the same manner as the Portfolio uses to compute its net
assets as set forth in its effective Prospectus). The Rule 12b-1 fee will be
paid to you within thirty (30) days after the end of the three-month periods
ending in January, April, July and November.
You shall furnish us with such information as shall reasonably be requested
by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1
fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for
their review on a quarterly basis, a written report of the amounts expended
under the Plans and the purposes for which such expenditures were made.
The Plans and provisions of any agreement relating to such Plans must be
approved annually by a vote of the Trustees, including the Trustees who are not
interested persons of the Trust and who have no financial interest in the Plans
or any related agreement ("Disinterested Trustees"). Each Plan may be terminated
at any time by the vote of a majority of the Disinterested Trustees, or by a
vote of a majority of the outstanding shares as provided in the Plan, on sixty
(60) days' written notice, without payment of any penalty. The Plans may also be
terminated by any act that terminates the Underwriting Agreement between the
Underwriter and the Trust, and/or the management or administration agreement
between Franklin Advisers, Inc. and its affiliates and the Trust. Continuation
of the Plans is also conditioned on Disinterested Trustees being ultimately
responsible for selecting and nominating any new Disinterested Trustees. Under
Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who
are party to any agreement related to a Plan have a duty to furnish, such
information as may reasonably be necessary to an informed determination of
whether the Plan or any agreement should be implemented or continued. Under Rule
12b-1, the Trust is permitted to implement or continue Plans or the provisions
of any agreement relating to such Plans from year-to-year only if, based on
certain legal considerations, the Trustees are able to conclude that the Plans
will benefit each affected Trust Portfolio and class. Absent such yearly
determination, the Plans must be terminated as set forth above. In the event of
the termination of the Plans for any reason, the provisions of this Schedule F
relating to the Plans will also terminate. You agree that your selling
agreements with persons or entities through whom you intend to distribute
Contracts will provide that compensation paid to such persons or entities may be
reduced if a Portfolio's Plan is no longer effective or is no longer applicable
to such Portfolio or class of shares available under the Contracts.
Any obligation assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the assets of the Trust and no person shall seek satisfaction
thereof from shareholders of the Trust. You agree to waive payment of any
amounts payable to you by Underwriter under a Plan until such time as the
Underwriter has received such fee from the Trust.
36
<PAGE>
The provisions of the Plans shall control over the provisions of the
Participation Agreement, including this Schedule F, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable statutes,
rules and regulations of all rule 12b-1 fees received from us in the prospectus
of the Contracts.
37
<PAGE>
SCHEDULE G
ADDRESSES FOR NOTICES
To the Company: First Allmerica Financial Life Insurance Company
440 Lincoln Street
Worcester, MA 01653
Attention: Richard M. Reilly, President
Or
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
Attention: Richard M. Reilly, President
To the Trust: Franklin Templeton Variable Insurance Products Trust
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: Karen L. Skidmore, Assistant Secretary
and Assistant Vice President
To the Underwriter: Franklin Templeton Distributors, Inc.
777 Mariners Island Boulevard
San Mateo, California 94404
Attention: Philip J. Kearns, Vice President
38
<PAGE>
SCHEDULE H
SHARED FUNDING ORDER
39
<PAGE>
FUND PARTICIPATION AGREEMENT
This Agreement is entered into as of the ____ day of ______, 1999, between
_______, a life insurance company organized under the laws of the State of
_______ ("Insurance Company"), and each of DREYFUS LIFE AND ANNUITY INDEX
FUND, INC. (d/b/a Dreyfus Stock Index Fund) and THE DREYFUS SOCIALLY
RESPONSIBLE GROWTH FUND, INC. (each, a "Fund").
ARTICLE I
DEFINITIONS
1.1 "Act" shall mean the Investment Company Act of 1940, as amended.
1.2 "Board" shall mean the Board of Directors of a Fund, which has the
responsibility for management and control of the Fund.
1.3 "Business Day" shall mean any day for which a Fund calculates net
asset value per share as described in the Fund's Prospectus.
1.4 "Commission" shall mean the Securities and Exchange Commission.
1.5 "Contract" shall mean a variable annuity or life insurance contract
that uses any Participating Fund (as defined below) as an underlying
investment medium. Individuals who participate under a group Contract
are "Participants."
1.6 "Contractholder" shall mean any entity that is a party to a Contract
with a Participating Company (as defined below).
1.7 "Disinterested Board Members" shall mean those members of the Board of
a Fund that are not deemed to be "interested persons" of the Fund, as
defined by the Act.
1.8 "Dreyfus" shall mean The Dreyfus Corporation and its affiliates,
including Dreyfus Service Corporation.
1.9 "Participating Companies" shall mean any insurance company (including
Insurance Company) that offers variable annuity and/or variable life
insurance contracts to the public and that has entered into an
agreement with one or more of the Funds.
1.10 "Participating Fund" shall mean each Fund and any other funds in the
Dreyfus Family of Funds, including, as applicable, any series thereof,
specified in Exhibit A, as such Exhibit may be amended from time to
time by agreement of the parties hereto, the shares of which are
available to serve as the underlying investment medium for the
aforesaid Contracts.
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1.11 "Prospectus" shall mean the current prospectus and statement of
additional information of a Fund, as most recently filed with the
Commission.
1.12 "Separate Account" shall mean _________, a separate account established
by Insurance Company in accordance with the laws of the State of
____________.
1.13 "Software Program" shall mean the software program used by a Fund for
providing Fund and account balance information including net asset
value per share. Such Program may include the Lion System. In
situations where the Lion System or any other Software Program used by
a Fund is not available, such information may be provided by telephone.
The Lion System shall be provided to Insurance Company at no charge.
1.14 "Insurance Company's General Account(s)" shall mean the general
account(s) of Insurance Company and its affiliates that invest in a
Fund.
ARTICLE II
REPRESENTATIONS
2.1 Insurance Company represents and warrants that (a) it is an insurance
company duly organized and in good standing under applicable law; (b)
it has legally and validly established the Separate Account pursuant to
the Illinois Insurance Code for the purpose of offering to the public
certain individual and group variable annuity and life insurance
contracts; (c) it has registered the Separate Account as a unit
investment trust under the Act to serve as the segregated investment
account for the Contracts; and (d) the Separate Account is eligible to
invest in shares of each Participating Fund without such investment
disqualifying any Participating Fund as an investment medium for
insurance company separate accounts supporting variable annuity
contracts or variable life insurance contracts.
2.2 Insurance Company represents and warrants that (a) the Contracts will
be described in a registration statement filed under the Securities Act
of 1933, as amended ("1933 Act"); (b) the Contracts will be issued and
sold in compliance in all material respects with all applicable federal
and state laws; and (c) the sale of the Contracts shall comply in all
material respects with state insurance law requirements. Insurance
Company agrees to notify each Participating Fund promptly of any
investment restrictions imposed by state insurance law and applicable
to the Participating Fund.
2.3 Insurance Company represents and warrants that the income, gains and
losses, whether or not realized, from assets allocated to the Separate
Account are, in accordance with the applicable Contracts, to be
credited to or charged against such Separate Account without regard to
other income, gains or losses from assets allocated to any other
accounts of Insurance Company. Insurance Company represents and
warrants that the assets of the Separate Account are and will be kept
separate from Insurance Company's General Account and any other
separate accounts Insurance Company may have, and will not be
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charged with liabilities from any business that Insurance Company may
conduct or the liabilities of any companies affiliated with Insurance
Company.
2.4 Each Participating Fund represents that it is registered with the
Commission under the Act as an open-end, management investment company
and possesses, and shall maintain, all legal and regulatory licenses,
approvals, consents and/or exemptions required for the Participating
Fund to operate and offer its shares as an underlying investment medium
for Participating Companies.
2.5 Each Participating Fund represents that it is currently qualified as a
regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and that it will make every
effort to maintain such qualification (under Subchapter M or any
successor or similar provision) and that it will notify Insurance
Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the
future.
2.6 Insurance Company represents and agrees that the Contracts are
currently, and at the time of issuance will be, treated as life
insurance policies or annuity contracts, whichever is appropriate,
under applicable provisions of the Code, and that it will make every
effort to maintain such treatment and that it will notify each
Participating Fund and Dreyfus immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or
that they might not be so treated in the future. Insurance Company
agrees that any prospectus offering a Contract that is a "modified
endowment contract," as that term is defined in Section 7702A of the
Code, will identify such Contract as a modified endowment contract (or
policy).
2.7 Each Participating Fund agrees that its assets shall be managed and
invested in a manner that complies with the requirements of Section
817(h) of the Code and the rules and regulations thereunder.
2.8 Insurance Company agrees that each Participating Fund shall be
permitted (subject to the other terms of this Agreement) to make its
shares available to other Participating Companies and Contractholders.
2.9 Each Participating Fund represents and warrants that any of its
directors, trustees, officers, employees, investment advisers, and
other individuals/entities who deal with the money and/or securities of
the Participating Fund are and shall continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit
of the Participating Fund in an amount not less than that required by
Rule 17g-1 under the Act. The aforesaid Bond shall include coverage for
larceny and embezzlement and shall be issued by a reputable bonding
company.
2.10 Insurance Company represents and warrants that all of its employees and
agents who deal with the money and/or securities of each Participating
Fund are and shall continue to be at all times covered by a blanket
fidelity bond or similar coverage in an amount not less
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than the coverage required to be maintained by the Participating Fund.
The aforesaid Bond shall include coverage for larceny and embezzlement
and shall be issued by a reputable bonding company.
2.11 Insurance Company agrees that Dreyfus shall be deemed a third party
beneficiary under this Agreement and may enforce any and all rights
conferred by virtue of this Agreement.
ARTICLE III
FUND SHARES
3.1 The Contracts funded through the Separate Account will provide for the
investment of certain amounts in shares of each Participating Fund.
3.2 Each Participating Fund agrees to make its shares available for
purchase at the then applicable net asset value per share by Insurance
Company and the Separate Account on each Business Day pursuant to rules
of the Commission. Notwithstanding the foregoing, each Participating
Fund may refuse to sell its shares to any person, or suspend or
terminate the offering of its shares, if such action is required by law
or by regulatory authorities having jurisdiction or is, in the sole
discretion of its Board, acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary
and in the best interests of the Participating Fund's shareholders.
3.3 Each Participating Fund agrees that shares of the Participating Fund
will be sold only to (a) Participating Companies and their separate
accounts or (b) "qualified pension or retirement plans" as determined
under Section 817(h)(4) of the Code. Except as otherwise set forth in
this Section 3.3, no shares of any Participating Fund will be sold to
the general public.
3.4 Each Participating Fund shall use its best efforts to provide closing
net asset value, dividend and capital gain information on a per-share
basis to Insurance Company by 6:00 p.m. Eastern time on each Business
Day. Any material errors in the calculation of net asset value,
dividend and capital gain information shall be reported immediately
upon discovery to Insurance Company. Non-material errors will be
corrected in the next Business Day's net asset value per share.
3.5 At the end of each Business Day, Insurance Company will use the
information described in Sections 3.2 and 3.4 to calculate the unit
values of the Separate Account for the day. Using this unit value,
Insurance Company will process the day's Separate Account transactions
received by it by the close of trading on the floor of the New York
Stock Exchange (currently 4:00 p.m. Eastern time) to determine the net
dollar amount of each Participating Fund's shares that will be
purchased or redeemed at that day's closing net asset value per share.
The net purchase or redemption orders will be transmitted to each
Participating Fund by Insurance Company by 11:00 a.m. Eastern time on
the Business Day next following Insurance Company's receipt of that
information. Subject to Sections
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3.6 and 3.8, all purchase and redemption orders for Insurance
Company's General Accounts shall be effected at the net asset value
per share of each Participating Fund next calculated after receipt of
the order by the Participating Fund or its Transfer Agent.
3.6 Each Participating Fund appoints Insurance Company as its agent for the
limited purpose of accepting orders for the purchase and redemption of
Participating Fund shares for the Separate Account. Each Participating
Fund will execute orders at the applicable net asset value per share
determined as of the close of trading on the day of receipt of such
orders by Insurance Company acting as agent ("effective trade date"),
provided that the Participating Fund receives notice of such orders by
11:00 a.m. Eastern time on the next following Business Day and, if such
orders request the purchase of Participating Fund shares, the
conditions specified in Section 3.8, as applicable, are satisfied. A
redemption or purchase request that does not satisfy the conditions
specified above and in Section 3.8, as applicable, will be effected at
the net asset value per share computed on the Business Day immediately
preceding the next following Business Day upon which such conditions
have been satisfied in accordance with the requirements of this Section
and Section 3.8. Insurance Company represents and warrants that all
orders submitted by the Insurance Company for execution on the
effective trade date shall represent purchase or redemption orders
received from Contractholders prior to the close of trading on the New
York Stock Exchange on the effective trade date.
3.7 Insurance Company will make its best efforts to notify each applicable
Participating Fund in advance of any purchase or redemption orders
exceeding $1 million.
3.8 If Insurance Company's order requests the purchase of a Participating
Fund's shares, Insurance Company will pay for such purchases by wiring
Federal Funds to the Participating Fund or its designated custodial
account on the day the order is transmitted. Insurance Company shall
make all reasonable efforts to transmit to the applicable Participating
Fund payment in Federal Funds by 12:00 noon Eastern time on the
Business Day the Participating Fund receives the notice of the order
pursuant to Section 3.5. Each applicable Participating Fund will
execute such orders at the applicable net asset value per share
determined as of the close of trading on the effective trade date if
the Participating Fund receives payment in Federal Funds by 12:00
midnight Eastern time on the Business Day the Participating Fund
receives the notice of the order pursuant to Section 3.5. If payment in
Federal Funds for any purchase is not received or is received by a
Participating Fund after 12:00 noon Eastern time on such Business Day,
Insurance Company shall promptly, upon each applicable Participating
Fund's request, reimburse the respective Participating Fund for any
charges, costs, fees, interest or other expenses incurred by the
Participating Fund in connection with any advances to, or borrowings or
overdrafts by, the Participating Fund, or any similar expenses incurred
by the Participating Fund, as a result of portfolio transactions
effected by the Participating Fund based upon such purchase request. If
Insurance Company's order requests the redemption of any Participating
Fund's shares valued at or greater than $1 million, the Participating
Fund will wire such amount to Insurance Company within seven days of
the order.
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3.9 Each Participating Fund has the obligation to ensure that its shares
are registered with applicable federal agencies at all times.
3.10 Each Participating Fund will confirm each purchase or redemption order
made by Insurance Company. Transfer of Participating Fund shares will
be by book entry only. No share certificates will be issued to
Insurance Company. Insurance Company will record shares ordered from a
Participating Fund in an appropriate title for the corresponding
account.
3.11 Each Participating Fund shall credit Insurance Company with the
appropriate number of shares.
3.12 On each ex-dividend date of a Participating Fund or, if not a Business
Day, on the first Business Day thereafter, each Participating Fund
shall communicate to Insurance Company the amount of dividend and
capital gain, if any, per share. All dividends and capital gains shall
be automatically reinvested in additional shares of the applicable
Participating Fund at the net asset value per share on the ex-dividend
date. Each Participating Fund shall, on the day after the ex-dividend
date or, if not a Business Day, on the first Business Day thereafter,
notify Insurance Company of the number of shares so issued.
ARTICLE IV
STATEMENTS AND REPORTS
4.1 Each Participating Fund shall provide monthly statements of account as
of the end of each month for all of Insurance Company's accounts by the
fifteenth (15th) Business Day of the following month.
4.2 Each Participating Fund shall distribute to Insurance Company copies of
the Participating Fund's Prospectuses, proxy materials, notices,
periodic reports and other printed materials (which the Participating
Fund customarily provides to its shareholders) in quantities as
Insurance Company may reasonably request for distribution to each
Contractholder and Participant.
4.3 Each Participating Fund will provide to Insurance Company at least one
complete copy of all registration statements, Prospectuses, reports,
proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Participating Fund
or its shares, contemporaneously with the filing of such document with
the Commission or other regulatory authorities.
4.4 Insurance Company will provide to each Participating Fund at least one
copy of all registration statements, Prospectuses, reports, proxy
statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all
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amendments to any of the above, that relate to the Contracts or the
Separate Account, contemporaneously with the filing of such document
with the Commission.
ARTICLE V
EXPENSES
5.1 The charge to each Participating Fund for all expenses and costs of the
Participating Fund, including but not limited to management fees,
administrative expenses and legal and regulatory costs, will be
included in the determination of the Participating Fund's daily net
asset value per share.
5.2 Except as provided in this Article V and, in particular in the next
sentence, Insurance Company shall not be required to pay directly any
expenses of any Participating Fund or expenses relating to the
distribution of its shares. Insurance Company shall pay the following
expenses or costs:
a. Such amount of the production expenses of any Participating Fund
materials, including the cost of printing a Participating Fund's
Prospectus, or marketing materials for prospective Insurance
Company Contractholders and Participants as Dreyfus and Insurance
Company shall agree from time to time.
b. Distribution expenses of any Participating Fund materials or
marketing materials for prospective Insurance Company
Contractholders and Participants.
c. Distribution expenses of any Participating Fund materials or
marketing materials for Insurance Company Contractholders and
Participants.
Except as provided herein, all other expenses of each Participating
Fund shall not be borne by Insurance Company.
ARTICLE VI
EXEMPTIVE RELIEF
6.1 Insurance Company has reviewed a copy of the order dated February 5,
1998 of the Securities and Exchange Commission under Section 6(c) of
the Act with respect to the Fund and, in particular, has reviewed the
conditions to the relief set forth in the related Notice. As set forth
therein, if the Fund is a Participating Fund, Insurance Company agrees,
as applicable, to report any potential or existing conflicts promptly
to the Fund's Board and, in particular, whenever contract voting
instructions are disregarded, and recognizes that it will be
responsible for assisting the Board in carrying out its
responsibilities under such application. Insurance Company agrees to
carry out such responsibilities with a view to the interests of
existing Contractholders.
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6.2 If a majority of the Board, or a majority of Disinterested Board
Members, determines that a material irreconcilable conflict exists with
regard to Contractholder investments in a Participating Fund, the Board
shall give prompt notice to all Participating Companies and any other
Participating Fund. If the Board determines that Insurance Company is
responsible for causing or creating said conflict, Insurance Company
shall at its sole cost and expense, and to the extent reasonably
practicable (as determined by a majority of the Disinterested Board
Members), take such action as is necessary to remedy or eliminate the
irreconcilable material conflict. Such necessary action may include,
but shall not be limited to:
a. Withdrawing the assets allocable to the Separate Account from the
Participating Fund and reinvesting such assets in another
Participating Fund (if applicable) or a different investment
medium, or submitting the question of whether such segregation
should be implemented to a vote of all affected Contractholders;
and/or
b. Establishing a new registered management investment company.
6.3 If a material irreconcilable conflict arises as a result of a decision
by Insurance Company to disregard Contractholder voting instructions
and said decision represents a minority position or would preclude a
majority vote by all Contractholders having an interest in a
Participating Fund, Insurance Company may be required, at the Board's
election, to withdraw the investments of the Separate Account in that
Participating Fund.
6.4 For the purpose of this Article, a majority of the Disinterested Board
Members shall determine whether or not any proposed action adequately
remedies any irreconcilable material conflict, but in no event will any
Participating Fund be required to bear the expense of establishing a
new funding medium for any Contract. Insurance Company shall not be
required by this Article to establish a new funding medium for any
Contract if an offer to do so has been declined by vote of a majority
of the Contractholders materially adversely affected by the
irreconcilable material conflict.
6.5 No action by Insurance Company taken or omitted, and no action by the
Separate Account or any Participating Fund taken or omitted as a result
of any act or failure to act by Insurance Company pursuant to this
Article VI, shall relieve Insurance Company of its obligations under,
or otherwise affect the operation of, Article V.
ARTICLE VII
VOTING OF PARTICIPATING FUND SHARES
7.1 Each Participating Fund shall provide Insurance Company with copies, at
no cost to Insurance Company, of the Participating Fund's proxy
material, reports to shareholders and other communications to
shareholders in such quantity as Insurance Company shall reasonably
require for distributing to Contractholders or Participants.
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Insurance Company shall:
(a) solicit voting instructions from Contractholders or Participants
on a timely basis and in accordance with applicable law;
(b) vote the Participating Fund shares in accordance with
instructions received from Contractholders or Participants; and
(c) vote the Participating Fund shares for which no instructions have
been received in the same proportion as Participating Fund shares
for which instructions have been received.
Insurance Company agrees at all times to vote its General Account
shares in the same proportion as the Participating Fund shares for
which instructions have been received from Contractholders or
Participants. Insurance Company further agrees to be responsible for
assuring that voting the Participating Fund shares for the Separate
Account is conducted in a manner consistent with other Participating
Companies.
7.2 Insurance Company agrees that it shall not, without the prior written
consent of each applicable Participating Fund and Dreyfus, solicit,
induce or encourage Contractholders to (a) change or supplement the
Participating Fund's current investment adviser or (b) change, modify,
substitute, add to or delete from the current investment media for the
Contracts.
ARTICLE VIII
MARKETING AND REPRESENTATIONS
8.1 Each Participating Fund or its underwriter shall periodically furnish
Insurance Company with the following documents, in quantities as
Insurance Company may reasonably request:
a. Current Prospectus and any supplements thereto; and
b. Other marketing materials.
Expenses for the production of such documents shall be borne by
Insurance Company in accordance with Section 5.2 of this Agreement.
8.2 Insurance Company shall designate certain persons or entities that
shall have the requisite licenses to solicit applications for the sale
of Contracts. No representation is made as to the number or amount of
Contracts that are to be sold by Insurance Company. Insurance Company
shall make reasonable efforts to market the Contracts and shall comply
with all applicable federal and state laws in connection therewith.
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8.3 Insurance Company shall furnish, or shall cause to be furnished, to
each applicable Participating Fund or its designee, each piece of sales
literature or other promotional material in which the Participating
Fund, its investment adviser or the administrator is named, at least
fifteen Business Days prior to its use. No such material shall be used
unless the Participating Fund or its designee approves such material.
Such approval (if given) must be in writing and shall be presumed not
given if not received within ten Business Days after receipt of such
material. Each applicable Participating Fund or its designee, as the
case may be, shall use all reasonable efforts to respond within ten
days of receipt.
8.4 Insurance Company shall not give any information or make any
representations or statements on behalf of a Participating Fund or
concerning a Participating Fund in connection with the sale of the
Contracts other than the information or representations contained in
the registration statement or Prospectus of, as may be amended or
supplemented from time to time, or in reports or proxy statements for,
the applicable Participating Fund, or in sales literature or other
promotional material approved by the applicable Participating Fund.
8.5 Each Participating Fund shall furnish, or shall cause to be furnished,
to Insurance Company, each piece of the Participating Fund's sales
literature or other promotional material in which Insurance Company or
the Separate Account is named, at least fifteen Business Days prior to
its use. No such material shall be used unless Insurance Company
approves such material. Such approval (if given) must be in writing and
shall be presumed not given if not received within ten Business Days
after receipt of such material. Insurance Company shall use all
reasonable efforts to respond within ten days of receipt.
8.6 Each Participating Fund shall not, in connection with the sale of
Participating Fund shares, give any information or make any
representations on behalf of Insurance Company or concerning Insurance
Company, the Separate Account, or the Contracts other than the
information or representations contained in a registration statement or
prospectus for the Contracts, as may be amended or supplemented from
time to time, or in published reports for the Separate Account that are
in the public domain or approved by Insurance Company for distribution
to Contractholders or Participants, or in sales literature or other
promotional material approved by Insurance Company.
8.7 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without
limitation, advertisements (such as material published, or designed for
use, in a newspaper, magazine or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures or other public media), sales literature (such as any
written communication distributed or made generally available to
customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published
article),
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educational or training materials or other communications distributed
or made generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional
information, shareholder reports and proxy materials, and any other
material constituting sales literature or advertising under National
Association of Securities Dealers, Inc. rules, the Act or the 1933
Act.
ARTICLE IX
INDEMNIFICATION
9.1 Insurance Company agrees to indemnify and hold harmless each
Participating Fund, Dreyfus, each respective Participating Fund's
investment adviser and sub-investment adviser (if applicable), each
respective Participating Fund's distributor, and their respective
affiliates, and each of their directors, trustees, officers, employees,
agents and each person, if any, who controls or is associated with any
of the foregoing entities or persons within the meaning of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of Section 9.1),
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)
for which the Indemnified Parties may become subject, under the 1933
Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect to thereof) (i) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in information furnished by Insurance Company
for use in the registration statement or Prospectus or sales literature
or advertisements of the respective Participating Fund or with respect
to the Separate Account or Contracts, 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; (ii) arise out of or as a result of conduct,
statements or representations (other than statements or representations
contained in the Prospectus and sales literature or advertisements of
the respective Participating Fund) of Insurance Company or its agents,
with respect to the sale and distribution of Contracts for which the
respective Participating Fund's shares are an underlying investment;
(iii) arise out of the wrongful conduct of Insurance Company or persons
under its control with respect to the sale or distribution of the
Contracts or the respective Participating Fund's shares; (iv) arise out
of Insurance Company's incorrect calculation and/or untimely reporting
of net purchase or redemption orders; or (v) arise out of any breach by
Insurance Company of a material term of this Agreement or as a result
of any failure by Insurance Company to provide the services and furnish
the materials or to make any payments provided for in this Agreement.
Insurance Company will reimburse any Indemnified Party in connection
with investigating or defending any such loss, claim, damage, liability
or action; provided, however, that with respect to clauses (i) and (ii)
above Insurance Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or
is based upon any untrue statement or omission or alleged omission made
in such registration statement, prospectus, sales literature, or
advertisement in conformity with written information furnished to
Insurance Company by the respective Participating
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Fund specifically for use therein. This indemnity agreement will be in
addition to any liability which Insurance Company may otherwise have.
9.2 Each Participating Fund severally agrees to indemnify and hold harmless
Insurance Company and each of its directors, officers, employees,
agents and each person, if any, who controls Insurance Company within
the meaning of the 1933 Act against any losses, claims, damages or
liabilities to which Insurance Company or any such director, officer,
employee, agent or controlling person may become subject, under the
1933 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) (1) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in the registration statement or Prospectus or
sales literature or advertisements of the respective Participating
Fund; (2) arise out of or are based upon the omission to state in the
registration statement or Prospectus or sales literature or
advertisements of the respective Participating Fund any material fact
required to be stated therein or necessary to make the statements
therein not misleading; or (3) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact
contained in the registration statement or Prospectus or sales
literature or advertisements with respect to the Separate Account or
the Contracts and such statements were based on information provided to
Insurance Company by the respective Participating Fund; and the
respective Participating Fund will reimburse any legal or other
expenses reasonably incurred by Insurance Company or any such director,
officer, employee, agent or controlling person in connection with
investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the respective Participating Fund will
not be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement
or omission or alleged omission made in such registration statement,
Prospectus, sales literature or advertisements in conformity with
written information furnished to the respective Participating Fund by
Insurance Company specifically for use therein. This indemnity
agreement will be in addition to any liability which the respective
Participating Fund may otherwise have.
9.3 Each Participating Fund severally shall indemnify and hold Insurance
Company harmless against any and all liability, loss, damages, costs or
expenses which Insurance Company may incur, suffer or be required to
pay due to the respective Participating Fund's (1) incorrect
calculation of the daily net asset value, dividend rate or capital gain
distribution rate; (2) incorrect reporting of the daily net asset
value, dividend rate or capital gain distribution rate; and (3)
untimely reporting of the net asset value, dividend rate or capital
gain distribution rate; provided that the respective Participating Fund
shall have no obligation to indemnify and hold harmless Insurance
Company if the incorrect calculation or incorrect or untimely reporting
was the result of incorrect information furnished by Insurance Company
or information furnished untimely by Insurance Company or otherwise as
a result of or relating to a breach of this Agreement by Insurance
Company.
9.4 Promptly after receipt by an indemnified party under this Article of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is
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to be made against the indemnifying party under this Article, notify
the indemnifying party of the commencement thereof. The omission to so
notify the indemnifying party will not relieve the indemnifying party
from any liability under this Article IX, except to the extent that
the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the
failure to give such notice. In case any such action is brought
against any indemnified party, and it notified the indemnifying party
of the commencement thereof, the indemnifying party will be entitled
to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such indemnified party,
and to the extent that the indemnifying party has given notice to such
effect to the indemnified party and is performing its obligations
under this Article, the indemnifying party shall not be liable for any
legal or other expenses subsequently incurred by such indemnified
party in connection with the defense thereof, other than reasonable
costs of investigation. Notwithstanding the foregoing, 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.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article IX.
The provisions of this Article IX shall survive termination of this
Agreement.
9.5 Insurance Company shall indemnify and hold each respective
Participating Fund, Dreyfus and sub-investment adviser of the
Participating Fund harmless against any tax liability incurred by the
Participating Fund under Section 851 of the Code arising from purchases
or redemptions by Insurance Company's General Accounts or the account
of its affiliates.
ARTICLE X
COMMENCEMENT AND TERMINATION
10.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions
herein.
10.2 This Agreement shall terminate without penalty:
a. As to any Participating Fund, at the option of Insurance Company
or the Participating Fund at any time from the date hereof upon
180 days' notice, unless a shorter time is agreed to by the
respective Participating Fund and Insurance Company;
-13-
<PAGE>
b. As to any Participating Fund, at the option of Insurance Company,
if shares of that Participating Fund are not reasonably available
to meet the requirements of the Contracts as determined by
Insurance Company. Prompt notice of election to terminate shall
be furnished by Insurance Company, said termination to be
effective ten days after receipt of notice unless the
Participating Fund makes available a sufficient number of shares
to meet the requirements of the Contracts within said ten-day
period;
c. As to a Participating Fund, at the option of Insurance Company,
upon the institution of formal proceedings against that
Participating Fund by the Commission, National Association of
Securities Dealers or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in
Insurance Company's reasonable judgment, materially impair that
Participating Fund's ability to meet and perform the
Participating Fund's obligations and duties hereunder. Prompt
notice of election to terminate shall be furnished by Insurance
Company with said termination to be effective upon receipt of
notice;
d. As to a Participating Fund, at the option of each Participating
Fund, upon the institution of formal proceedings against
Insurance Company by the Commission, National Association of
Securities Dealers or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in the
Participating Fund's reasonable judgment, materially impair
Insurance Company's ability to meet and perform Insurance
Company's obligations and duties hereunder. Prompt notice of
election to terminate shall be furnished by such Participating
Fund with said termination to be effective upon receipt of
notice;
e. As to a Participating Fund, at the option of that Participating
Fund, if the Participating Fund shall determine, in its sole
judgment reasonably exercised in good faith, that Insurance
Company has suffered a material adverse change in its business or
financial condition or is the subject of material adverse
publicity and such material adverse change or material adverse
publicity is likely to have a material adverse impact upon the
business and operation of that Participating Fund or Dreyfus,
such Participating Fund shall notify Insurance Company in writing
of such determination and its intent to terminate this Agreement,
and after considering the actions taken by Insurance Company and
any other changes in circumstances since the giving of such
notice, such determination of the Participating Fund shall
continue to apply on the sixtieth (60th) day following the giving
of such notice, which sixtieth day shall be the effective date of
termination;
f. As to a Participating Fund, upon termination of the Investment
Advisory Agreement between that Participating Fund and Dreyfus or
its successors unless Insurance Company specifically approves the
selection of a new Participating Fund investment adviser. Such
Participating Fund shall promptly furnish notice of such
termination to Insurance Company;
-14-
<PAGE>
g. As to a Participating Fund, in the event that Participating
Fund's shares are not registered, issued or sold in accordance
with applicable federal law, or such law precludes the use of
such shares as the underlying investment medium of Contracts
issued or to be issued by Insurance Company. Termination shall be
effective immediately as to that Participating Fund only upon
such occurrence without notice;
h. At the option of a Participating Fund upon a determination by its
Board in good faith that it is no longer advisable and in the
best interests of shareholders of that Participating Fund to
continue to operate pursuant to this Agreement. Termination
pursuant to this Subsection (h) shall be effective upon notice by
such Participating Fund to Insurance Company of such termination;
i. At the option of a Participating Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if such Participating Fund
reasonably believes that the Contracts may fail to so qualify;
j. At the option of any party to this Agreement, upon another
party's breach of any material provision of this Agreement;
k. At the option of a Participating Fund, if the Contracts are not
registered, issued or sold in accordance with applicable federal
and/or state law; or
l. Upon assignment of this Agreement, unless made with the written
consent of every other non-assigning party.
Any such termination pursuant to Section 10.2a, 10.2d, 10.2e,
10.2f or 10.2k herein shall not affect the operation of Article V
of this Agreement. Any termination of this Agreement shall not
affect the operation of Article IX of this Agreement.
10.3 Notwithstanding any termination of this Agreement pursuant to Section
10.2 hereof, each Participating Fund and Dreyfus may, at the option of
the Participating Fund, continue to make available additional shares of
that Participating Fund for as long as the Participating Fund desires
pursuant to the terms and conditions of this Agreement as provided
below, for all Contracts in effect on the effective date of termination
of this Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, if that Participating Fund and
Dreyfus so elect to make additional Participating Fund shares
available, the owners of the Existing Contracts or Insurance Company,
whichever shall have legal authority to do so, shall be permitted to
reallocate investments in that Participating Fund, redeem investments
in that Participating Fund and/or invest in that Participating Fund
upon the making of additional purchase payments under the Existing
Contracts. In the event of a termination of this Agreement pursuant to
Section 10.2 hereof, such Participating Fund and Dreyfus, as promptly
as is practicable under the circumstances, shall notify Insurance
Company whether Dreyfus and that Participating Fund will continue to
make that Participating Fund's shares available after such
-15-
<PAGE>
termination. If such Participating Fund shares continue to be made
available after such termination, the provisions of this Agreement
shall remain in effect and thereafter either of that Participating
Fund or Insurance Company may terminate the Agreement as to that
Participating Fund, as so continued pursuant to this Section 10.3,
upon prior written notice to the other party, such notice to be for a
period that is reasonable under the circumstances but, if given by the
Participating Fund, need not be for more than six months.
10.4 Termination of this Agreement as to any one Participating Fund shall
not be deemed a termination as to any other Participating Fund unless
Insurance Company or such other Participating Fund, as the case may be,
terminates this Agreement as to such other Participating Fund in
accordance with this Article X.
ARTICLE XI
AMENDMENTS
11.1 Any other changes in the terms of this Agreement, except for the
addition or deletion of any Participating Fund as specified in Exhibit
A, shall be made by agreement in writing between Insurance Company and
each respective Participating Fund.
ARTICLE XII
NOTICE
12.1 Each notice required by this Agreement shall be given by certified
mail, return receipt requested, to the appropriate parties at the
following addresses:
Insurance Company:
-----------------------------------
---------------------
- -
---------------------
Attn:
----------------
Participating Funds: [Name of Fund]
c/o Premier Mutual Fund Services, Inc.
200 Park Avenue
New York, New York 10166
Attn: Vice President and Assistant
Secretary
with copies to: [Name of Fund]
c/o The Dreyfus Corporation
200 Park Avenue
New York, New York 10166
Attn: Mark N. Jacobs, Esq.
Steven F. Newman, Esq.
Stroock & Stroock & Lavan LLP
180 Maiden Lane
-16-
<PAGE>
New York, New York 10038-4982
Attn: Lewis G. Cole, Esq.
Stuart H. Coleman, Esq.
Notice shall be deemed to be given on the date of receipt by the
addresses as evidenced by the return receipt.
MISCELLANEOUS XIII
13.1 This Agreement has been executed on behalf of each Fund by the
undersigned officer of the Fund in his capacity as an officer of the
Fund. The obligations of this Agreement shall only be binding upon the
assets and property of the Fund and shall not be binding upon any
director, trustee, officer or shareholder of the Fund individually. It
is agreed that the obligations of the Funds are several and not joint,
that no Fund shall be liable for any amount owing by another Fund and
that the Funds have executed one instrument for convenience only.
LAW XIV
14.1 This Agreement shall be construed in accordance with the internal laws
of the State of New York, without giving effect to principles of
conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be duly executed and attested as of the date first above written.
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY
By:
---------------------------------
Its:
---------------------------------
Attest:
-----------------------------
DREYFUS LIFE AND ANNUITY INDEX
FUND, INC.
By:
---------------------------------
Its:
---------------------------------
Attest:
-----------------------------
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
-17-
<PAGE>
By:
---------------------------------
Its:
---------------------------------
Attest:
-----------------------------
-18-
<PAGE>
EXHIBIT A
LIST OF PARTICIPATING FUNDS
Dreyfus Life and Annuity Index Fund, Inc. (d/b/a Dreyfus Stock Index Fund)
The Dreyfus Socially Responsible Growth Fund, Inc.
-19-
<PAGE>
FUND PARTICIPATION AGREEMENT AMENDMENT
This Fund Participation Agreement Amendment hereby amends the Fund Participation
Agreement dated June 1999 between the Allmerica Financial Life Insurance and
Annuity Company, and each of Dreyfus Investment Portfolios and The Dreyfus
Socially Responsible Growth Fund, Inc. ("Agreement") in the following manner:
1) The Agreement is amended to include Dreyfus Variable Investment Fund as a
party to the Agreement by the insertion of the following language in the first
paragraph, beginning of the fourth line:
"DREYFUS VARIABLE INVESTMENT FUND,"
2) The following language shall be added to Paragraph 1.5 of the Agreement
following "investment medium:"
", which are delineated on Exhibit B"
3) The current Paragraph 1.12 of the Agreement is deleted and a new
Paragraph 1.12 is substituted to read as follows:
"Separate Account" shall mean Separate Account KG of Allmerica
Financial Life Insurance and Annuity Company, Separate Account KGC of
Allmerica Financial Life Insurance and Annuity Company and FUVUL
Separate Account of Allmerica Financial Life and Annuity Insurance
Company, each a separate account established by Insurance Company in
accordance with the laws of the State of Delaware.
3) The Agreement is amended to replace Exhibit A in its entirety by the
revised Exhibit A, attached hereto.
4) The following language shall be added to Paragraph 11.1 of the Agreement
following "Exhibit A:"
"and Exhibit B"
5) The Agreement is amended to add Exhibit B.
IN WITNESS WHEREOF, the parties hereto have executed this Fund Participation
Agreement Amendment as of _______________, 2000.
<PAGE>
ALLAMERICA FINANCIAL LIFE
INSURANCE AND ANNUITY COMPANY
By:
Its:
Attest:
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
By:
Its:
Attest:
DREYFUS VARIABLE INVESTMENT FUND
By:
Its:
Attest:
DREYFUS INVESTMENT PORTFOLIOS
By:
Its:
Attest:
<PAGE>
EXHIBIT A
Dreyfus Investment Portfolios
MidCap Stock Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio
Quality Bond Portfolio
<PAGE>
EXHIBIT B
CONTRACTS OF THE COMPANY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Kemper Gateway Elite Kemper Gateway Custom Kemper Gateway Advisor
NAME
- ----------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Y Y Y
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-9965 333-10283 333-63091
NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM A3025-96 A3026-96 A3027-98
NUMBERS
- ----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Separate Account KG of Separate Account KGC of Separate Account KG of
NAME/DATE Allmerica Financial Life Allmerica Financial Life Allmerica Financial Life
ESTABLISHED Insurance and Annuity Insurance and Annuity Insurance and Annuity
Company Company Company
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-7767 811-7777 811-7767
NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS Dreyfus Investment Dreyfus Investment Dreyfus Investment
Portfolios: Portfolios: Portfolios:
- Dreyfus MidCap Stock - Dreyfus MidCap Stock - Dreyfus MidCap Stock
Portfolio Portfolio Portfolio
Drefus Socially Responsible Drefus Socially Responsible Drefus Socially Responsible
Growth Fund, Inc. Growth Fund, Inc. Growth Fund, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B (continued)
CONTRACTS OF THE COMPANY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACT 4 CONTRACT 5 CONTRACT 6
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Kemper Gateway Plus Kemper Gateway (TBD) ValuePlus Assurance
NAME
- ----------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Y Y Y
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-81019 333-90539 333-93031
NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM A3028-99 A3030-99 1036-99
NUMBERS
- ----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Separate Account KG of Separate Account KG of FUVUL Separate Account of
NAME/DATE Allmerica Financial Life Allmerica Financial Life Allmerica Financial Life
ESTABLISHED Insurance and Annuity Insurance and Annuity Insurance and Annuity
Company Company Company
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION NUMBER 811-7767 811-7767 811-09731
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS Dreyfus Investment Dreyfus Investment Dreyfus Variable Investment
Portfolios: Portfolios: Fund:
- Dreyfus MidCap Stock - Dreyfus MidCap Stock - Dreyfus Capital
Portfolio Portfolio Appreciation Portfolio
- Dreyfus Quality Bond
Drefus Socially Responsible Drefus Socially Responsible Portfolio
Growth Fund, Inc. Growth Fund, Inc.
Dreyfus Socially Responsible
Growth Fund, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
FUND PARTICIPATION AGREEMENT AMENDMENT
This Fund Participation Agreement Amendment hereby amends the Fund Participation
Agreement dated June 1999 between the First Allmerica Financial Life Insurance
Company, and each of Dreyfus Investment Portfolios and The Dreyfus Socially
Responsible Growth Fund, Inc. ("Agreement") in the following manner:
1) The Agreement is amended to include Dreyfus Variable Investment Fund as a
party to the Agreement by the insertion of the following language in the first
paragraph, beginning of the fourth line:
"DREYFUS VARIABLE INVESTMENT FUND,"
2) The following language shall be added to Paragraph 1.5 of the Agreement
following "investment medium:"
", which are delineated on Exhibit B"
3) The current Paragraph 1.12 of the Agreement is deleted and a new
Paragraph 1.12 is substituted to read as follows:
"Separate Account" shall mean Separate Account KG of First
Allmerica Financial Life Insurance Company, Separate Account KGC
of First Allmerica Financial Life Insurance Company and FUVUL
Separate Account of First Allmerica Financial Life Insurance
Company, each a separate account established by Insurance Company
in accordance with the laws of the State of Massachusetts.
3) The Agreement is amended to replace Exhibit A in its entirety by the
revised Exhibit A, attached hereto.
4) The following language shall be added to Paragraph 11.1 of the Agreement
following "Exhibit A:"
"and Exhibit B"
5) The Agreement is amended to add Exhibit B.
IN WITNESS WHEREOF, the parties hereto have executed this Fund Participation
Agreement Amendment as of _______________, 2000.
<PAGE>
FIRST ALLAMERICA FINANCIAL LIFE
INSURANCE COMPANY
By:
Its:
Attest:
THE DREYFUS SOCIALLY RESPONSIBLE
GROWTH FUND, INC.
By:
Its:
Attest:
DREYFUS VARIABLE INVESTMENT FUND
By:
Its:
Attest:
DREYFUS INVESTMENT PORTFOLIOS
By:
Its:
Attest:
<PAGE>
EXHIBIT A
Dreyfus Investment Portfolios
MidCap Stock Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc.
Dreyfus Variable Investment Fund
Capital Appreciation Portfolio
Quality Bond Portfolio
<PAGE>
EXHIBIT B
CONTRACTS OF THE COMPANY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Kemper Gateway Elite Kemper Gateway Custom Kemper Gateway Advisor
NAME
- ----------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Y Y Y
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-9965 333-10283 333-63091
NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM A3025-96 A3026-96 A3027-98
NUMBERS
- ----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Separate Account KG of Separate Account KGC of Separate Account KG of
NAME/DATE Allmerica Financial Life Allmerica Financial Life Allmerica Financial Life
ESTABLISHED Insurance and Annuity Insurance and Annuity Insurance and Annuity
Company Company Company
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION NUMBER 811-7767 811-7777 811-7767
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS Dreyfus Investment Dreyfus Investment Dreyfus Investment
Portfolios: Portfolios: Portfolios:
- Dreyfus MidCap Stock - Dreyfus MidCap Stock - Dreyfus MidCap Stock
Portfolio Portfolio Portfolio
Drefus Socially Responsible Drefus Socially Responsible Drefus Socially Responsible
Growth Fund, Inc. Growth Fund, Inc. Growth Fund, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT B (continued)
CONTRACTS OF THE COMPANY
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACT 4 CONTRACT 5 CONTRACT 6
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Kemper Gateway Plus Kemper Gateway (TBD) ValuePlus Assurance
NAME
- ----------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Y Y Y
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-81019 333-90539 333-93031
NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM A3028-99 A3030-99 1036-99
NUMBERS
- ----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Separate Account KG of Separate Account KG of FUVUL Separate Account of
NAME/DATE Allmerica Financial Life Allmerica Financial Life Allmerica Financial Life
ESTABLISHED Insurance and Annuity Insurance and Annuity Insurance and Annuity
Company Company Company
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-7767 811-7767 811-09731
NUMBER
- ----------------------------------------------------------------------------------------------------------------------------
PORTFOLIOS Dreyfus Investment Dreyfus Investment Dreyfus Variable Investment
Portfolios: Portfolios: Fund:
- Dreyfus MidCap Stock - Dreyfus MidCap Stock - Dreyfus Capital
Portfolio Portfolio Appreciation Portfolio
- Dreyfus Quality Bond
Drefus Socially Responsible Drefus Socially Responsible Portfolio
Growth Fund, Inc. Growth Fund, Inc.
Dreyfus Socially Responsible
Growth Fund, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
A I M DISTRIBUTORS, INC.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
AND
ALLMERICA INVESTMENTS, INC.
<PAGE>
TABLE OF CONTENTS
DESCRIPTION PAGE
Section 1. Available Funds....................................................2
1.1 Availability.................................................2
1.2 Addition, Deletion or Modification of Funds..................2
1.3 No Sales to the General Public...............................2
Section 2. Processing Transactions............................................3
2.1 Timely Pricing and Orders....................................3
2.2 Timely Payments..............................................3
2.3 Applicable Price.............................................3
2.4 Dividends and Distributions..................................4
2.5 Book Entry...................................................4
Section 3. Costs and Expenses.................................................4
3.1 General......................................................4
3.2 Parties To Cooperate.........................................4
Section 4. Legal Compliance...................................................5
4.1 Tax Laws.....................................................5
4.2 Insurance and Certain Other Laws.............................7
4.3 Securities Laws..............................................7
4.4 Notice of Certain Proceedings and Other Circumstances........8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF....9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY...10
Section 5. Mixed and Shared Funding..........................................11
5.1 General.....................................................11
5.2 Disinterested Directors.....................................12
5.3 Monitoring for Material Irreconcilable Conflicts............12
5.4 Conflict Remedies...........................................13
5.5 Notice to LIFE COMPANY......................................14
5.6 Information Requested by Board of Directors.................14
5.7 Compliance with SEC Rules...................................14
5.8 Other Requirements..........................................14
Section 6. Termination.......................................................15
6.1 Events of Termination.......................................15
6.2 Notice Requirement for Termination..........................16
6.3 Funds To Remain Available...................................16
i
<PAGE>
6.4 Survival of Warranties and Indemnifications.................16
6.5 Continuance of Agreement for Certain Purposes...............16
Section 7. Parties To Cooperate Respecting Termination.......................17
Section 8. Assignment........................................................17
Section 9. Notices...........................................................17
Section 10. Voting Procedures................................................18
Section 11. Foreign Tax Credits..............................................18
Section 12. Indemnification..................................................19
12.1 Of AVIF and AIM by LIFE COMPANY and UNDERWRITER.............19
12.2 Of LIFE COMPANY and UNDERWRITER by AVIF and AIM.............21
12.3 Effect of Notice............................................23
12.4 Successors..................................................23
Section 13. Applicable Law...................................................23
Section 14. Execution in Counterparts........................................24
Section 15. Severability.....................................................24
Section 16. Rights Cumulative................................................24
Section 17. Headings.........................................................24
Section 18. Confidentiality..................................................24
Section 19. Trademarks and Fund Names........................................25
Section 20. Parties to Cooperate.............................................26
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 27th day of July, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM")
Allmerica Financial Life Insurance and Annuity Company, a Delaware life
insurance company ("LIFE COMPANY"), on behalf of itself and each of its
segregated asset accounts listed in Schedule A hereto, as the parties hereto may
amend from time to time (each, an "Account," and collectively, the "Accounts");
and Allmerica Investments, Inc., an affiliate of LIFE COMPANY and the principal
underwriter of the Contracts ("UNDERWRITER") (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of thirteen separate series
("Series"), shares ("Shares") of each of which are registered under the
Securities Act of 1933, as amended (the "1933 Act") and are currently sold to
one or more separate accounts of life insurance companies to fund benefits under
variable annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") as set forth on
Schedule A hereto, as the Parties hereto may amend from time to time, which
Contracts (hereinafter collectively, the "Contracts"), if required by applicable
law, will be registered under the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts,
each of which may be divided into two or more subaccounts ("Subaccounts";
reference herein to an "Account" includes reference to each Subaccount thereof
to the extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each
of which is registered as a unit investment trust investment company under the
1940 Act (or exempt therefrom), and the security interests deemed to be issued
by the Accounts under the Contracts will be registered as securities under the
1933 Act (or exempt therefrom); and
1
<PAGE>
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under
the Securities Exchange Act of 1934 ("1934 Act") and a member in good standing
of the National Association of Securities Dealers, Inc. ("NASD");
WHEREAS, AIM is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 ("1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to LIFE COMPANY for
purchase and redemption at net asset value and with no sales charges, subject to
the terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Contracts, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
2
<PAGE>
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to
provide LIFE COMPANY with the net asset value per Share for each Fund by 6:00
p.m. Central Time on each Business Day. As used herein, "Business Day" shall
mean any day on which (i) the New York Stock Exchange is open for regular
trading, (ii) AVIF calculates the Fund's net asset value, and (iii) LIFE COMPANY
is open for business.
(b) LIFE COMPANY will use the data provided by AVIF each Business
Day pursuant to paragraph (a) immediately above to calculate Account unit values
and to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; PROVIDED, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY
and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
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2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from
purchase payments, premium payments, surrenders and other transactions under
Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives
prior to the close of regular trading on the New York Stock Exchange on a
Business Day will be executed at the net asset values of the appropriate Funds
next computed after receipt by AVIF or its designated agent of the orders. For
purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of
AVIF for receipt of orders relating to Contract transactions on each Business
Day and receipt by such designated agent shall constitute receipt by AVIF;
PROVIDED that AVIF receives notice of such orders by 9:00 a.m. Central Time on
the next following Business Day or such later time as computed in accordance
with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
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SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached
hereto and made a part hereof, each Party will bear, or arrange for others to
bear, all expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently
qualified as a regulated investment company ("RIC") under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"), and represents that it
will use its best efforts to qualify and to maintain qualification of each Fund
as a RIC. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so qualify or that it might not so
qualify in the future.
(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4.1(b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion
or potential claim (subject to the Confidentiality
provisions of Section 18 as to any Participant);
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(ii) LIFE COMPANY shall consult with AVIF as to how to minimize
any liability that may arise as a result of such failure or
alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating,
pursuant to Treasury Regulations Section 1.817-5(a)(2), to
the Commissioner of the IRS that such failure was
inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their
legal and accounting advisors to participate in any
conferences, settlement discussions or other administrative
or judicial proceeding or contests (including judicial
appeals thereof) with the IRS, any Participant or any other
claimant regarding any claims that could give rise to
liability to AVIF or its affiliates as a result of such a
failure or alleged failure; PROVIDED, however, that LIFE
COMPANY will retain control of the conduct of such
conferences discussions, proceedings, contests or appeals;
(v) any written materials to be submitted by LIFE COMPANY to
the IRS, any Participant or any other claimant in
connection with any of the foregoing proceedings or
contests (including, without limitation, any such materials
to be submitted to the IRS pursuant to Treasury Regulations
Section 1.817-5(a)(2)), (a) shall be provided by LIFE
COMPANY to AVIF (together with any supporting information
or analysis); subject to the confidentiality provisions of
Section 18, at least ten (10) business days or such shorter
period to which the Parties hereto agree prior to the day
on which such proposed materials are to be submitted, and
(b) shall not be submitted by LIFE COMPANY to any such
person without the express written consent of AVIF which
shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF
shall reasonably request (including, without limitation, by
permitting AVIF and its accounting and legal advisors to
review the relevant books and records of LIFE COMPANY) in
order to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or
amount of any claim against its arising from such a failure
or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS
or any Participant that would give rise to a claim against
AVIF or its affiliates (a) compromise or settle any claim,
(b) accept any adjustment on audit, or (c) forego any
allowable administrative or judicial appeals, without the
express written consent of AVIF or its affiliates, which
shall not be unreasonably withheld, PROVIDED that LIFE
COMPANY shall not be required, after
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exhausting all administrative penalties, to appeal any
adverse judicial decision unless AVIF or its affiliates
shall have provided an opinion of independent counsel to
the effect that a reasonable basis exists for taking such
appeal; and PROVIDED FURTHER that the costs of any such
appeal shall be borne equally by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result
of such failure or alleged failure if LIFE COMPANY fails to
comply with any of the foregoing clauses (i) through (vii),
and such failure could be shown to have materially
contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent
to any compromise or settlement of any claim or liability hereunder, LIFE
COMPANY may, in its discretion, authorize AVIF or its affiliates to act in the
name of LIFE COMPANY in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals and all administrative or judicial
appeals thereof, and in that event AVIF or its affiliates shall bear the fees
and expenses associated with the conduct of the proceedings that it is so
authorized to control; PROVIDED, that in no event shall LIFE COMPANY have any
liability resulting from AVIF's refusal to accept the proposed settlement or
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Contracts
currently are and will be treated as annuity contracts or life insurance
contracts under applicable provisions of the Code and that it will use its best
efforts to maintain such treatment; LIFE COMPANY will notify AVIF immediately
upon having a reasonable basis for believing that any of the Contracts have
ceased to be so treated or that they might not be so treated in the future.
(e) LIFE COMPANY represents and warrants that each Account is a
"segregated asset account" and that interests in each Account are offered
exclusively through the purchase of or transfer into a "variable contract,"
within the meaning of such terms under Section 817 of the Code and the
regulations thereunder. LIFE COMPANY will use its best efforts to continue to
meet such definitional requirements, and it will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWSError! Bookmark not defined..
(a) AVIF will use its best efforts to comply with any applicable
state insurance laws or regulations, to the extent specifically requested in
writing by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
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(b) LIFE COMPANY represents and warrants that (i) it is an
insurance company duly organized, validly existing and in good standing under
the laws of the State of Delaware and has full corporate power, authority and
legal right to execute, deliver and perform its duties and comply with its
obligations under this Agreement, (ii) it has legally and validly established
and maintains each Account as a segregated asset account under Section 2932 of
the Delaware Insurance Law and the regulations thereunder, and (iii) the
Contracts comply in all material respects with all other applicable federal and
state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver, and
perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWSError! Bookmark not defined..
(a) LIFE COMPANY represents and warrants that (i) interests in
each Account pursuant to the Contracts will be registered under the 1933 Act to
the extent required by the 1933 Act, (ii) the Contracts will be duly authorized
for issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Delaware law, (iii) each Account is and will remain registered under the 1940
Act, to the extent required by the 1940 Act, (iv) each Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Contracts, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Accounts
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Contracts or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to
this Agreement will be registered under the 1933 Act to the extent required by
the 1933 Act and duly authorized for issuance and sold in compliance with
Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the
extent required by the 1940 Act, (iii) AVIF will amend the registration
statement for its Shares under the 1933 Act and itself under the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares, (iv) AVIF does and will comply in all material respects with the
requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act
registration statement, together with any amendments thereto, will at all times
comply in all material respects with the requirements of the 1933 Act and rules
thereunder, and (vi) AVIF's Prospectus will at all times comply in all material
respects with the requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for
sale in accordance with the laws of any state or other jurisdiction if and to
the extent reasonably deemed advisable by AVIF.
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(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees,
officers, employees, investment advisers, and other individuals/entities having
access to the funds and/or securities of the Fund are and continue to be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Fund in an amount not less than the minimal coverage as required currently
by Rule 17g-(1) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to AVIF's registration statement under the 1933
Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIF's Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance
by any court or regulatory body of any stop order, cease and desist order, or
other similar order with respect to each Account's registration statement under
the 1933 Act relating to the Contracts or each Account Prospectus, (ii) any
request by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Contracts,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
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4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of all SEC registration statements, Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to each Account or the Contracts,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which AVIF or any of its affiliates is named, at least
five (5) Business Days prior to its use or such shorter period as the Parties
hereto may, from time to time, agree upon. No such material shall be used if
AVIF or its designated agent objects to such use within five (5) Business Days
after receipt of such material or such shorter period as the Parties hereto may,
from time to time, agree upon. AVIF hereby designates AIM as the entity to
receive such sales literature, until such time as AVIF appoints another
designated agent by giving notice to LIFE COMPANY in the manner required by
Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Contracts other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that is
intended for use only by brokers or agents selling the Contracts (I.E.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither AVIF nor any of its affiliates shall be
liable for any losses, damages or expenses relating to the improper use of such
broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales
literature or other promotional material" includes, but is not limited to,
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media,
(E.G., on-line networks such as the Internet or other electronic messages),
sales literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
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proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete
copy of all SEC registration statements, AVIF Prospectuses, reports, any
preliminary and final proxy material, applications for exemptions, requests for
no-action letters, and all amendments to any of the above, that relate to AVIF
or the Shares of a Fund, contemporaneously with the filing of such document with
the SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY a camera ready copy of all
AVIF prospectuses and printed copies, in an amount specified by LIFE COMPANY, of
AVIF statements of additional information, proxy materials, periodic reports to
shareholders and other materials required by law to be sent to Participants who
have allocated any Contract value to a Fund. AVIF will provide such copies to
LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may
be, to print and distribute such materials within the time required by law to be
furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at
least one (1) complete copy of each piece of sales literature or other
promotional material in which LIFE COMPANY, or any of its respective affiliates
is named, or that refers to the Contracts, at least five (5) Business Days prior
to its use or such shorter period as the Parties hereto may, from time to time,
agree upon. No such material shall be used if LIFE COMPANY or its designated
agent objects to such use within five (5) Business Days after receipt of such
material or such shorter period as the Parties hereto may, from time to time,
agree upon. LIFE COMPANY shall receive all such sales literature until such time
as it appoints a designated agent by giving notice to AVIF in the manner
required by Section 9 hereof.
(d) Neither AVIF nor any of its affiliates will give any
information or make any representations or statements on behalf of or concerning
LIFE COMPANY, each Account, or the Contracts other than (i) the information or
representations contained in the registration statement, including each Account
Prospectus contained therein, relating to the Contracts, as such registration
statement and Account Prospectus may be amended from time to time; or (ii) in
published reports for the Account or the Contracts that are in the public domain
and approved by LIFE COMPANY for distribution; or (iii) in sales literature or
other promotional material approved by LIFE COMPANY or its affiliates, except
with the express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and
implement procedures reasonably designed to ensure that information concerning
LIFE COMPANY, and its respective affiliates that is intended for use only by
brokers or agents selling the Contracts (I.E., information that is not intended
for distribution to Participants) ("broker only materials") is so used, and
neither LIFE COMPANY, nor any of its respective affiliates shall be liable for
any losses, damages or expenses relating to the improper use of such broker only
materials.
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(f) For purposes of this Section 4.6, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (E.G.,
on-line networks such as the Internet or other electronic messages), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Contract is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORSError! Bookmark not defined..
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
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5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax or
securities regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist
the Board of Directors in carrying out its responsibilities by providing the
Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
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5.4 CONFLICT REMEDIESError! Bookmark not defined..
(a) It is agreed that if it is determined by a majority of the
members of the Board of Directors or a majority of the Disinterested Directors
that a material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the
Accounts from AVIF or any Fund and reinvesting such assets
in a different investment medium, including another Fund of
AVIF, or submitting the question whether such segregation
should be implemented to a vote of all affected
Participants and, as appropriate, segregating the assets of
any particular group (E.G., annuity Participants, life
insurance Participants or all Participants) that votes in
favor of such segregation, or offering to the affected
Participants the option of making such a change; and
(ii) establishing a new registered investment company of the
type defined as a "management company" in Section 4(3) of
the 1940 Act or a new separate account that is operated as
a management company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such withdrawal. Any such withdrawal must take place within six (6) months
after AVIF gives notice to LIFE COMPANY that this provision is being
implemented, and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF.
(c) If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to LIFE COMPANY
conflicts with the majority of other state regulators, then LIFE COMPANY will
withdraw each Account's investment in AVIF within six (6) months after AVIF's
Board of Directors informs LIFE COMPANY that it has determined that such
decision has created a material irreconcilable conflict, and until such
withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY
for the purchase and redemption of Shares of AVIF. No charge or penalty will be
imposed as a result of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors
will determine whether or not any proposed action adequately remedies any
material irreconcilable conflict. In no event,
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however, will AVIF or any of its affiliates be required to establish a new
funding medium for any Contracts. LIFE COMPANY will not be required by the terms
hereof to establish a new funding medium for any Contracts if an offer to do so
has been declined by vote of a majority of Participants materially adversely
affected by the material irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least
annually submit to the Board of Directors of AVIF such reports, materials or
data as the Board of Directors may reasonably request so that the Board of
Directors may fully carry out the obligations imposed upon it by the provisions
hereof or any exemptive order granted by the SEC to permit Mixed and Shared
Funding, and said reports, materials and data will be submitted at any
reasonable time deemed appropriate by the Board of Directors. All reports
received by the Board of Directors of potential or existing conflicts, and all
Board of Directors actions with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating Plans of
a conflict, and determining whether any proposed action adequately remedies a
conflict, will be properly recorded in the minutes of the Board of Directors or
other appropriate records, and such minutes or other records will be made
available to the SEC upon request.
5.7 COMPLIANCE WITH SEC RULESError! Bookmark not defined..
If, at any time during which AVIF is serving as an investment medium
for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable,
6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with
respect to Mixed and Shared Funding, AVIF agrees that it will comply with the
terms and conditions thereof and that the terms of this Section 5 shall be
deemed modified if and only to the extent required in order also to comply with
the terms and conditions of such exemptive relief that is afforded by any of
said rules that are applicable.
5.8 OTHER REQUIREMENTSError! Bookmark not defined..
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
15
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SECTION 6. TERMINATIONError! Bookmark not defined.
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of any party, with or without cause with respect
to the Fund, upon six (6) months advance written notice to the other parties,
or, if later, upon receipt of any required exemptive relief from the SEC, unless
otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings
against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal
proceedings against AVIF, its principal underwriter, or its investment adviser
by the NASD, the SEC, or any state insurance regulator or any other regulatory
body regarding AVIF's obligations under this Agreement or related to the
operation or management of AVIF or the purchase of AVIF Shares, if, in each
case, LIFE COMPANY reasonably determines that such proceedings, or the facts on
which such proceedings would be based, have a material likelihood of imposing
material adverse consequences on LIFE COMPANY, or the Subaccount corresponding
to the Fund with respect to which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's
Shares are not registered and, in all material respects, issued and sold in
accordance with any applicable federal or state law, or (ii) such law precludes
the use of such Shares as an underlying investment medium of the Contracts
issued or to be issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in
the Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as
a RIC under Subchapter M of the Code or under successor or similar provisions,
or if LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions, or if LIFE
COMPANY reasonably believes that the Fund may fail to so comply; or
16
<PAGE>
(h) at the option of AVIF if the Contracts issued by LIFE COMPANY
cease to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Contracts are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATIONError! Bookmark not defined..
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the
other Party to this Agreement of its intent to terminate, and such
notice shall set forth the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions
of Sections 6.1(a) or 6.1(e) hereof, such prior written notice
shall be given at least six (6) months in advance of the
effective date of termination unless a shorter time is agreed
to by the Parties hereto;
(b) in the event that any termination is based upon the provisions
of Sections 6.1(b) or 6.1(c) hereof, such prior written notice
shall be given at least ninety (90) days in advance of the
effective date of termination unless a shorter time is agreed
to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions
of Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof,
such prior written notice shall be given as soon as possible
within twenty-four (24) hours after the terminating Party
learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the
option of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Contracts. The parties agree that this Section 6.3 will not apply to
any terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONSError! Bookmark not
defined..
All warranties and indemnifications will survive the termination of
this Agreement.
17
<PAGE>
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund
pursuant to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i)
hereof, this Agreement shall nevertheless continue in effect as to any Shares of
that Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATIONError! Bookmark not
defined.
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Contracts in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
SECTION 9. NOTICESERROR! BOOKMARK NOT DEFINED.
Notices and communications required or permitted by Section 9 hereof
will be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
18
<PAGE>
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
440 Lincoln Street
Worcester, Massachusetts 01653
Facsimile: (508) 855-6641
Attn: Richard M. Reilly, President
ALLMERICA INVESTMENTS, INC.
440 Lincoln Street
Worcester, Massachusetts 01653
Facsimile: (508) 855-6641
Attn: Stephen Parker
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. LIFE COMPANY reserves the right to vote
shares held in any Account in its own right, to the extent permitted by law.
LIFE COMPANY shall be responsible for assuring that each of its Accounts holding
Shares calculates voting privileges in a manner consistent with that of other
Participating Insurance Companies or in the manner required by the Mixed and
Shared Funding exemptive order obtained by AVIF. AVIF will notify LIFE COMPANY
of any changes of interpretations or amendments to Mixed and Shared Funding
exemptive order it has obtained. AVIF will comply with all provisions of the
1940 Act requiring voting by shareholders, and in particular, AVIF either will
provide for annual meetings
19
<PAGE>
(except insofar as the SEC may interpret Section 16 of the 1940 Act not to
require such meetings) or will comply with Section 16(c) of the 1940 Act
(although AVIF is not one of the trusts described in Section 16(c) of that Act)
as well as with Sections 16(a) and, if and when applicable, 16(b). Further, AVIF
will act in accordance with the SEC's interpretation of the requirements of
Section 16(a) with respect to periodic elections of directors and with whatever
rules the SEC may promulgate with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY LIFE COMPANY AND UNDERWRITER.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, LIFE COMPANY and UNDERWRITER agree to indemnify and hold harmless AVIF,
AIM, their affiliates, and each person, if any, who controls AVIF, AIM, or their
affiliates within the meaning of Section 15 of the 1933 Act and each of their
respective directors and officers, (collectively, the "Indemnified Parties" for
purposes of this Section 12.1) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY and UNDERWRITER) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses), to which the Indemnified Parties
may become subject under any statute, regulation, at common law or otherwise;
PROVIDED, the Account owns shares of the Fund and insofar as such losses,
claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any Account's 1933 Act registration statement, any Account
Prospectus, the Contracts, or sales literature or
advertising for the Contracts (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;
provided, that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to LIFE
COMPANY or UNDERWRITER by or on behalf of AVIF or AIM for
use in any Account's 1933 Act registration statement, any
Account Prospectus, the Contracts, or sales literature or
advertising or otherwise for use in connection with the
sale of Contracts or Shares (or any amendment or supplement
to any of the foregoing); or
20
<PAGE>
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of LIFE COMPANY,
UNDERWRITER or their respective affiliates and on which
such persons have reasonably relied) or the negligent,
illegal or fraudulent conduct of LIFE COMPANY, UNDERWRITER
or their respective affiliates or persons under their
control (including, without limitation, their employees and
"persons associated with a member," as that term is defined
in paragraph (q) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the Contracts
or Shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
AVIF's 1933 Act registration statement, AVIF Prospectus,
sales literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing, or the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was
made in reliance upon and in conformity with information
furnished to AVIF, AIM or their affiliates by or on behalf
of LIFE COMPANY, UNDERWRITER or their respective affiliates
for use in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY or
UNDERWRITER to perform the obligations, provide the
services and furnish the materials required of them under
the terms of this Agreement, or any material breach of any
representation and/or warranty made by LIFE COMPANY or
UNDERWRITER in this Agreement or arise out of or result
from any other material breach of this Agreement by LIFE
COMPANY or UNDERWRITER; or
(v) arise as a result of failure by the Contracts issued by
LIFE COMPANY to qualify as annuity contracts or life
insurance contracts under the Code, otherwise than by
reason of any Fund's failure to comply with Subchapter M or
Section 817(h) of the Code.
(b) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any losses, claims, damages, liabilities or actions
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the
21
<PAGE>
performance by that Indemnified Party of its duties or by reason of that
Indemnified Party's reckless disregard of obligations or duties (i) under this
Agreement, or (ii) to AVIF or AIM.
(c) Neither LIFE COMPANY nor UNDERWRITER shall be liable under this
Section 12.1 with respect to any action against an Indemnified Party unless AVIF
or AIM shall have notified LIFE COMPANY and UNDERWRITER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the action shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify LIFE COMPANY and
UNDERWRITER of any such action shall not relieve LIFE COMPANY and UNDERWRITER
from any liability which they may have to the Indemnified Party against whom
such action is brought otherwise than on account of this Section 12.1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, LIFE COMPANY and UNDERWRITER shall be entitled to
participate, at their own expense, in the defense of such action and also shall
be entitled to assume the defense thereof, with counsel approved by the
Indemnified Party named in the action, which approval shall not be unreasonably
withheld. After notice from LIFE COMPANY or UNDERWRITER to such Indemnified
Party of LIFE COMPANY's or UNDERWRITER's election to assume the defense thereof,
the Indemnified Party will cooperate fully with LIFE COMPANY and UNDERWRITER and
shall bear the fees and expenses of any additional counsel retained by it, and
neither LIFE COMPANY nor UNDERWRITER will be liable to such Indemnified Party
under this Agreement for any legal or other expenses subsequently incurred by
such Indemnified Party independently in connection with the defense thereof,
other than reasonable costs of investigation.
12.2 OF LIFE COMPANY AND UNDERWRITER BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e), below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY,
UNDERWRITER, their respective affiliates, and each person, if any, who controls
LIFE COMPANY, UNDERWRITER or their respective affiliates within the meaning of
Section 15 of the 1933 Act and each of their respective directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF and/or AIM) or actions in respect
thereof (including, to the extent reasonable, legal and other expenses), to
which the Indemnified Parties may become subject under any statute, regulation,
at common law, or otherwise; PROVIDED, the Account owns shares of the Fund and
insofar as such losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
AVIF's 1933 Act registration statement, AVIF Prospectus or
sales literature or advertising of AVIF (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;
PROVIDED, that this agreement to indemnify shall not apply
as to any Indemnified Party if such statement or omission
or such alleged
22
<PAGE>
statement or omission was made in reliance upon and in
conformity with information furnished to AVIF or its
affiliates by or on behalf of LIFE COMPANY, UNDERWRITER or
their respective affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, or in sales
literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement,
any Account Prospectus, sales literature or advertising for
the Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of
AVIF, AIM or their affiliates and on which such persons
have reasonably relied) or the negligent, illegal or
fraudulent conduct of AVIF, AIM or their affiliates or
persons under their control (including, without limitation,
their employees and "persons associated with a member" as
that term is defined in Section (q) of Article I of the
NASD By-Laws), in connection with the sale or distribution
of AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, if
such statement or omission was made in reliance upon and in
conformity with information furnished to LIFE COMPANY,
UNDERWRITER or their respective affiliates by or on behalf
of AVIF or AIM for use in any Account's 1933 Act
registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any
material breach of any representation and/or warranty made
by AVIF in this Agreement or arise out of or result from
any other material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF and AIM agree to indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages,
liabilities (including amounts paid in settlement thereof with, the written
consent of AVIF and/or AIM) or actions in respect thereof (including, to the
extent reasonable, legal and other expenses) to which the Indemnified Parties
may become subject directly or indirectly under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities
23
<PAGE>
or actions directly or indirectly result from or arise out of the failure of any
Fund to operate as a regulated investment company in compliance with (i)
Subchapter M of the Code and regulations thereunder, or (ii) Section 817(h) of
the Code and regulations thereunder, including, without limitation, any income
taxes and related penalties, rescission charges, liability under state law to
Participants asserting liability against LIFE COMPANY pursuant to the Contracts,
the costs of any ruling and closing agreement or other settlement with the IRS,
and the cost of any substitution by LIFE COMPANY of Shares of another investment
company or portfolio for those of any adversely affected Fund as a funding
medium for each Account that LIFE COMPANY reasonably deems necessary or
appropriate as a result of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY,
UNDERWRITER, each Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM and shall
bear the fees and expenses of any additional counsel retained by it, and AVIF
and AIM will not be liable to such Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof, other than reasonable
costs of investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, UNDERWRITER or any other Participating
Insurance Company or any Participant, with respect to any losses, claims,
damages, liabilities or expenses that arise out of or result from (i) a breach
of any representation, warranty, and/or covenant made by LIFE COMPANY or
UNDERWRITER hereunder or by any Participating Insurance Company under an
agreement containing substantially similar representations, warranties and
covenants; (ii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its segregated asset account (which
24
<PAGE>
invests in any Fund) as a legally and validly established segregated asset
account under applicable state law and as a duly registered unit investment
trust under the provisions of the 1940 Act (unless exempt therefrom); or (iii)
the failure by LIFE COMPANY or any Participating Insurance Company to maintain
its variable annuity or life insurance contracts (with respect to which any Fund
serves as an underlying funding vehicle) as annuity contracts or life insurance
contracts under applicable provisions of the Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORSError! Bookmark not defined..
A successor by law of any Party shall be entitled to the benefits of
the indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAWError! Bookmark not defined.
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS 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, that the Parties are entitled to under federal and state
laws.
25
<PAGE>
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY
or any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
26
<PAGE>
SECTION 19. TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other tradenames, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written notice
from AIM to LIFE COMPANY (the "AIM licensed marks" or the "licensor's licensed
marks") and is authorized to use and to license other persons to use such marks.
LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to
use the AIM licensed marks in connection with LIFE COMPANY's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates ( the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that LIFE COMPANY shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, LIFE COMPANY and its affiliates
shall immediately cease to issue any new annuity or life insurance contracts
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that LIFE COMPANY shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.
(c) The licensee shall obtain the prior written approval of the
licensor for the public release by such licensee of any materials bearing the
licensor's licensed marks. The licensor's approvals shall not be unreasonably
withheld.
(d) During the term of this grant of license, a licensor may request
that a licensee submit samples of any materials bearing any of the licensor's
licensed marks which were previously approved by the licensor but, due to
changed circumstances, the licensor may wish to reconsider. If, on
reconsideration, or on initial review, respectively, any such samples fail to
meet with the written approval of the licensor, then the licensee shall
immediately cease distributing such disapproved materials. The licensor's
approval shall not be unreasonably withheld, and the licensor, when requesting
reconsideration of a prior approval, shall assume the reasonable expenses of
withdrawing and replacing such disapproved materials. The licensee shall obtain
the prior written approval of the licensor for the use of any new materials
developed to replace the disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to
the best of the knowledge of the licensee, the licensor's licensed marks are
valid and enforceable trademarks and/or service marks and that such licensee
does not own the licensor's licensed marks and claims no rights therein other
than as a licensee under this Agreement; (ii) agrees never to contend otherwise
in legal
27
<PAGE>
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
------------------------------------
28
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
Name: Nancy L. Martin Name: Robert H. Graham
Title Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Michael J. Cemo
Name: Nancy L. Martin Name: Michael J. Cemo
Title Assistant Secretary Title: President
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY, on behalf of itself
and its separate accounts
Attest: /s/ Jacqueline E. Esteves By: /s/ Richard M. Reilly
Name: Jacqueline E. Esteves Name: Richard M. Reilly
Title: Administrator Title: President
ALLMERICA INVESTMENTS, INC.
Attest: /s/ Elaine Allen By: /s/ Stephen Parker
Name: Elaine Allen Name: Stephen Parker
Title: Administrative Assistant Title: President
29
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE CONTRACTS
- - AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Fulcrum Account of Allmerica Financial Life
Insurance and Annuity Company
Fulcrum Variable Life Account of Allmerica Financial Life
Insurance and Annuity Company
CONTRACTS FUNDED BY THE SEPARATE ACCOUNTS
30
<PAGE>
SCHEDULE B
- - AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Value Fund
- - AIM and Design
31
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
=========================================================== ========================================================
LIFE COMPANY AVIF / AIM
<S> <C>
preparing and filing the Account's registration statement preparing and filing the Fund's registration statement
text composition for Account prospectuses and supplements text composition for Fund prospectuses and supplements
text alterations of prospectuses (Account) and text alterations of prospectuses (Fund) and
supplements (Account) supplements (Fund)
printing Account and Fund prospectuses and supplements a camera ready Fund prospectus
text composition and printing Account SAIs text composition and printing Fund SAIs
mailing and distributing Account SAIs to policy owners mailing and distributing Fund SAIs to policy owners
upon request by policy owners upon request by policy owners
mailing and distributing prospectuses (Account and Fund)
and supplements (Account and Fund) to policy owners of
record as required by Federal Securities Laws and to
prospective purchasers
text composition (Account), printing, mailing, and text composition of annual and semi-annual reports
distributing annual and semi-annual reports for Account (Fund)
(Fund and Account as, applicable)
text composition, printing, mailing, distributing, and text composition, printing, mailing, distributing and
tabulation of proxy statements and voting instruction tabulation of proxy statements and voting instruction
solicitation materials to policy owners with respect to solicitation materials to policy owners with respect
proxies related to the Account to proxies related to the Fund
preparation, printing and distributing sales material and
advertising relating to the Funds, insofar as such
materials relate to the Contracts and filing such
materials with and obtaining approval from, the SEC, the
NASD, any state insurance regulatory authority, and any
other appropriate regulatory authority, to the extent
required
=========================================================== ========================================================
</TABLE>
32
<PAGE>
33
<PAGE>
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated July 27, 1998, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, Allmerica Financial Life Insurance
and Annuity Company, a Delaware life insurance company and Allmerica
Investments, Inc., is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- ------------------------------------------ ------------------------------------------- ---------------------------------------
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
- ------------------------------------------ ------------------------------------------- ---------------------------------------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Fulcrum Account of Allmerica Financial 3025-96
AIM V.I. Value Fund Life Insurance and Annuity Company
------------------------------------------- ---------------------------------------
Fulcrum Variable Life Account of 1030-96
Allmerica Financial Life Insurance and
Annuity Company
------------------------------------------- ---------------------------------------
FUVUL Separate Account of Allmerica 1036-99
Financial Life Insurance and Annuity
Company
------------------------------------------- ---------------------------------------
Separate Account VA-P of Allmerica Pioneer Vision; Pioneer C-Vision; and
Financial Life Insurance and Annuity Pioneer Xtra Vision
Company
- ------------------------------------------ ------------------------------------------- ---------------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: ___________________
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
------------------------------ -------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: By:
------------------------------ -------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
1 of 2
<PAGE>
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
Attest: By:
---------------------------- -------------------------------
Name: Name:
------------------------------ -----------------------------
Title: Title:
----------------------------- ----------------------------
(SEAL)
ALLMERICA INVESTMENTS, INC.
Attest: By:
---------------------------- -------------------------------
Name: Name:
------------------------------ -----------------------------
Title: Title:
----------------------------- ----------------------------
(SEAL)
2 of 2
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 22nd day of October, 1999, by and among The
Alger American Fund (the "Trust"), an open-end management investment company
organized as a Massachusetts business trust, Allmerica Financial Life Insurance
and Annuity Company, a life insurance company organized as a corporation under
the laws of the State of Delaware, (the "Company"), on its own behalf and on
behalf of each segregated asset account of the Company set forth in Schedule A,
as may be amended from time to time (the "Accounts"), and Fred Alger & Company,
Incorporated, a Delaware corporation, the Trust's distributor (the
"Distributor").
WHEREAS, the Trust is registered with the Securities and Exchange
Commission (the "Commission") as an open-end management investment company under
the Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Distributor desire that Trust shares be used
as an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, shares of beneficial interest in the Trust are divided into
the following series which are available for purchase by the Company for the
Accounts: Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, Alger American Income and Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio, and Alger American Leveraged
AllCap Portfolio;
WHEREAS, the Trust has received an order from the Commission, dated
February 17, 1989 (File No. 812-7076), granting Participating Insurance
Companies and their separate accounts exemptions from the provisions of Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the Trust to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register under the 1933 Act
certain variable life insurance policies and variable annuity contracts to be
issued by the Company under which the Portfolios are to be made available as
investment vehicles (the "Contracts");
1
<PAGE>
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised;
WHEREAS, the Company desires to use shares of the Portfolios indicated
on Schedule A as investment vehicles for the Accounts;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article I, the Company shall be the Trust's agent
for the receipt from each account of purchase orders and requests for
redemption pursuant to the Contracts relating to each Portfolio,
provided that the Company notifies the Trust of such purchase orders
and requests for redemption by 9:30 a.m. Eastern time on the next
following Business Day, as defined in Section 1.3.
1.2. The Trust shall make shares of the Portfolios available to the Accounts
at the net asset value next computed after receipt of a purchase order
by the Trust (or its agent), as established in accordance with the
provisions of the then current prospectus of the Trust describing
Portfolio purchase procedures. The Company will transmit orders from
time to time to the Trust for the purchase and redemption of shares of
the Portfolios. The Trustees of the Trust (the "Trustees") may refuse
to sell shares of any Portfolio to any person, or suspend or terminate
the offering of shares of any Portfolio if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such
action is deemed in the best interests of the shareholders of such
Portfolio.
1.3. The Company shall pay for the purchase of shares of a Portfolio on
behalf of an Account with federal funds to be transmitted by wire to
the Trust, with the reasonable expectation of receipt by the Trust by
2:00 p.m. Eastern time on the next Business Day after the Trust (or its
agent) receives the purchase order. Upon receipt by the Trust of the
federal funds so wired, such funds shall cease to be the responsibility
of the Company and shall become the responsibility of the Trust for
this purpose. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Trust calculates
its net asset value pursuant to the rules of the Commission.
1.4. The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at
the net asset value next computed after receipt by the Trust (or its
agent) of the request for redemption, as established in
2
<PAGE>
accordance with the provisions of the then current prospectus of the
Trust describing Portfolio redemption procedures. The Trust shall make
payment for such shares in the manner established from time to time by
the Trust. Proceeds of redemption with respect to a Portfolio will
normally be paid to the Company for an Account in federal funds
transmitted by wire to the Company by order of the Trust with the
reasonable expectation of receipt by the Company by 2:00 p.m. Eastern
time on the next Business Day after the receipt by the Trust (or its
agent) of the request for redemption. Such payment may be delayed if,
for example, the Portfolio's cash position so requires or if
extraordinary market conditions exist, but in no event shall payment be
delayed for a greater period than is permitted by the 1940 Act. The
Trust reserves the right to suspend the right of redemption, consistent
with Section 22(e) of the 1940 Act and any rules thereunder.
1.5. Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of
the Trust's Portfolios under Section 1.4 on any Business Day may be
netted against one another for the purpose of determining the amount of
any wire transfer.
1.6. Issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the
Accounts. Portfolio Shares purchased from the Trust will be recorded in
the appropriate title for each Account or the appropriate subaccount of
each Account.
1.7. The Trust shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions
payable on the shares of any Portfolio of the Trust. The Company hereby
elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional
shares of that Portfolio. The Trust shall notify the Company of the
number of shares so issued as payment of such dividends and
distributions.
1.8. The Trust shall calculate the net asset value of each Portfolio on each
Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or
its designated agent on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available to the
Company by 6:30 p.m. Eastern time each Business Day.
1.9. The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their segregated asset accounts,
to the Fund Sponsor or its affiliates and to such other entities as may
be permitted by Section 817(h) of the Code, the regulations hereunder,
or judicial or administrative interpretations thereof. No shares of any
Portfolio will be sold directly to the general public. The Company
agrees that it will use Trust shares only for the purposes of funding
the Contracts through the Accounts listed in Schedule A, as amended
from time to time.
3
<PAGE>
1.10. The Trust agrees that all Participating Insurance Companies shall have
the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding materially to those contained in
Section 2.9 and Article IV of this Agreement.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. The Trust shall prepare and be responsible for filing with the
Commission and any state regulators requiring such filing all
shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and
statements of additional information of the Trust. The Trust shall bear
the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance
and transfer of its shares.
2.2. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Trust to the Contract owners as required to be
distributed to such Contract owners under applicable federal or state
law.
2.3. The Trust shall provide such documentation (including a final copy of
the Trust's prospectus as set in type or in camera-ready copy) and
other assistance as is reasonably necessary in order for the Company to
print together in one document the current prospectus for the Contracts
issued by the Company and the current prospectus for the Trust. The
Trust shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Contract owners, and
the Company shall bear the expense of printing copies of the Trust's
prospectus that are used in connection with offering the Contracts
issued by the Company.
2.4. The Trust and the Distributor shall provide (1) at the Trust's expense,
one copy of the Trust's current Statement of Additional Information
("SAI") to the Company and to any Contract owner who requests such SAI,
(2) at the Company's expense, such additional copies of the Trust's
current SAI as the Company shall reasonably request and that the
Company shall require in accordance with applicable law in connection
with offering the Contracts issued by the Company.
2.5. The Trust, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other
communications to shareholders in such quantity as the Company shall
reasonably require for purposes of distributing to Contract owners.The
Trust shall bear any costs associated with the distribution of its
proxy materials to existing shareholders. The Trust, at the Company's
expense, shall provide the Company with copies of its periodic reports
to shareholders and other communications to shareholders in such
quantity as the Company shall reasonably request for use in
4
<PAGE>
connection with offering the Contracts issued by the Company. If
requested by the Company in lieu thereof, the Trust shall provide such
documentation (including a final copy of the Trust's proxy materials,
periodic reports to shareholders and other communications to
shareholders, as set in type or in camera-ready copy) and other
assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to Contract owners.
2.6. The Company agrees and acknowledges that the Distributor is the sole
owner of the name and mark "Alger" and that all use of any designation
comprised in whole or part of such name or mark under this Agreement
shall inure to the benefit of the Distributor. Except as provided in
Section 2.5, the Company shall not use any such name or mark on its own
behalf or on behalf of the Accounts or Contracts in any registration
statement, advertisement, sales literature or other materials relating
to the Accounts or Contracts without the prior written consent of the
Distributor. Upon termination of this Agreement for any reason, the
Company shall cease all use of any such name or mark as soon as
reasonably practicable.
2.7. The Company shall furnish, or cause to be furnished, to the Trust or
its designee a copy of each Contract prospectus and/or statement of
additional information describing the Contracts, each report to
Contract owners, proxy statement, application for exemption or request
for no-action letter in which the Trust or the Distributor is named
contemporaneously with the filing of such document with the Commission.
The Company shall furnish, or shall cause to be furnished, to the Trust
or its designee each piece of sales literature or other promotional
material in which the Trust or the Distributor is named, at least five
Business Days prior to its use. No such material shall be used if the
Trust or its designee reasonably objects to such use within three
Business Days after receipt of such material.
2.8. The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust or the
Distributor in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from
the registration statement or prospectus for the Trust shares (as such
registration statement and prospectus may be amended or supplemented
from time to time), annual and semi-annual reports of the Trust,
Trust-sponsored proxy statements, or in sales literature or other
promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the prior
written permission of the Trust, the Distributor or their respective
designees. The Trust and the Distributor agree to respond to any
request for approval on a prompt and timely basis. The Company shall
adopt and implement procedures reasonably designed to ensure that
"broker only" materials including information therein about the Trust
or the Distributor are not distributed to existing or prospective
Contract owners.
5
<PAGE>
2.9. The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and
the Distributor, in such form as the Company may reasonably require, as
the Company shall reasonably request in connection with the preparation
of registration statements, prospectuses and annual and semi-annual
reports pertaining to the Contracts.
2.10. The Trust and the Distributor shall not give, and agree that no
affiliate of either of them shall give, any information or make any
representations or statements on behalf of the Company or concerning
the Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the
registration statement or prospectus for the Contracts (as such
registration statement and prospectus may be amended or supplemented
from time to time), or in materials approved by the Company for
distribution including sales literature or other promotional materials,
except as required by legal process or regulatory authorities or with
the prior written permission of the Company. The Company agrees to
respond to any request for approval on a prompt and timely basis.
2.11. So long as, and to the extent that, the Commission interprets the 1940
Act to require pass-through voting privileges for Contract owners, the
Company will provide pass-through voting privileges to Contract owners
whose cash values are invested, through the registered Accounts, in
shares of one or more Portfolios of the Trust. The Trust shall require
all Participating Insurance Companies to calculate voting privileges in
the same manner and the Company shall be responsible for assuring that
the Accounts calculate voting privileges in the manner established by
the Trust. With respect to each registered Account, the Company will
vote shares of each Portfolio of the Trust held by a registered Account
and for which no timely voting instructions from Contract owners are
received in the same proportion as those shares for which voting
instructions are received. The Company and its agents will in no way
recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contacts without the prior written
consent of the Trust, which consent may be withheld in the Trust's sole
discretion. The Company reserves the right, to the extent permitted by
law, to vote shares held in any Account in its sole discretion.
2.12. The Company and the Trust will each provide to the other information
about the results of any regulatory examination relating to the
Contracts or the Trust, including relevant portions of any "deficiency
letter" and any response thereto.
2.13. No compensation shall be paid by the Trust to the Company, or by the
Company to the Trust, under this Agreement (except for specified
expense reimbursements). However, nothing herein shall prevent the
parties hereto from otherwise agreeing to perform, and arranging for
appropriate compensation for, other services relating to the Trust, the
Accounts or both.
6
<PAGE>
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under the laws of the State of
Delaware and that it has legally and validly established each Account
as a segregated asset account under such law as of the date set forth
in Schedule A, and that Allmerica Investments, Inc., the principal
underwriter for the Contracts, is registered as a broker-dealer under
the Securities Exchange Act of 1934 and is a member in good standing of
the National Association of Securities Dealers, Inc.
3.2. The Company represents and warrants that it has registered or, prior to
any issuance or sale of the Contracts, will register each Account as a
unit investment trust in accordance with the provisions of the 1940 Act
and cause each Account to remain so registered to serve as a segregated
asset account for the Contracts, unless an exemption from registration
is available.
3.3. The Company represents and warrants that the Contracts will be
registered under the 1933 Act unless an exemption from registration is
available prior to any issuance or sale of the Contracts; the Contracts
will be issued and sold in compliance in all material respects with all
applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with state insurance law suitability
requirements.
3.4. The Trust represents and warrants that it is duly organized and validly
existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
the rules and regulations thereunder.
3.5. The Trust and the Distributor represent and warrant that the Portfolio
shares offered and sold pursuant to this Agreement will be registered
under the 1933 Act and sold in accordance with all applicable federal
and state laws, and the Trust shall be registered under the 1940 Act
prior to and at the time of any issuance or sale of such shares. The
Trust shall amend its registration statement under the 1933 Act and the
1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify
its shares for sale in accordance with the laws of the various states
only if and to the extent deemed advisable by the Trust.
3.6. The Trust represents and warrants that the investments of each
Portfolio will comply with the diversification requirements for
variable annuity, endowment or life insurance contracts set forth in
Section 817(h) of the Internal Revenue Code of 1986, as amended
7
<PAGE>
(the "Code"), and the rules and regulations thereunder, including
without limitation Treasury Regulation 1.817-5, and will notify the
Company immediately upon having a reasonable basis for believing any
Portfolio has ceased to comply or might not so comply and will
immediately take all reasonable steps to adequately diversify the
Portfolio to achieve compliance within the grace period afforded by
Regulation 1.817-5.
3.7. The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify
the Company immediately upon having a reasonable basis for believing it
has ceased to so qualify or might not so qualify in the future.
3.8. The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of
a Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in an amount not less
than the minimum coverage required by Rule 17g-1 or other applicable
regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.
3.9. The Distributor represents that it is duly organized and validly
existing under the laws of the State of Delaware and that it is
registered, and will remain registered, during the term of this
Agreement, as a broker-dealer under the Securities Exchange Act of 1934
and is a member in good standing of the National Association of
Securities Dealers, Inc.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1. The parties acknowledge that a Portfolio's shares may be made available
for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all Participating Insurance Companies. A material
irreconcilable conflict may arise for a variety of reasons, including:
(a) an action by any state insurance regulatory authority; (b) a change
in applicable federal or state insurance, tax or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in
voting instructions given by variable annuity contract and variable
life insurance contract owners; or (f) a decision by an insurer to
disregard the voting instructions of contract owners. The Trust shall
promptly inform the Company of any determination by the Trustees that a
material irreconcilable conflict exists and of the implications
thereof.
4.2. The Company agrees to report promptly any potential or existing
conflicts of which it is
8
<PAGE>
aware to the Trustees. The Company will assist the Trustees in carrying
out their responsibilities under the Shared Funding Exemptive Order by
providing the Trustees with all information reasonably necessary for
and requested by the Trustees to consider any issues raised including,
but not limited to, information as to a decision by the Company to
disregard Contract owner voting instructions. All communications from
the Company to the Trustees may be made in care of the Trust.
4.3. If it is determined by a majority of the Trustees, or a majority of the
disinterested Trustees, that a material irreconcilable conflict exists
that affects the interests of contract owners, the Company shall, in
cooperation with other Participating Insurance Companies whose contract
owners are also affected, at its own expense and to the extent
reasonably practicable (as determined by the Trustees) take whatever
steps are necessary to remedy or eliminate the material irreconcilable
conflict, which steps could include: (a) withdrawing the assets
allocable to some or all of the Accounts from the Trust or any
Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or
submitting the question of whether or not such segregation should be
implemented to a vote of all affected Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e.,
annuity contract owners, life insurance contract owners, or variable
contract owners of one or more Participating Insurance Companies) that
votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (b)
establishing a new registered management investment company or managed
separate account.
4.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that
decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Trust's election, to withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account; provided, however that such
withdrawal and termination shall be limited to the extent required by
the foregoing material irreconcilable conflict as determined by a
majority of the disinterested Trustees. Any such withdrawal and
termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end
of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.5. If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw
the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account within six (6) months after the
Trustees inform the Company in writing that the Trust has determined
that such decision has created a material irreconcilable conflict;
provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees.
Until the
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<PAGE>
end of such six (6) month period, the Trust shall continue to accept
and implement orders by the Company for the purchase and redemption of
shares of the Trust.
4.6. For purposes of Section 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed
action adequately remedies any material irreconcilable conflict, but in
no event will the Trust be required to establish a new funding medium
for any Contract. The Company shall not be required to establish a new
funding medium for the Contracts if an offer to do so has been declined
by vote of a majority of Contract owners materially adversely affected
by the material irreconcilable conflict. In the event that the Trustees
determine that any proposed action does not adequately remedy any
material irreconcilable conflict, then the Company will withdraw the
Account's investment in the Trust and terminate this Agreement within
six (6) months after the Trustees inform the Company in writing of the
foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested Trustees.
4.7. The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so
that the Trustees may fully carry out the duties imposed upon them by
the Shared Funding Exemptive Order, and said reports, materials and
data shall be submitted more frequently if reasonably deemed
appropriate by the Trustees.
4.8. If and to the extent that Rule 6e-3(T) is amended, or Rule 6e-3 is
adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared
Funding Exemptive Order, then the Trust and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rule 6e-3(T), as amended, or Rule 6e-3, as
adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Distributor, the Trust and each of its Trustees,
officers, employees and agents and each person, if any, who controls
the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section
5.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any
alleged loss, claim, damage, liability or expense and reasonable legal
counsel fees incurred in
10
<PAGE>
connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation,
or at common law or otherwise, insofar as such Losses are related to
the sale or acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in
the Contracts themselves or in sales literature generated or
approved by the Company on behalf of the Contracts or Accounts
(or any amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this
Article V), 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, provided that this indemnity shall not
apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in
reliance upon and was accurately derived from written
information furnished to the Company by or on behalf of the
Trust for use in Company Documents or otherwise for use in
connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived from Trust Documents as defined in Section
5.2(a)) or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition of the
Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such statement or omission was made in
reliance upon and accurately derived from written information
furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under
the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company; or
(f) arise out of or result from the provision by the Company to
the Trust of insufficient or incorrect information regarding
the purchase or sale of shares of any Portfolio, or the
failure of the Company to provide such information on a timely
basis.
11
<PAGE>
5.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify
and hold harmless the Company and each of its directors, officers,
employees, and agents and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for the purposes of this Section 5.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Distributor, which consent
shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or regulation,
or at common law or otherwise, insofar as such Losses are related to
the sale or acquisition of the Contracts or Trust shares and:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the registration statement or prospectus for the Trust (or any
amendment or supplement thereto) (collectively, "Trust
Documents" for the purposes of this Article V), 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,
provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
was accurately derived from written information furnished to
the Distributor or the Trust by or on behalf of the Company
for use in Trust Documents or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and
accurately derived form Company Documents) or wrongful conduct
of the Distributor or persons under its control, with respect
to the sale or acquisition of the Contracts or Portfolio
shares; or
(c) arise out of or result from any untrue statement or alleged
untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to
make the statements therein not misleading if such statement
or omission was made in reliance upon and accurately derived
from written information furnished to the Company by or on
behalf of the Trust; or
(d) arise out of or result from any failure by the Distributor or
the Trust to provide the services or furnish the materials
required under the terms of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Distributor or the
Trust in this Agreement or arise out of or
12
<PAGE>
result from any other material breach of this Agreement by the
Distributor or the Trust.
5.3. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any Losses incurred or assessed against an Indemnified
Party that arise from such Indemnified Party's willful misfeasance, bad
faith or negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations or duties under this Agreement.
5.4. None of the Company, the Trust or the Distributor shall be liable under
the indemnification provisions of Sections 5.1 or 5.2, as applicable,
with respect to any claim made against an Indemnified party unless such
Indemnified Party shall have notified the other party in writing within
a reasonable time after the summons, or other first written
notification, giving information of the nature of the claim shall have
been served upon or otherwise received by such Indemnified Party (or
after such Indemnified Party shall have received notice of service upon
or other notification to any designated agent), but failure to notify
the party against whom indemnification is sought of any such claim
shall not relieve that party from any liability which it may have to
the Indemnified Party in the absence of Sections 5.1 and 5.2.
5.5. In case any such action is brought against an Indemnified Party, the
indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also
shall be entitled to assume the defense thereof, with counsel
reasonably satisfactory to the party named in the action. After notice
from the indemnifying party to the Indemnified Party of an election to
assume such defense, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the indemnifying
party will not be liable to the Indemnified Party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than
reasonable costs of investigation.
ARTICLE VI.
TERMINATION
6.1. This Agreement shall terminate:
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<PAGE>
(a) at the option of any party upon 60 days advance written notice
to the other parties, unless a shorter time is agreed to by
the parties;
(b) at the option of the Trust or the Distributor if the Contracts
issued by the Company cease to qualify as annuity contracts or
life insurance contracts, as applicable, under the Code or if
the Contracts are not registered, issued or sold in accordance
with applicable state and/or federal law; or
(c) at the option of any party upon a determination by a majority
of the Trustees of the Trust, or a majority of its
disinterested Trustees, that a material irreconcilable
conflict exists; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust or the Distributor by the NASD,
the SEC, or any state securities or insurance department or
any other regulatory body regarding the Trust's or the
Distributor's duties under this Agreement or related to the
sale of Trust shares or the operation of the Trust; or
(e) at the option of the Company if the Trust or a Portfolio fails
to meet the diversification requirements specified in Section
3.6 hereof; or
(f) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable
Contracts issued by the Company, as determined by the Company,
and upon prompt notice by the Company to the other parties; or
(g) at the option of the Company in the event any of the shares of
the Portfolio are not registered, issued or sold in accordance
with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment
media of the Variable Contracts issued or to be issued by the
Company; or
(h) at the option of the Company, if the Portfolio fails to
qualify as a Regulated Investment Company under Subchapter M
of the Code; or
(i) at the option of the Distributor if it shall determine in its
sole judgment exercised in good faith, that the Company and/or
its affiliated companies has suffered a
material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement or is the
subject of material adverse publicity.
6.2. Notwithstanding any termination of this Agreement, the Trust shall, at
the option of the Company, continue to make available additional shares
of any Portfolio and redeem
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<PAGE>
shares of any Portfolio pursuant to the terms and conditions of this
Agreement for all Contracts in effect on the effective date of
termination of this Agreement.
6.3. The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.9 shall
survive the termination of this Agreement as long as shares of the
Trust are held on behalf of Contract owners in accordance with Section
6.2.
ARTICLE VII.
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust or its Distributor:
Fred Alger Management, Inc.
30 Montgomery Street
Jersey City, NJ 07302
Attn: Gregory S. Duch
If to the Company:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
Attn: Richard M. Reilly, President
ARTICLE VIII.
MISCELLANEOUS
8.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
8.2. This Agreement may be executed in two or more counterparts, each of
which taken together shall constitute one and the same instrument.
8.3. If any provision of this Agreement shall be held or made invalid by a
court decision,
15
<PAGE>
statute, rule or otherwise, the remainder of the Agreement shall not be
affected thereby.
8.4. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws
and the rules and regulations thereunder and to any orders of the
Commission granting exemptive relief therefrom and the conditions of
such orders. Copies of any such orders shall be promptly forwarded by
the Trust to the Company.
8.5. All liabilities of the Trust arising, directly or indirectly, under
this Agreement, of any and every nature whatsoever, shall be satisfied
solely out of the assets of the Trust and no Trustee, officer, agent or
holder of shares of beneficial interest of the Trust shall be
personally liable for any such liabilities.
8.6. Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the Commission,
the National Association of Securities Dealers, Inc. and state
insurance regulators) and shall permit such authorities reasonable
access to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions contemplated
hereby.
8.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
8.8. This Agreement shall not be exclusive in any respect.
8.9. Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the
other party.
8.10. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed
by both parties.
8.11. Each party hereto shall, except as required by law or otherwise
permitted by this greement, treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto, and
shall not disclose such confidential information without the written
consent of the affected party unless such information has become
publicly available.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
16
<PAGE>
Fred Alger & Company, Incorporated
By:____/s/ Gregory S. Duch___________
Name: Gregory S. Duch
Title: Executive Vice President
The Alger American Fund
By:_ /s/ Gregory S. Duch_______________
Name: Gregory S. Duch
Title: Treasurer
Allmerica Financial Life Insurance and Annuity Company
By:__/s/ Richard M. Reilly_________________
Name: Richard M. Reilly
Title: President
17
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SCHEDULE A
The Alger American Fund:
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American Income and Growth Portfolio
Alger American Small Capitalization Portfolio
Alger American Balanced Portfolio
Alger American MidCap Growth Portfolio
The Accounts:
Separate Account KG
Separate Account KGC
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<PAGE>
19
<PAGE>
SCHEDULE A
The Alger American Fund
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American Income and Growth Portfolio
Alger American Small Capitalization Portfolio
Alger American Balanced Portfolio
Alger American MidCap Growth Portfolio
The Accounts:
Separate Account KG
Separate Account KGC
FUVUL Separate Account of Allmerica Financial Life
Insurance and Annuity Company
Separate Account VA-K(Delaware)
<PAGE>
SCHEDULE A
The Alger American Fund
Alger American Growth Portfolio
Alger American Leveraged AllCap Portfolio
Alger American Income and Growth Portfolio
Alger American Small Capitalization Portfolio
Alger American Balanced Portfolio
Alger American MidCap Growth Portfolio
The Accounts:
Separate Account KG
Separate Account KGC
FUVUL Separate Account of First Allmerica
Financial Life Insurance Company
Separate Account VA-K(Delaware)
<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this 1st day of August 1998, by
and among MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the
"Trust"), ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY, a Delaware
corporation (the "Company") on its own behalf and on behalf of each of the
segregated asset accounts of the Company set forth in Schedule A hereto, as may
be amended from time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL
SERVICES COMPANY, a Delaware corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
law, and is the Trust's investment adviser;
WHEREAS, the Company will issue certain variable annuity and/or
variable life insurance contracts (individually, the "Policy" or, collectively,
the "Policies") which, if required by applicable law, will be registered under
the 1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated
asset accounts, established by resolution of the Board of Directors of the
Company, to set aside and invest assets attributable to the aforesaid variable
annuity and/or variable life insurance contracts that are allocated to the
Accounts (the Policies and the Accounts covered by this Agreement, and each
corresponding Portfolio covered by this Agreement in which the Accounts invest,
is specified in Schedule A attached hereto as may be modified from time to
time);
WHEREAS, the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered
as a broker-dealer with the Securities and Exchange Commission (the "SEC") under
the Securities Exchange Act of 1934, as
<PAGE>
amended (hereinafter the "1934 Act"), and is a member in good standing of the
National Association of Securities Dealers, Inc. (the "NASD");
WHEREAS, Allmerica Investments, Inc., the underwriter for the
individual variable annuity and the variable life policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust,
MFS, and the Company agree as follows:
ARTICLE I. SALE OF TRUST SHARES
1.1. The Trust agrees to sell to the Company those Shares which the
Accounts order (based on orders placed by Policy holders on that
Business Day, as defined below) and which are available for purchase by
such Accounts, executing such orders on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the
order for the Shares. For purposes of this Section 1.1, the Company
shall be the designee of the Trust for receipt of such orders from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; PROVIDED that the Trust receives notice of such orders by
9:30 a.m. New York time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange, Inc. (the
"NYSE") is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and
the Accounts on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC and the Trust shall calculate such
net asset value on each day which the NYSE is open for trading.
Notwithstanding the foregoing, the Board of Trustees of the Trust (the
"Board") may refuse to sell any Shares to the Company and the Accounts,
or suspend or terminate the offering of the Shares if such action is
required by law or by regulatory authorities having jurisdiction or is,
in the sole discretion of the Board acting in good faith and in light
of its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to
insurance companies which have entered into participation agreements
with the Trust and MFS (the "Participating Insurance Companies") and
their separate accounts, qualified pension and retirement plans and MFS
or its affiliates. The Trust and MFS will not sell Trust shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles III and VII of this
Agreement is in effect to govern such sales. The Company will not
resell the Shares except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any
full or fractional Shares held by the Accounts (based on orders placed
by Policy owners on that Business Day),
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<PAGE>
executing such requests on a daily basis at the net asset value next
computed after receipt by the Trust or its designee of the request for
redemption. For purposes of this Section 1.4, the Company shall be the
designee of the Trust for receipt of requests for redemption from
Policy owners and receipt by such designee shall constitute receipt by
the Trust; provided that the Trust receives notice of such request for
redemption by 9:30 a.m. New York time on the next following Business
Day.
1.5. Each purchase, redemption and exchange order placed by the Company
shall be placed separately for each Portfolio and shall not be netted
with respect to any Portfolio. However, with respect to payment of the
purchase price by the Company and of redemption proceeds by the Trust,
the Company and the Trust shall net purchase and redemption orders with
respect to each Portfolio and shall transmit one net payment for all of
the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the
Shares by 2:00 p.m. New York time on the next Business Day after an
order to purchase the Shares is made in accordance with the provisions
of Section 1.1. hereof. In the event of net redemptions, the Trust
shall pay the redemption proceeds by 2:00 p.m. New York time on the
next Business Day after an order to redeem the shares is made in
accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only.
Stock certificates will not be issued to the Company or the Accounts.
The Shares ordered from the Trust will be recorded in an appropriate
title for the Accounts or the appropriate subaccounts of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone
followed by written confirmation) to the Company of any dividends or
capital gain distributions payable on the Shares. The Company hereby
elects to receive all such dividends and distributions as are payable
on a Portfolio's Shares in additional Shares of that Portfolio. The
Trust shall notify the Company of the number of Shares so issued as
payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per
share for each Portfolio available to the Company on each Business Day
as soon as reasonably practical after the net asset value per share is
calculated and shall use its best efforts to make such net asset value
per share available by 6:30 p.m. New York time. In the event that the
Trust is unable to meet the 6:30 p.m. time stated herein, it shall
provide additional time for the Company to place orders for the
purchase and redemption of Shares. Such additional time shall be equal
to the additional time which the Trust takes to make the net asset
value available to the Company. If the Trust provides materially
incorrect share net asset value information, the Trust shall make an
adjustment to the number of shares purchased or redeemed for the
Accounts to reflect the correct net asset value per share. Any material
error in the calculation or reporting of net asset value per share,
dividend or capital gains information shall be reported promptly upon
discovery to the Company.
ARTICLE II. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will
be registered under the 1933 Act or are exempt from or not subject to
registration thereunder, and that the Policies will be issued, sold,
and distributed in compliance in all material respects with all
applicable state and federal laws, including without limitation the
1933 Act, the Securities Exchange Act of 1934, as
-3-
<PAGE>
amended (the "1934 Act"), and the 1940 Act. The Company further
represents and warrants that it is an insurance company duly organized
and in good standing under applicable law and that it has legally and
validly established the Account as a segregated asset account under
applicable law and has registered or, prior to any issuance or sale of
the Policies, will register the Accounts as unit investment trusts in
accordance with the provisions of the 1940 Act (unless exempt
therefrom) to serve as segregated investment accounts for the
Policies, and that it will maintain such registration for so long as
any Policies are outstanding. The Company shall amend the registration
statements under the 1933 Act for the Policies and the registration
statements under the 1940 Act for the Accounts from time to time as
required in order to effect the continuous offering of the Policies or
as may otherwise be required by applicable law. The Company shall
register and qualify the Policies for sales in accordance with the
securities laws of the various states only if and to the extent deemed
necessary by the Company.
2.2. The Company represents and warrants that the Policies are
currently and at the time of issuance will be treated as life
insurance, endowment or annuity contract under applicable provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), that it
will maintain such treatment and that it will notify the Trust or MFS
immediately upon having a reasonable basis for believing that the
Policies have ceased to be so treated or that they might not be so
treated in the future.
2.3. The Company represents and warrants that Allmerica Investments,
Inc., the underwriter for the individual variable annuity and the
variable life policies, is a member in good standing of the NASD and is
a registered broker-dealer with the SEC. The Company represents and
warrants that the Company and Allmerica Investments, Inc. will sell and
distribute such policies in accordance in all material respects with
all applicable state and federal securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of The
Commonwealth of Massachusetts and all applicable federal and state
securities laws and that the Trust is and shall remain registered under
the 1940 Act. The Trust shall amend the registration statement for its
Shares under the 1933 Act and the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares. The
Trust shall register and qualify the Shares for sale in accordance with
the laws of the various states only if and to the extent deemed
necessary by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in
good standing of the NASD and is registered as a broker-dealer with the
SEC. The Trust and MFS represent that the Trust and the Underwriter
will sell and distribute the Shares in accordance in all material
respects with all applicable state and federal securities laws,
including without limitation the 1933 Act, the 1934 Act, and the 1940
Act.
2.6. The Trust represents that it is lawfully organized and validly
existing under the laws of The Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act and
any applicable regulations thereunder.
2.7. MFS represents and warrants that it is and shall remain duly
registered under all applicable federal securities laws and that it
shall perform its obligations for the Trust in compliance in all
material respects with any applicable federal securities laws and with
the securities laws of The
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<PAGE>
Commonwealth of Massachusetts. MFS represents and warrants that it is
not subject to state securities laws other than the securities laws of
The Commonwealth of Massachusetts and that it is exempt from
registration as an investment adviser under the securities laws of The
Commonwealth of Massachusetts.
2.8. No less frequently than annually, the Company shall submit to the
Board such reports, material or data as the Board may reasonably
request so that it may carry out fully the obligations imposed upon it
by the conditions contained in the exemptive application pursuant to
which the SEC has granted exemptive relief to permit mixed and shared
funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the
Company, free of charge, with as many copies of the current prospectus
(describing only the Portfolios listed in Schedule A hereto) for the
Shares as the Company may reasonably request for distribution to
existing Policy owners whose Policies are funded by such Shares. The
Trust or its designee shall provide the Company, at the Company's
expense, with as many copies of the current prospectus for the Shares
as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested by the Company in lieu thereof,
the Trust or its designee shall provide such documentation (including a
"camera ready" copy of the new prospectus as set in type or, at the
request of the Company, as a diskette in the form sent to the financial
printer) and other assistance as is reasonably necessary in order for
the parties hereto once each year (or more frequently if the prospectus
for the Shares is supplemented or amended) to have the prospectus for
the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a)
the Company and (b) the Trust or its designee in proportion to the
number of pages of the Policy and Shares' prospectuses, taking account
of other relevant factors affecting the expense of printing, such as
covers, columns, graphs and charts; the Trust or its designee to bear
the cost of printing the Shares' prospectus portion of such document
for distribution to owners of existing Policies funded by the Shares
and the Company to bear the expenses of printing the portion of such
document relating to the Accounts; PROVIDED, however, that the Company
shall bear all printing expenses of such combined documents where used
for distribution to prospective purchasers or to owners of existing
Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus
in a "camera ready" or diskette format, the Trust shall be responsible
for providing the prospectus in the format in which it or MFS is
accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus in such format (E.G., typesetting expenses),
and the Company shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or
its designee. The Trust or its designee, at its expense, shall print
and provide such statement of additional information to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to any owner of a Policy funded by the Shares. The Trust
or its designee, at the Company's expense, shall print and provide such
statement to the Company (or a master of such statement suitable for
duplication by the Company) for distribution to a prospective purchaser
who requests such statement or to an owner of a Policy not funded by
the Shares.
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3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to the Shares, of the Trust's
proxy materials, reports to Shareholders and other communications to
Shareholders in such quantity as the Company shall reasonably require
for distribution to Policy owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3
above, or of Article V below, the Company shall pay the expense of
printing or providing documents to the extent such cost is considered a
distribution expense. Distribution expenses would include by way of
illustration, but are not limited to, the printing of the Shares'
prospectus or prospectuses for distribution to prospective purchasers
or to owners of existing Policies not funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate
to include in the prospectus pursuant to which a Policy is offered
disclosure regarding the potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions
received from Policy owners; and
(c) vote the Shares for which no instructions have been
received in the same proportion as the Shares of such
Portfolio for which instructions have been received
from Policy owners;
so long as and to the extent that the SEC continues to interpret the
1940 Act to require pass through voting privileges for variable
contract owners. The Company will in no way recommend action in
connection with or oppose or interfere with the solicitation of proxies
for the Shares held for such Policy owners. The Company reserves the
right to vote shares held in any segregated asset account in its own
right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate
accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order. The Trust and
MFS will notify the Company of any changes of interpretations or
amendments to the Mixed and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other
promotional material in which the Trust, MFS, any other investment
adviser to the Trust, or any affiliate of MFS are named, at least three
(3) Business Days prior to its use. No such material shall be used if
the Trust, MFS, or their respective designees reasonably objects to
such use within three (3) Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statement on behalf of the Trust, MFS, any other
investment adviser to the Trust, or any affiliate of MFS or concerning
the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional
information for the Shares, as such registration statement, prospectus
and statement of
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additional information may be amended or supplemented from time to
time, or in reports or proxy statements for the Trust, or in sales
literature or other promotional material approved by the Trust, MFS or
their respective designees, except with the permission of the Trust,
MFS or their respective designees. The Trust, MFS or their respective
designees each agrees to respond to any request for approval on a
prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning
the Trust, MFS or any of their affiliates which is intended for use
only by brokers or agents selling the Policies (I.E., information that
is not intended for distribution to Policy owners or prospective
Policy owners) is so used, and neither the Trust, MFS nor any of their
affiliates shall be liable for any losses, damages or expenses
relating to the improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or
the Accounts is named, at least three (3) Business Days prior to its
use. No such material shall be used if the Company or its designee
reasonably objects to such use within three (3) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter
shall not give, any information or make any representations on behalf
of the Company or concerning the Company, the Accounts, or the Policies
in connection with the sale of the Policies other than the information
or representations contained in a registration statement, prospectus,
or statement of additional information for the Policies, as such
registration statement, prospectus and statement of additional
information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional
material approved by the Company or its designee, except with the
permission of the Company. The Company or its designee agrees to
respond to any request for approval on a prompt and timely basis. The
parties hereto agree that this Section 4.4. is neither intended to
designate nor otherwise imply that MFS is an underwriter or distributor
of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company
or the Trust, as appropriate) will each provide to the other at least
one complete copy of all registration statements, prospectuses,
statements of additional information, reports, proxy statements, sales
literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments to any
of the above, that relate to the Policies, or to the Trust or its
Shares, prior to or contemporaneously with the filing of such document
with the SEC or other regulatory authorities. The Company and the Trust
shall also each promptly inform the other of the results of any
examination by the SEC (or other regulatory authorities) that relates
to the Policies, the Trust or its Shares, and the party that was the
subject of the examination shall provide the other party with a copy of
relevant portions of any "deficiency letter" or other correspondence or
written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as
is reasonably practicable of any proxy solicitation for any Portfolio,
and of any material change in the Trust's registration statement,
particularly any change resulting in change to the registration
statement or prospectus or statement of additional information for any
Account. The Trust and MFS will cooperate with the Company so as to
enable the Company to solicit proxies from Policy owners or to make
changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will
make reasonable efforts to attempt to have changes
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affecting Policy prospectuses become effective simultaneously with the
annual updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited
to advertisements (such as material published, or designed for use in,
a newspaper, magazine, or other periodical, radio, television,
telephone or tape recording, videotape display, signs or billboards,
motion pictures, or other public media), and sales literature (such as
brochures, circulars, reprints or excerpts or any other advertisement,
sales literature, or published articles), distributed or made generally
available to customers or the public, educational or training materials
or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company
under this Agreement, and the Company shall pay no fee or other
compensation to the Trust, except that if the Trust or any Portfolio
adopts and implements a plan pursuant to Rule 12b-1 under the 1940 Act
to finance distribution and Shareholder servicing expenses, then,
subject to obtaining any required exemptive orders or regulatory
approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust
in writing. Each party, however, shall, in accordance with the
allocation of expenses specified in Articles III and V hereof,
reimburse other parties for expenses initially paid by one party but
allocated to another party. In addition, nothing herein shall prevent
the parties hereto from otherwise agreeing to perform, and arranging
for appropriate compensation for, other services relating to the Trust
and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable
federal and state laws, including preparation and filing of the Trust's
registration statement, and payment of filing fees and registration
fees; preparation and filing of the Trust's proxy materials and reports
to Shareholders; setting in type and printing its prospectus and
statement of additional information (to the extent provided by and as
determined in accordance with Article III above); setting in type and
printing the proxy materials and reports to Shareholders (to the extent
provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by
any federal or state law with respect to its Shares; all taxes on the
issuance or transfer of the Shares; and the costs of distributing the
Trust's prospectuses and proxy materials to owners of Policies funded
by the Shares and any expenses permitted to be paid or assumed by the
Trust pursuant to a plan, if any, under Rule 12b-1 under the 1940 Act.
The Trust shall not bear any expenses of marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies
and of distributing the Trust's Shareholder reports to Policy owners.
The Company shall bear all expenses associated with the registration,
qualification, and filing of the Policies under applicable federal
securities and state insurance laws; the cost of preparing, printing
and distributing the Policy prospectus and statement of additional
information; and the cost of preparing, printing and distributing
annual individual account statements for Policy owners as required by
state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
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6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (1)
of the Code and Treas. Reg. 1.817-5, relating to the diversification
requirements for variable annuity, endowment, or life insurance
contracts, as they may be amended from time to time (and any revenue
rulings, revenue procedures, notices, and other published announcements
of the Internal Revenue Service interpreting these sections), as if
those requirements applied directly to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be
qualified as a Regulated Investment Company under Subchapter M of the
Code and that they will maintain such qualification (under Subchapter M
or any successor or similar provision).
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for
the existence of any material irreconcilable conflict between the
interests of the variable annuity contract owners and the variable life
insurance policy owners of the Company and/or affiliated companies
("contract owners") investing in the Trust. The Board shall have the
sole authority to determine if a material irreconcilable conflict
exists, and such determination shall be binding on the Company only if
approved in the form of a resolution by a majority of the Board, or a
majority of the disinterested trustees of the Board. The Board will
give prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the
Board in carrying out its responsibilities under the conditions set
forth in the Trust's exemptive application pursuant to which the SEC
has granted the Mixed and Shared Funding Exemptive Order by providing
the Board, as it may reasonably request, with all information necessary
for the Board to consider any issues raised and agrees that it will be
responsible for promptly reporting any potential or existing conflicts
of which it is aware to the Board including, but not limited to, an
obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that, if a
material irreconcilable conflict arises, it will at its own cost remedy
such conflict up to and including (a) withdrawing the assets allocable
to some or all of the Accounts from the Trust or any Portfolio and
reinvesting such assets in a different investment medium, including
(but not limited to) another Portfolio of the Trust, or submitting to a
vote of all affected contract owners whether to withdraw assets from
the Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets
attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract
owners the option of segregating the assets attributable to their
contracts or policies, and (b) establishing a new registered management
investment company and segregating the assets underlying the Policies,
unless a majority of Policy owners materially adversely affected by the
conflict have voted to decline the offer to establish a new registered
management investment company.
7.3. A majority of the disinterested trustees of the Board shall
determine whether any proposed action by the Company adequately
remedies any material irreconcilable conflict. In the event that the
Board determines that any proposed action does not adequately remedy
any material irreconcilable conflict, the Company will withdraw from
investment in the Trust each of the Accounts designated by the
disinterested trustees and terminate this Agreement within six (6)
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months after the Board informs the Company in writing of the foregoing
determination; PROVIDED, HOWEVER, that such withdrawal and termination
shall be limited to the extent required to remedy any such material
irreconcilable conflict as determined by a majority of the
disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the 1940 Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Mixed and Shared Funding
Exemptive Order) on terms and conditions materially different from
those contained in the Mixed and Shared Funding Exemptive Order, then
(a) the Trust and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with
Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2,
7.3 and 7.4 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such
Sections are contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust,
MFS, any affiliates of MFS, and each of their respective
directors/trustees, officers and each person, if any, who controls the
Trust or MFS within the meaning of Section 15 of the 1933 Act, and any
agents or employees of the foregoing (each an "Indemnified Party," or
collectively, the "Indemnified Parties" for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Company) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, regulation, at
common law or otherwise, insofar as such losses, claims, damages,
liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies
and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement, prospectus or statement
of additional information for the Policies or contained
in the Policies or sales literature or other promotional
material for the Policies (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 PROVIDED that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Company or
its designee by or on behalf of the Trust or MFS for use
in the registration statement, prospectus or statement
of additional information for the Policies or in the
Policies or sales literature or other promotional
material (or any amendment or supplement) or otherwise
for use in connection with the sale of the Policies or
Shares; or
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<PAGE>
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration statement,
prospectus, statement of additional information or sales
literature or other promotional material of the Trust
not supplied by the Company or its designee, or persons
under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or
persons under its control, with respect to the sale or
distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Trust, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statement or statements therein not misleading, if such
statement or omission was made in reliance upon
information furnished to the Trust by or on behalf of
the Company; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Company in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to
provide the services and furnish the materials under the
terms of this Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act,
and any agents or employees of the foregoing (each an "Indemnified
Party," or collectively, the "Indemnified Parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Trust) or expenses (including reasonable counsel fees) to which any
Indemnified Party may become subject under any statute, at common law
or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to
the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained
in the registration statement, prospectus, statement of
additional information or sales literature or other
promotional material of the Trust (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 statement therein not
misleading, PROVIDED that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reasonable reliance upon and in
conformity with information furnished to the Trust, MFS,
the Underwriter or their respective designees by or on
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behalf of the Company for use in the registration
statement, prospectus or statement of additional
information for the Trust or in sales literature or
other promotional material for the Trust (or any
amendment or supplement) or otherwise for use in
connection with the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or
representations (other than statements or
representations contained in the registration statement,
prospectus, statement of additional information or sales
literature or other promotional material for the
Policies not supplied by the Trust, MFS, the Underwriter
or any of their respective designees or persons under
their respective control and on which any such entity
has reasonably relied) or wrongful conduct of the Trust
or persons under its control, with respect to the sale
or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the
registration statement, prospectus, statement of
additional information, or sales literature or other
promotional literature of the Accounts or relating to
the Policies, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statement or statements therein
not misleading, if such statement or omission was made
in reliance upon information furnished to the Company by
or on behalf of the Trust, MFS or the Underwriter; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this
Agreement (including a failure, whether unintentional or
in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of
this Agreement) or arise out of or result from any other
material breach of this Agreement by the Trust; or
(e) arise out of or result from the materially incorrect or
untimely calculation or reporting of the daily net asset
value per share or dividend or capital gain distribution
rate; or
(f) arise as a result of any failure by the Trust to provide
the services and furnish the materials under the terms
of the Agreement;
as limited by and in accordance with the provisions of this Article
VIII.
8.3. In no event shall the Trust be liable under the indemnification
provisions contained in this Agreement to any individual or entity,
including without limitation, the Company, or any Participating
Insurance Company or any Policy holder, with respect to any losses,
claims, damages, liabilities or expenses that arise out of or result
from (i) a breach of any representation, warranty, and/or covenant made
by the Company hereunder or by any Participating Insurance Company
under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any
Participating Insurance Company to maintain its segregated asset
account (which invests in any Portfolio) as a legally and validly
established segregated asset account under applicable state law and as
a duly registered unit investment trust under the provisions of the
1940 Act (unless exempt therefrom); or (iii) the failure by the Company
or any Participating Insurance Company to maintain its variable annuity
and/or variable life insurance
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contracts (with respect to which any Portfolio serves as an underlying
funding vehicle) as life insurance, endowment or annuity contracts
under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Agreement with respect to
any losses, claims, damages, liabilities or expenses to which an
Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, willful misconduct, or gross
negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations
and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section
8.5. of notice of commencement of any action, such Indemnified Party
will, if a claim in respect thereof is to be made against the
indemnifying party under this section, notify the indemnifying party of
the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability which it may
have to any Indemnified Party otherwise than under this section. In
case any such action is brought against any Indemnified Party, and it
notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the
extent that it may wish, assume the defense thereof, with counsel
satisfactory to such Indemnified Party. After notice from the
indemnifying party of its intention to assume the defense of an action,
the Indemnified Party shall bear the expenses of any additional counsel
obtained by it, and the indemnifying party shall not be liable to such
Indemnified Party under this section for any legal or other expenses
subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of
the commencement of any litigation or proceeding against it or any of
its respective officers, directors, trustees, employees or 1933 Act
control persons in connection with the Agreement, the issuance or sale
of the Policies, the operation of the Accounts, or the sale or
acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be
entitled to the benefits of the indemnification contained in this
Article VIII. The indemnification provisions contained in this Article
VIII shall survive any termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant and the terms hereof shall be
interpreted and construed in accordance therewith.
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ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to this Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or
one, some, or all Portfolios:
(a) at the option of any party upon six (6) months' advance
written notice to the other parties; or
(b) at the option of the Company to the extent that the Shares
of Portfolios are not reasonably available to meet the
requirements of the Policies or are not "appropriate funding
vehicles" for the Policies, as reasonably determined by the
Company. Without limiting the generality of the foregoing,
the Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the
diversification or other requirements referred to in Article
VI hereof; or if the Company would be permitted to disregard
Policy owner voting instructions pursuant to Rule 6e-2 or
6e-3(T) under the 1940 Act. Prompt notice of the election to
terminate for such cause and an explanation of such cause
shall be furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any
insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the
sale of the Policies, the operation of the Accounts, or the
purchase of the Shares; provided that the party terminating
this Agreement under this provision shall give notice of
such termination to the other parties to this Agreement; or
(d) at the option of the Company upon institution of formal
proceedings against the Trust by the NASD, the SEC, or any
state securities or insurance department or any other
regulatory body regarding the Trust's or MFS' duties under
this Agreement or related to the sale of the Shares;
provided that the party terminating this Agreement under
this provision shall give notice of such termination to the
other parties to this Agreement; or
(e) at the option of the Company, the Trust or MFS upon receipt
of any necessary regulatory approvals and/or the vote of the
Policy owners having an interest in the Accounts (or any
subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance
with the terms of the Policies for which those Portfolio
Shares had been selected to serve as the underlying
investment media. The Company will give thirty (30) days'
prior
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written notice to the Trust of the Date of any proposed vote
or other action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice to
the Company, if either one or both of the Trust or MFS
respectively, shall determine, in their sole judgment
exercised in good faith, that the Company has suffered a
material adverse change in its business, operations,
financial condition, or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Trust
and MFS, if the Company shall determine, in its sole
judgment exercised in good faith, that the Trust or MFS has
suffered a material adverse change in this business,
operations, financial condition or prospects since the date
of this Agreement or is the subject of material adverse
publicity; or
(h) at the option of any party to this Agreement, upon another
party's material breach of any provision of this Agreement;
or
(i) upon assignment of this Agreement, unless made with the
written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies
and, if applicable, the Accounts as to which the Agreement is to be
terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1(a) may be exercised
for cause or for no cause.
11.4. Except as necessary to implement Policy owner initiated
transactions, or as required by state insurance laws or regulations,
the Company shall not redeem the Shares attributable to the Policies
(as opposed to the Shares attributable to the Company's assets held in
the Accounts), and the Company shall not prevent Policy owners from
allocating payments to a Portfolio that was otherwise available under
the Policies, until thirty (30) days after the Company shall have
notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and
MFS shall, at the option of the Company, continue to make available
additional shares of the Portfolios pursuant to the terms and
conditions of this Agreement, for all Policies in effect on the
effective date of termination of this Agreement (the "Existing
Policies"), except as otherwise provided under Article VII of this
Agreement. Specifically, without limitation, the owners of the Existing
Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the
Trust upon the making of additional purchase payments under the
Existing Policies.
-15-
<PAGE>
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail, overnight courier or facsimile to the other party at the address
of such party set forth below or at such other address as such party may from
time to time specify in writing to the other party.
If to the Trust:
MFS VARIABLE INSURANCE TRUST
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
440 Lincoln Street
Worcester, MA 01653
Facsimile No.: (508) 853-6332
Attn: Richard M. Reilly, President
If to MFS:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Policies and all information reasonably
identified as confidential in writing by any other party hereto and,
except as permitted by this Agreement or as otherwise required by
applicable law or regulation, shall not disclose, disseminate or
utilize such names and addresses and other confidential information
without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the
same instrument.
-16-
<PAGE>
13.4. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities
(including without limitation the SEC, the NASD, and state insurance
regulators) relating to this Agreement or the transactions contemplated
hereby.
13.7. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled
to under state and federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument
are not binding upon any of the Trust's trustees, officers, employees,
agents or shareholders individually, but are binding solely upon the
assets and property of the Trust in accordance with its proportionate
interest hereunder. The Company further acknowledges that the assets
and liabilities of each Portfolio are separate and distinct and that
the obligations of or arising out of this instrument are binding solely
upon the assets or property of the Portfolio on whose behalf the Trust
has executed this instrument. The Company also agrees that the
obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the
Company agrees not to proceed against any Portfolio for the obligations
of another Portfolio.
-17-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified above.
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
/s/ Richard M. Reilly
---------------------
By its authorized officer,
By: /s/ Richard M. Reilly
-------------------------
Title: President
---------
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not
individually,
By: /s/ James R. Bordewick, Jr.
-----------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By: /s/ Jeffrey L. Shames
----------------------
Jeffrey L. Shames
Chairman and Chief Executive
Officer
-18-
<PAGE>
As of August 1, 1998
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
=================================================================================================================================
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
=================================================================================================================================
<S> <C> <C>
FULCRUM ACCOUNT OF ALLMERICA VARIABLE ANNUITY MFS EMERGING GROWTH
FINANCIAL LIFE INSURANCE AND ANNUITY MFS GROWTH WITH INCOME
COMPANY
'33 ACT #: 333-11377
'40 ACT #811-7799
FULCRUM VARIABLE LIFE ACCOUNT OF
ALLMERICA FINANCIAL LIFE INSURANCE VARIABLE LIFE
AND ANNUITY COMPANY
'33 ACT #333-15569
'40 ACT #: 811-07913
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-19-
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of
the 1st day of August, 1998, by and among MFS Variable Insurance Trust,
Allmerica Financial Life Insurance and Annuity Company and Massachusetts
Financial Services Company, the parties do hereby agree to an amended Schedule A
as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to the Participation Agreement to be executed in its name and on its
behalf by its duly authorized representative. The Amendment shall take effect on
February 8, 2000.
ALLMERICA FINANCIAL LIFE INSURANCE AND
ANNUITY COMPANY
/s/ Richard M. Reilly
---------------------
By its authorized officer,
By: /s/ Richard M. Reilly
----------------------
Title: President
---------
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer and not
individually,
By: /s/ James R. Bordewick, Jr.
----------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES
COMPANY
By its authorized officer,
By: /s/ Jeffrey L. Shames
----------------------
Jeffrey L. Shames
Chairman and Chief Executive
Officer
<PAGE>
As of February 8, 2000
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
=================================================================================================================================
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
=================================================================================================================================
<S> <C> <C>
FULCRUM ACCOUNT OF ALLMERICA VARIABLE ANNUITY MFS EMERGING GROWTH
FINANCIAL LIFE INSURANCE AND ANNUITY MFS GROWTH WITH INCOME
COMPANY
'33 ACT #: 333-11377
'40 ACT #811-7799
FULCRUM VARIABLE LIFE ACCOUNT OF MFS EMERGING GROWTH
ALLMERICA FINANCIAL LIFE INSURANCE VARIABLE LIFE MFS GROWTH WITH INCOME
AND ANNUITY COMPANY
'33 ACT #333-15569
'40 ACT #: 811-07913
FUVUL SEPARATE ACCOUNT OF VARIABLE LIFE MFS GROWTH WITH INCOME
ALLMERICA FINANCIAL LIFE INSURANCE MFS UTILITIES
AND ANNUITY COMPANY
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-2-
<PAGE>
PARTICIPATION AGREEMENT
AMONG
OPPENHEIMER VARIABLE ACCOUNT FUNDS
OPPENHEIMERFUNDS, INC.
AND
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
DATED AS OF
AUGUST 1, 1998
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I. Purchase of Fund Shares 4
ARTICLE II Representations and Warranties 5
ARTICLE III Prospectuses, Reports to Shareholders
and Proxy Statements, Voting 6
ARTICLE IV Sales Material and Information 8
ARTICLE V Fees and Expenses 9
ARTICLE VI Diversification 9
ARTICLE VII Potential Conflicts 9
ARTICLE VIII Indemnification 11
ARTICLE IX. Applicable Law 15
ARTICLE X Termination 15
ARTICLE XI Notices 16
ARTICLE XII Miscellaneous 17
SCHEDULE A Separate Accounts and Variable Products A -1
SCHEDULE B Portfolios of Oppenheimer Variable Account Funds B -1
SCHEDULE C Proxy Voting Procedures C -1
2
<PAGE>
THIS AGREEMENT, made and entered into as of the 1st day of August, 1998 by and
among: ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY (hereinafter the
"Company"), a Delaware corporation, on its own behalf and on behalf of each
separate account of the Company set forth on Schedule A hereto, as may be
amended from time to time (each such account hereinafter referred to as the
"Account"); OPPENHEIMER VARIABLE ACCOUNT FUNDS, an unincorporated Massachusetts
business trust (hereinafter the "Fund"), and oppenheimerfunds, inc. (hereinafter
the "Adviser"), a Colorado corporation
WHEREAS, the Fund engages in business as an open-end management investment
company and is available to act as (i) the investment vehicle for separate
accounts established by insurance companies for individual and group life
insurance policies and annuity contracts with variable accumulation and/or
pay-out provisions (hereinafter referred to individually and/or collectively as
"Variable Products") and (ii) the investment vehicle for certain qualified
pension and retirement plans (hereinafter "Qualified Plans"); and
WHEREAS, insurance companies desiring to utilize the Fund as an investment
vehicle under their Variable Products enter into participation agreements with
the Fund and the Adviser (the "Participating Insurance Companies");
WHEREAS, shares of the Fund are divided into several series of shares, each
representing the interest in a particular managed portfolio of securities and
other assets (each such series hereinafter referred to as a "Portfolio"), any
one or more of which may be made available under this Agreement, as may be
amended from time to time by mutual agreement of the parties hereto; and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission, granting Participating Insurance Companies and Variable Insurance
Product separate accounts exemptions from the provisions of Sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended
(hereinafter the "1940 Act"), and Rules 6e-2(b)(15) and 6e-3(T)(b)(15)
thereunder, to the extent necessary to permit shares of the Fund to be sold to
and held by separate accounts of both affiliated and unaffiliated life insurance
companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management investment
company under the 1940 Act and its shares are registered under the Securities
Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, the Adviser is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended, and any applicable state securities
laws and manages each of the portfolios of the Fund; and
WHEREAS, Allmerica Investments, Inc. (the "Underwriter") is registered as a
broker/dealer under the Securities Exchange Act of 1934, as amended (hereinafter
the "1934 Act"), is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter the "NASD"); and
WHEREAS, the Company has registered or will register certain Variable
Products under the 1933 Act; and
3
<PAGE>
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution or under authority of the Board of
Directors of the Company, to set aside and invest assets attributable to the
aforesaid Variable Products, and the Company has registered or will register
each Account as a unit investment trust under the 1940 Act; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase, on behalf of each Account, shares
in the Portfolios set forth in Schedule B attached to this Agreement, to fund
certain of the aforesaid Variable Insurance Products and the Fund is authorized
to sell such shares to each such Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the parties
hereto agree as follows:
ARTICLE I. PURCHASE OF FUND SHARES
1.1. The Fund agrees to make available for purchase by the Company shares
of the Fund and shall execute orders placed for each Account on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
such order. For purposes of this Section 1.1, the Company shall be the designee
of the Fund for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such order by 9:30 a.m. Eastern time on the next following Business
Day. "Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value pursuant
to the rules of the Securities and Exchange Commission.
1.2. The Fund, so long as this Agreement is in effect, agrees to make its
shares available indefinitely for purchase at the applicable net asset value per
share by the Company and its Accounts on those days on which the Fund calculates
its net asset value pursuant to rules of the Securities and Exchange Commission
and the Fund shall use reasonable efforts to calculate such net asset value on
each day which the New York Stock Exchange is open for trading. Notwithstanding
the foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to permit the Fund to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, in the best
interests of the shareholders of such Portfolio.
1.3. The Fund agrees that shares of the Fund will be sold only to (i)
Participating Insurance Companies and their separate accounts, (ii) to certain
Qualified Plans, or (iii) to such other persons as are permitted under
applicable provisions of the Internal Revenue Code of 1986, as amended (the
"Code") and regulations promulgated thereunder, the sale of which will not
impair the tax treatment currently afforded the Variable Products.
1.4. The Fund agrees to redeem for cash, on the Company's request, any full
or fractional shares of the Fund held by the Company, executing such requests on
a daily basis at the net asset value next computed after receipt by the Fund or
its designee of the request for redemption. For purposes of this Section 1.4,
the Company shall be the designee of the Fund for receipt of requests for
redemption from each Account and receipt by such designee shall constitute
receipt by the Fund, provided that the Fund receives notice of such request for
redemption by 9:30 a.m. Eastern time on the next following Business Day.
4
<PAGE>
1.5. The Company agrees that purchases and redemptions of Portfolio shares
offered by the then current prospectus of the Fund shall be made in accordance
with the provisions of such prospectus.
1.6. The Company shall pay for Fund shares on the next Business Day after
an order to purchase Fund shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Shares
ordered from the Fund will be recorded in an appropriate title for each Account
or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by fax, e-mail or telephone,
followed by written confirmation, if by telephone) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the right to revoke this election upon 60
days written notice and to receive all such income dividends and capital gain
distributions in cash. The Fund shall notify the Company of the number of shares
so issued as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated (normally by 6:30 p.m. Eastern time)
and shall use its best efforts to make such net asset value per share available
by 7:00 p.m. Eastern time.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Variable Products are or
will be registered under the 1933 Act; that the Variable Products will be issued
and sold in compliance in all material respects with all applicable federal and
state laws, and that the sale of the Variable Products shall comply in all
material respects with state insurance suitability requirements. The Company
further represents and warrants that it is an insurance company duly organized
and in good standing under applicable law, that it has legally and validly
established each Account as a segregated asset account under Section 2932 of the
Delaware Insurance Code, and that it has registered or, prior to any issuance or
sale of the Variable Products, will register each Account as a unit investment
trust in accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Variable Products.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of the Commonwealth of
Massachusetts and all applicable federal and state securities laws, and that the
Fund is and shall make every reasonable effort to remain registered under the
1940 Act. The Fund shall amend the registration statement for its shares under
the 1933 Act and the 1940 Act from time to time as required in order to effect
the continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if and to
the extent deemed advisable by the Fund.
2.3. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Code, and that it will make every
effort to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company promptly upon
5
<PAGE>
having a reasonable basis for believing that it has ceased to so qualify or that
it might not so qualify in the future.
2.4. The Company represents that the Variable Products are currently
treated as life insurance policies or annuity contracts under applicable
provisions of the Code, that it will make every effort to maintain such
treatment, and that it will notify the Fund immediately upon having a reasonable
basis for believing that the Variable Products have ceased to be so treated or
that they might not be so treated in the future.
2.5. The Fund represents that its board of Trustees, a majority of whom are
not interested persons of the Fund, has approved the Fund's plans under Rule
12b-1 to finance distribution expenses.
2.6. The Fund represents that it is lawfully organized and validly existing
under the laws of the Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act.
2.7. The Adviser represents and warrants that it is and shall remain duly
registered in all material respects under all applicable federal and state
securities laws and that it will perform its obligations for the Fund in
compliance in all material respects with the laws of its state of domicile and
any applicable state and federal securities laws.
2.8. The Fund represents and warrants that its Trustees, officers,
employees, and other individuals/entities dealing with the money and/or
securities of the Fund are and shall continue to be at all times covered by a
blanket fidelity bond or similar coverage for the benefit of the Fund in an
amount not less than the minimal coverage as required currently by Rule 17g-(1)
of the 1940 Act or related provisions as may be promulgated from time to time.
The aforesaid blanket fidelity bond shall include coverage for larceny and
embezzlement and shall be issued by a reputable bonding company.
2.9. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities dealing
with the money and/or securities of the Fund are covered by a blanket fidelity
bond or similar coverage, in an amount not less $5 million. The aforesaid, which
includes coverage for larceny and embezzlement, shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Fund and the Underwriter promptly in writing in the event
that such coverage no longer applies.
ARTICLE III. PROSPECTUSES, REPORTS TO SHAREHOLDERS AND PROXY STATEMENTS; VOTING
3.1. The Fund or its designee shall provide the Company with as many
printed copies of the Fund's current prospectus as the Company may reasonably
request. If requested by the Company, in lieu of providing printed copies, the
Fund shall provide camera-ready film or computer diskettes containing the Fund's
prospectus, and such other assistance as is reasonably necessary in order for
the Company once each year (or more frequently if the prospectus for the Fund is
amended during the year) to have the prospectus for the Variable Products and
the Fund's prospectus printed together in one document. Alternatively, the
Company may print the Fund's prospectus in combination with other fund
companies' prospectuses.
6
<PAGE>
3.2. Except as provided in this Section 3.2., all expenses of printing and
distributing Fund prospectuses shall be the expense of the Company. For any
prospectuses provided by the Company to the existing owners of Variable Products
who currently own shares of one or more of the Fund's Portfolios, in order to
update disclosure as required by the 1933 Act and/or the 1940 Act, the cost of
printing shall be borne by the Fund. If the Company chooses to receive
camera-ready film or computer diskettes in lieu of receiving printed copies of
the Fund's prospectus, the Fund will reimburse the Company in an amount equal to
the product of x and y where x is the number of such prospectuses distributed to
owners of the Variable Products who currently own shares of one or more of the
Fund's Portfolios, and y is the Fund's per unit cost of typesetting and printing
the Fund's prospectus. The Company agrees to provide the Fund or its designee
with such information as may be reasonably requested by the Fund to assure that
the Fund's expenses do not include the cost of printing any prospectuses other
than those actually distributed to existing owners of the Variable Products.
3.3. The Fund prospectus shall state that the statement of additional
information for the Fund is available from the Fund or its designee. The Fund or
its designee, at its expense, shall print and provide such statement of
additional information to the Company (or a master of such statement suitable
for duplication by the Company) for distribution to any owner of a contract
funded by the Fund. The Fund or its designee, at the Company's expense, shall
print and provide such statement to the Company (or a master of such statement
suitable for duplication by the Company) for distribution to a prospective
purchaser who requests such statement or to an owner of a contract not funded by
the Fund.
3.4. The Fund, at its expense, shall provide the Company with copies of its
proxy statements, reports to shareholders, and other communications (except for
prospectuses, which are covered in Section 3.1) to shareholders in such quantity
as the Company shall reasonably require for distribution to contract owners. The
Fund or its designee shall bear the cost of printing, duplicating, and mailing
of these documents to current contract owners, and the Company shall bear the
cost for such documents used for purposes other than distribution to current
contract owners.
3.5. If and to the extent required by law the Company shall:
(i) solicit voting instructions from contract owners;
(ii) vote the Fund shares in accordance with instructions
received from contract owners; and
(iii) vote Fund shares for which no instructions have been
received in the same proportion as Fund shares of
such Portfolio for which instructions have been
received,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. The Fund and the Company shall follow the procedures, and shall have the
corresponding responsibilities, for the handling of proxy and voting instruction
solicitations, as set forth in Schedule C attached hereto and incorporated
herein by reference. Participating Insurance Companies shall be responsible for
ensuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set forth
on Schedule C, which standards will also be provided to the other Participating
Insurance Companies, if any.
7
<PAGE>
3.6. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular the Fund will either provide for
annual meetings or comply with Section 16(c) of the 1940 Act (although the Fund
is not one of the trusts described in Section 16(c) of that Act) as well as with
Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will act in
accordance with the Securities and Exchange Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of trustees and
with whatever rules the Commission may promulgate with respect thereto.
3.7. The Fund shall use reasonable efforts to provide Fund prospectuses,
reports to shareholders, proxy materials and other Fund communications (or
camera-ready equivalents) to the Company sufficiently in advance of the
Company's mailing dates to enable the Company to complete, at reasonable cost,
the printing, assembling and/or distribution of the communications in accordance
with applicable laws and regulations.
3.8. In the event the Company or its agent shall receive requests for the
Fund's Prospectus, statement of additional information or annual or semi-annual
report, the Company shall send the requested document within three business days
of receipt of such request, by first-class mail or other means to ensure prompt
delivery, or as otherwise required by Rule 498 under the Securities Act of 1933
or any successor provision, at the Company's expense.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Adviser or its designee, each piece of sales literature or other promotional
material in which the Fund or the Adviser(s) is named, at least fifteen Business
Days prior to its use. No such material shall be used if the Fund or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of the Variable Products other than the information or representations
contained in the registration statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee,
except with the permission of the Fund.
4.3. The Fund or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company and/or its separate account(s)
is named at least fifteen Business Days prior to its use. No such material shall
be used if the Company or its designee reasonably objects to such use within
fifteen Business Days after receipt of such material.
4.4. The Fund and the Adviser shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Variable Products, other than the information or representations
contained in a registration statement or prospectus for the Variable Products,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in published reports for each Account which are in the
public domain or approved by the Company for distribution to contract owners, or
in sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
8
<PAGE>
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to the Fund or its shares, which are relevant
to the Company or the Variable Products.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the investment
in the Fund under the Variable Products.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, any of the following that
refer to the Fund or any affiliate of the Fund: advertisements (such as material
published, or designed for use in, a newspaper, magazine, or other periodical,
radio, television, telephone or tape recording, videotape display, signs or
billboards, motion pictures, or other public media), sales literature (I.E., any
written or electronic communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, and registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund shall pay no fee or other compensation to the Company under
this Agreement.
5.2. All expenses incident to performance by each party of their respective
duties under this Agreement shall be paid by that party, other than expenses
assumed by the Adviser under the Management Agreement between the Fund and the
Adviser or by another party. The Fund shall see to it that all its shares are
registered and authorized for issuance in accordance with applicable federal law
and, if and to the extent deemed advisable by the Fund, in accordance with
section 2.2 hereof. The Fund shall bear the expenses for the cost of
registration and qualification of the Fund's shares, preparation and filing of
the Fund's prospectus and registration statement, proxy materials and reports,
setting the prospectus in type, setting in type and printing the proxy materials
and reports to shareholders (including the costs of printing a prospectus that
constitutes an annual report), the preparation of all statements and notices
required by any federal or state law, and all applicable taxes on the issuance
or transfer of the Fund's shares to the Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Variable Products in
such a manner as to ensure that the Variable Products will be treated as
variable contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
9
<PAGE>
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Fund. An material irreconclable conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by Variable Insurance Product owners; or (f) a decision by a Participating
Insurance Company to disregard the voting instructions of contract owners. The
Board shall promptly inform the Company if it determines that an material
irreconclable conflict exists and the implications thereof.
7.2. The Company will report any potential or existing conflicts of which
it is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under SEC rules and regulations and the conditions of any
Shared Funding Exemptive Order obtained by the Fund, by providing the Board with
all information reasonably necessary for the Board to consider any issues
raised. This includes, but is not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are disregarded, by
confirming in writing, at the Fund's request, that the Company is unaware of any
such potential or existing material irreconclable conflicts, and, upon request,
submitting to the Board at least annually (or more frequently if deemed
appropriate by the Board) such reports, materials or data as the Board may
reasonably request so that the Board may fully carry out the duties imposed upon
it as delineated in the Shared Funding Exemptive Order.
7.3. If it is determined by a majority of the Board, or a majority of its
disinterested members, that a material irreconcilable conflict exists, the
Company and other Participating Insurance Companies shall, at their expense and
to the extent reasonably practicable (as determined by a majority of the
disinterested directors), take whatever steps are necessary to remedy or
eliminate the material irreconclable conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (I.E., annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a decision by
the Company to disregard contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the affected Account's
investment in the Fund and terminate this Agreement with respect to such Account
(at the Company's expense); provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board.
7.5. If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the
10
<PAGE>
Company will withdraw the affected Account's investment in the Fund and
terminate this Agreement with respect to such Account within six months after
the Board informs the Company in writing that it has determined that such
decision has created an material irreconclable conflict; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund, subject
to applicable regulations.
7.6. For purposes of Sections 7.3 through 7.5 of this Agreement, a majority
of the disinterested members of the Board shall determine whether any proposed
action adequately remedies any material irreconclable conflict, but in no event
will the Fund be required to establish a new funding medium for the Variable
Products. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Variable Products if an offer to do so has been declined
by vote of a majority of contract owners materially adversely affected by the
material irreconclable conflict.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding,
or if the Fund obtains a Shared Exemptive Order which requires provisions that
are materially different from the provisions of this Agreement, then (a) the
Fund and/or the Participating Insurance Companies, as appropriate, shall take
such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T), as
amended, and Rule 6e-3, as adopted, or to the terms of the Shared Exemptive
Order, to the extent applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4,
and 7.5 of this Agreement shall continue in effect only to the extent that terms
and conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a) The Company agrees to indemnify and hold harmless the Fund and the
Adviser, each of their respective officers, employees, and Trustees or
Directors, and each person, if any, who controls the Fund or the Adviser within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually, "Indemnified Party," for purposes of this Section
8.1) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Variable Products and:
(i) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the registration statement or
prospectus for the Variable Products or contained in the Variable Products
or sales literature for the Variable Products (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, provided that this agreement to indemnify shall not apply as to
any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished to the Company by or on behalf of the Fund for use in
the registration statement or prospectus for the Variable Products or in
the Variable Products or sales literature (or any amendment or
11
<PAGE>
supplement) or otherwise for use in connection with the sale of the
Variable Products or Fund shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company, or
persons under its control and other than statements or representations
authorized by the Fund or an Adviser) or unlawful conduct of the Company or
persons under its control, with respect to the sale or distribution of the
Variable Products or Fund shares; or
(iii) arise out of or as a result of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature of the Fund or any amendment thereof or
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, if such a statement or omission was made
in reliance upon and in conformity with information furnished to the Fund
by or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company, as
limited by and in accordance with the provisions of Sections 8.1(b) and
8.1(c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
12
<PAGE>
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Products or the
operation of the Fund.
8.2. INDEMNIFICATION BY THE ADVISER
8.2(a). The Adviser agrees, with respect to each Portfolio that it manages,
to indemnify and hold harmless the Company, each of its directors, officers, and
employees, and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act (collectively, the "Indemnified Parties" and
individually, "Indemnified Party," for purposes of this Section 8.2) against any
and all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Adviser) or litigation (including
legal and other expenses) to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the sale or acquisition of shares of the Portfolio
that it manages or the Variable Products and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of 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,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Fund by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Variable Products or Portfolio shares; or
(ii) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Products not supplied by
the Fund or persons under its control and other than statements or
representations authorized by the Company) or unlawful conduct of the Fund,
Adviser(s) or Underwriter or persons under their control, with respect to
the sale or distribution of the Variable Products or Portfolio shares; or
(iii) arise out of or as a result of any untrue statement or alleged untrue
statement of a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Products, or any
amendment thereof or supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
(iv) arise as a result of any material failure by the Adviser to provide
the services and furnish the materials under the terms of this Agreement;
or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Adviser in this Agreement or arise out of or
result from any other material breach of this Agreement by the Adviser; as
limited by and in accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
13
<PAGE>
8.2(b). The Adviser shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
8.2(c). The Adviser shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Adviser in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Adviser will be entitled to participate, at
its own expense, in the defense thereof. The Adviser also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Adviser to such party of the Adviser's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Adviser will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Adviser of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Products or
the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the Company, and
each of its directors and officers and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act (hereinafter
collectively, the "Indemnified Parties" and individually, "Indemnified Party,"
for purposes of this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Fund) or litigation (including legal and other expenses) to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof), litigation or settlements result from
the gross negligence, bad faith or willful misconduct of the Board or any member
thereof, are related to the operations of the Fund and:
(i) arise as a result of any material failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement;
or
(ii) arise out of or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of thisAgreement by the Fund, as
limited and in accordance with the provisions of Sections 8.3(b) and
8.3(a);
8.3(b). The Fund shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as may arise from such Indemnified
Party's gross negligence, bad faith, or willful misconduct the performance of
14
<PAGE>
such Indemnified Party's duties or by reason of such Indemnified Party's
reckless disregard of obligations and duties under this Agreement.
8.3(c). The Fund shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Fund in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Fund of any such claim shall not
relieve the Fund from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Fund will be entitled to participate, at its own
expense, in the defense thereof. The Fund also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Fund will not be liable to such party
under this Agreement for any legal or other expenses subsequently incurred by
such party independently in connection with the defense thereof other than
reasonable costs of investigation.
8.3(d). The Company agrees promptly to notify the Fund of the commencement
of any litigation or proceedings against it or any of its respective officers or
directors in connection with this Agreement, the issuance or sale of the
Variable Products, with respect to the operation of either Account, or the sale
or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
10.1(a) termination by any party for any reason by at least sixty (60) days
advance written notice delivered to the other parties; or
10.1(b) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio based upon the Company's determination
that shares of such Portfolio are not reasonably available to meet the
requirements of the Variable Products; or
10.1(c) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event any of the Portfolio's shares
are not registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the underlying
investment media of the Variable Products issued or to be issued by the Company;
or
15
<PAGE>
10.1(d) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio ceases to
qualify as a Regulated Investment Company under Subchapter M of the Code or
under any successor or similar provision, or if the Company reasonably believes
that the Fund may fail to so qualify; or
10.1(e) termination by the Company by written notice to the Fund and the
Adviser with respect to any Portfolio in the event that such Portfolio fails to
meet the diversification requirements specified in Article VI hereof; or
10.1(f) termination by the Fund and/or the Adviser by written notice to the
Company if (i) the Fund and/or the Adviser shall determine, in its sole judgment
exercised in good faith, that the Company and/or its affiliated companies has
suffered a material adverse change in its business, operations, financial
condition or prospects since the date of this Agreement, is the subject of
material adverse publicity, (ii) upon institution of formal proceedings against
the Company by the NASD, the Securities and Exchange Commission, any state
insurance regulator or any other regulatory body regarding the Company's duties
under this Agreement or related to the sale of the Variable Products, the
administration of the Variable Products, the operation of the Account, or the
purchase of Fund shares, which would have a material adverse effect on the
Company's ability to perform its obligations under this Agreement, (iii) upon a
determination by a majority of the Board, or a majority of the disinterested
Board members, that an material irreconclable conflict exists among the
interests of (a) all contract owners of variable insurance products of all
separate accounts or (b) the interests of the Participating Insurance Companies
investing in the Fund as delineated in Article VII hereof, or (iv) upon the
Company's material breach of any provision of this Agreement.
10.1(g) termination by the Company by written notice to the Fund and the
Adviser, if the Company shall determine, in its sole judgment exercised in good
faith, that either the Fund or the Adviser has suffered a material adverse
change in its business, operations, financial condition or prospects since the
date of this Agreement or is the subject of material adverse publicity; or
10.2. Notwithstanding any termination of this Agreement, the Fund shall, at
the option of the Company, continue to make available additional shares of the
Fund pursuant to the terms and conditions of this Agreement, for all Variable
Products in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Variable Products"). Specifically, without
limitation, the owners of the Existing Variable Products shall be permitted to
direct reallocation of investments in the Portfolios of the Fund, redemption of
investments in the Portfolios of the Fund and/or investment in the Portfolios of
the Fund upon the making of additional purchase payments under the Existing
Variable Products. The parties agree that this Section 10.2 shall not apply to
any termination under Article VII and the effect of such Article VII termination
shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to the Variable
Products (as distinct from Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement contract owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the Securities and Exchange Commission pursuant to
Section 26(b) of the 1940 Act. Upon request, the Company will promptly furnish
to the Fund the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Fund) to the effect that any redemption pursuant
to clause (ii) above is a Legally Required Redemption. Furthermore, except in
cases where permitted under the terms of the Variable
16
<PAGE>
Products, the Company shall not prevent contract owners from allocating payments
to a Portfolio that was otherwise available under the Variable Products without
first giving the Fund 90 days prior written notice of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when hand delivered or sent by
registered or certified mail to the other party at the address of such party set
forth below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
Oppenheimer Variable Account Funds
6803 South Tuscon Way
Englewood, CO 80112
Attn: George Bowen, Vice President, Secretary and Treasurer
If to the Adviser:
OppenheimerFunds, Inc.
2 World Trade Center
Suite 3400
New York, NY 10048-0203
Attn: Andrew J. Donohue, Esq.
Executive Vice President and General Counsel
If to the Company:
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, Massachusetts 01653
Attention: Richard M. Reilly, President
ARTICLE XII. MISCELLANEOUS
12.1. A copy of the Fund's Declaration of Trust, as may be amended from
time to time, is on file with the Secretary of the Commonwealth of
Massachusetts. Notice is hereby given that this instrument is executed by the
Fund's Trustees as Trustees and not individually, and the Fund's obligations
under this Agreement are not binding upon any of the Trustees or Shareholders of
the Fund, but bind only the Fund and the Fund's property; the Company and the
Adviser each represent that it has notice of the provisions of the Declaration
of Trust of the Fund disclaiming shareholder and trustee liability for acts or
obligations of the Trust.
12.2. Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Variable Products and all information reasonably identified
as confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
17
<PAGE>
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
12.6. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, the National Association of Securities
Dealers and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the California Insurance Commissioner with any information or
reports in connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the insurance operations
of the Company are being conducted in a manner consistent with the California
Insurance Regulations and any other applicable law or regulations.
12.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
12.8. This Agreement or any of the rights and obligations hereunder may not
be assigned by any party without the prior written consent of all parties
hereto; provided, however, that the Adviser may assign this Agreement or any
rights or obligations hereunder to any affiliate of or company controlled by or
under common control with the Adviser, if such assignee is duly licensed and
registered to perform the obligations of the Adviser under this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and on its behalf by its duly authorized representative and
its seal to be hereunder affixed hereto as of the date specified above.
ALLMERICA FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY
By: /s/ Richard M. Reilly
---------------------------
NAME: Richard M. Reilly
TITLE: President
OPPENHEIMER VARIABLE ACCOUNT FUNDS
By:
--------------------------------
NAME:
TITLE:
18
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OPPENHEIMERFUNDS, INC.
By:
--------------------------------
NAME:
TITLE:
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
SEPARATE ACCOUNTS AND VARIABLE PRODUCTS
- --------------------------------------------------------------------------------------------------------
VARIABLE LIFE PRODUCTS
<S> <C> <C> <C>
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
- ---------------- ------------ ------------------------
Fulcrum Variable Life Separate Account Fulcrum SPVUL 333-15569 811-07913
VARIABLE ANNUITY PRODUCTS
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
- ---------------- ------------ ------------------------
Fulcrum Separate Account Fulcrum Annuity 333-11377 811-7799
- -------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
PORTFOLIOS OF
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Aggressive Growth Fund
Oppenheimer Growth & Income Fund
B-1
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participation Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
- - The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of
voting instructions from owners of the Variable Products and to
facilitate the establishment of tabulation procedures. At this time the
Fund will inform the Company of the Record, Mailing and Meeting dates.
This will be done verbally approximately two months before meeting.
- - Promptly after the Record Date, the Company will perform a "tape run,"
or other activity, which will generate the names, addresses and number
of units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described above. The Company will use its best efforts to call in the
number of Customers to the Fund , as soon as possible, but no later
than two weeks after the Record Date.
- - The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting
instruction solicitation material. The Fund will provide the last
Annual Report to the Company pursuant to the terms of Section 3.43 of
the Agreement to which this Schedule relates.
- - The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Fund or its affiliate must approve the Card before it is printed.
Allow approximately 2-4 business days for printing information on the
Cards. Information commonly found on the Cards includes:
- name (legal name as found on account registration)
- address
- fund or account number
- coding to state number of units
- individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
C-1
<PAGE>
- - During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
- Voting Instruction Card(s)
- One proxy notice and statement (one document)
- return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
- "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
- cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
- - The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
- - Package mailed by the Company, which shall complete and sign the Fund's
Affidavit of Mailing.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but NOT including,) the meeting,
counting backwards.
- - Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
- - Signatures on Card checked against legal name on account registration which
was printed on the Card. Note: For Example, if the account registration is
under "John A. Smith, Trustee," then that is the exact legal name to be
printed on the Card and is the signature needed on the Card.
- - If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
- - There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
C-3
<PAGE>
- - The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of SHARES.) The Fund must review
and approve tabulation format.
- - Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 10:00 a.m. Eastern time. The Fund
may request an earlier deadline if reasonable and if required to calculate
the vote in time for the meeting.
- - A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
- - The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
- - All approvals and "signing-off' may be done orally, but must always be
followed up in writing.
C-3
<PAGE>
AMENDMENT TO PARTICIPATION AGREEMENT
The Participation Agreement dated as of August 1, 1998, by and among
OPPENHEIMER VARIABLE ACCOUNT FUNDS, OPPENHEIMERFUNDS, INC. and ALLMERICA
FINANCIAL LIFE INSURANCE AND ANNUITY COMPANY (the "Agreement") is hereby amended
as follows:
Schedules A and B of the Agreement are hereby deleted in their entirety and
replaced with the Schedules A and B attached hereto, respectively.
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: February ____, 2000
OPPENHEIMER VARIABLE ACCOUNT OPPENHEIMERFUNDS, INC.
FUNDS
By: _________________________________ By:_________________________________
Name: _____________________________ Name: ______________________________
Title: _____________________________ Title: ___________________________
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY
By: ________________________________
Name: _____________________________
Title: _____________________________
legag\allmerica
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
SEPARATE ACCOUNTS AND VARIABLE PRODUCTS
- --------------------------------------------------------------------------------------------------
VARIABLE LIFE PRODUCTS
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
- --------------- ------------- ---------- ----------
<S> <C> <C> <C>
Fulcrum Variable Life Separate Account Fulcrum SPVUL 333-15569 811-07913
FUVUL Separate Account of Allmerica Financial TO BE DETERMINED 333-93031 811-09731
Life Insurance and Annuity Company
VARIABLE ANNUITY PRODUCTS
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
- ---------------- ------------ ---------- ----------
Fulcrum Separate Account Fulcrum Annuity 333-11377 811-7799
- --------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
SCHEDULE B
PORTFOLIOS OF
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Aggressive Growth Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA
Oppenheimer Small Cap Growth Fund/VA
Oppenheimer Strategic Bond Fund/VA
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A
SEPARATE ACCOUNTS AND VARIABLE PRODUCTS
- --------------------------------------------------------------------------------------------------
VARIABLE LIFE PRODUCTS
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
- --------------- ------------- ---------- ----------
<S> <C> <C> <C>
Fulcrum Variable Life Separate Account Fulcrum SPVUL 333-15569 811-07913
VARIABLE ANNUITY PRODUCTS
SEPARATE ACCOUNT PRODUCT NAME 1933 ACT # 1940 ACT #
- ---------------- ------------ ---------- ----------
Fulcrum Separate Account Fulcrum Annuity 333-11377 811-7799
- --------------------------------------------------------------------------------------------------
</TABLE>
A-1
<PAGE>
SCHEDULE B
PORTFOLIOS OF
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Aggressive Growth Fund
Oppenheimer Growth & Income Fund
B-1
<PAGE>
SCHEDULE C
PROXY VOTING PROCEDURES
The following is a list of procedures and corresponding responsibilities for the
handling of proxies and voting instructions relating to the Fund. The defined
terms herein shall have the meanings assigned in the Participating Agreement
except that the term "Company" shall also include the department or third party
assigned by the Company to perform the steps delineated below.
- - The proxy proposals are given to the Company by the Fund as early as
possible before the date set by the Fund for the shareholder meeting to
enable the Company to consider and prepare for the solicitation of voting
instructions from owners of the Variable Products and to facilitate the
establishment of tabulation procedures. At this time the Fund will inform
the Company of the Record, Mailing and Meeting dates. This will be done
verbally approximately two months before meeting.
- - Promptly after the Record Date, the Company will perform a "tape run," or
other activity, which will generate the names, addresses and number of
units which are attributed to each contract owner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described above. The Company will use its best efforts to call in the
number of Customers to the Fund, as soon as possible, but not later than
two weeks after the Record Date.
- - The Fund's Annual Report must be sent to each Customer by the Company
either before or together with the Customers' receipt of voting instruction
solicitation material. The Fund will provide the last annual Report to the
Company pursuant to the terms of Section 3.43 of the Agreement to which
this Schedule relates.
- - The text and format for the Voting Instruction Cards ("Cards" or "Card") is
provided to the Company by the Fund. The Company, at its expense, shall
produce and personalize the Voting Instruction Cards. The Fund or its
affiliate must approve the Card before it is printed. Allow approximately
2-4 business days for printing information on the Cards. Information
commonly found on the Cards includes:
- name (legal name as found on account registration)
- address
- fund or account number
- coding to state number of units
- individual Card number for use in tracking and verification of votes
(already on Cards as printed by the Fund).
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
C-1
<PAGE>
- - During this time, the Fund will develop, produce and pay for the Notice of
Proxy and the Proxy Statement (one document). Printed and folded notices
and statements will be sent to Company for insertion into envelopes
(envelopes and return envelopes are provided and paid for by the Company).
Contents of envelope sent to Customers by the Company will include:
- Voting Instruction Card(s)
- One proxy notice and statement (one document)
- return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
- "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
- cover letter - optional, supplied by Company and reviewed and approved
in advance by the Fund.
- - The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews and
approves the contents of the mailing package to ensure correctness and
completeness. Copy of this approval sent to the Fund.
- - Package mailed by the Company, which shall complete and sign the Fund's
Affidavit of Mailing.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time
is calculated as calendar days from (but NOT including,) the meeting,
counting backwards.
- - Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An often
used procedure is to sort Cards on arrival by proposal into vote categories
of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not been
required by the Fund in the past.
- - Signatures on Card checked against legal name on account registration which
was printed on the Card.
Note: For example, if the account registration is under "John A. Smith,
Trustee," then that is the exact legal name to be printed on the Card and
is the signature needed on the Card.
- - If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are sent back to Customer with an explanatory letter and a
new Card and return envelope. The mutilated or illegible Card is
disregarded and considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have been "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to why
they did not complete the system. Any questions on those Cards are usually
remedied individually.
- - There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
- - The actual tabulation of votes is done in units which is then converted to
shares. (It is very important that the Fund receives the tabulations stated
in terms of a percentage and the number of SHARES.) The Fund must review
and approve tabulation format.
- - Final tabulation in shares is verbally given by the Company to the Fund on
the morning of the meeting not later than 10:00 a.m. Eastern time. The Fund
may request an earlier deadline if reasonable and if required to calculate
the vote in time for the meeting.
C-2
<PAGE>
- - A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
The Fund will provide a standard form for each Certification.
- - The Company will be required to box and archive the Cards received from the
Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, the Fund will be
permitted reasonable access to such Cards.
- - All approvals and "signing-off" may be done orally, but must always be
followed up in writing.
<PAGE>
POWER OF ATTORNEY
We, the undersigned, hereby severally constitute and appoint Richard M. Reilly,
John F. Kelly, Joseph W. MacDougall, Jr., and Sheila B. St. Hilaire, and each of
them singly, our true and lawful attorneys, with full power to them and each of
them, to sign for us, and in our names and in any and all capacities, any and
all Registration Statements and all amendments thereto, including post-effective
amendments, with respect to the Separate Accounts supporting variable life and
variable annuity contracts issued by Allmerica Financial Life Insurance and
Annuity Company, and to file the same with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
and with any other regulatory agency or state authority that may so require,
granting unto said attorneys and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in the premises, as fully to all intents and purposes as he or she
might or could do in person, hereby ratifying and confirming all that said
attorneys or any of them may lawfully do or cause to be done by virtue hereof.
Witness our hands on the date set forth below.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ John F. O'Brien Director and Chairman of the Board 2/1/2000
- ----------------------------
John F. O'Brien
/s/ Bruce C. Anderson Director 2/1/2000
- ----------------------------
Bruce C. Anderson
/s/ Robert E. Bruce Director and Chief Information Officer 2/1/2000
- ----------------------------
Robert E. Bruce
/s/ John P. Kavanaugh Director, Vice President and 2/1/2000
- ---------------------------- Chief Investment Officer
John P. Kavanaugh
/s/ John F. Kelly Director, Vice President and 2/1/2000
- ---------------------------- General Counsel
John F. Kelly
/s/ J. Barry May Director 2/1/2000
- ----------------------------
J. Barry May
/s/ James R. McAuliffe Director 2/1/2000
- ----------------------------
James R. McAuliffe
/s/ Edward J. Parry, III Director, Vice President, Chief Financial 2/1/2000
- ---------------------------- Officer and Treasurer
Edward J. Parry, III
/s/ Richard M. Reilly Director, President and 2/1/2000
- ---------------------------- Chief Executive Officer
Richard M. Reilly
/s/ Robert P. Restrepo, Jr. Director 2/1/2000
- ----------------------------
Robert P. Restrepo, Jr.
/s/ Eric A. Simonsen Director and Vice President 2/1/2000
- ----------------------------
Eric A. Simonsen
</TABLE>
<PAGE>
[FIRST UNION]
VARIABLE LIFE APPLICATION
ALLMERICA FINANCIAL
[LOGO] ALLMERICA LIFE INSURANCE AND 440 Lincoln Street
FINANCIAL-Registered Trademark- ANNUITY COMPANY Worcester, MA 01653
- --------------------------------------------------------------------------------
IF OIR PLEASE COMPLETE SUPPLEMENTAL APPLICATION.
- --------------------------------------------------------------------------------
1 INSURED The person upon whose life this insurance coverage is proposed.
- --------------------------------------------------------------------------------
- ----------------------------------------------------------------------------
First Name Middle Last
- ----------------------------------------------------------------------------
Street Address Years at this Address
- ----------------------------------------------------------------------------
City State Zip
( )
- ----------------------------------------------------------------------------
Daytime Telephone Number
M/ D/ Y/
------- ------- ------- ---------------------------------------
Date of Birth State of Birth
- -
- ------------------------------------------------ M / / F / /
Social Security Number Sex
- ----------------------------------------------------------------------------
Driver's License Number State
- --------------------------------------------------------------------------------
2 PAYMENT The monetary contribution to the policy.
- --------------------------------------------------------------------------------
CHECK ONE:
[ / / I have enclosed a check for my initial payment of $____________
[(100 minimum)]and have received a temporary insurance agreement.
(Please make check payable to Allmerica Financial Life Insurance and
Annuity Company)]
[ / / My initial payment will be transferred from another insurance company.
Approximate amount $________________________
Name of transferring company___________________________
My Transfer of Assets form is attached. Yes / /
My present contract has a loan that I wish to carry over to the
new contract Yes / / No / /
Loan carry over amount $ ____________. ]
[2a I WANT TO MAKE FUTURE PAYMENTS OF $___________:
/ /Annually / /Semi-Annually / /Quarterly / /Monthly
(I have included a voided check and Bank Drafting Form.)]
[2b PAYMENT REMINDER NOTICES WILL BE SENT TO THE POLICYOWNER UNLESS SPECIFIED
OTHERWISE HERE:
--------------------------------------------------------
Name
--------------------------------------------------------
Street Address
--------------------------------------------------------
City State Zip
- --------------------------------------------------------------------------------
3 POLICYOWNER The person or entity exercising the policy's contractual rights.
- --------------------------------------------------------------------------------
THE POLICYOWNER WILL BE THE INSURED UNLESS SPECIFIED HERE:
--------------------------------------------------------
Name
--------------------------------------------------------
Street Address
--------------------------------------------------------
City State Zip
Social Security or Tax I.D. Number
----------------------------
Trust Date M/ D/ Y/ (if Trust owned)
-------- -------- --------
- --------------------------------------------------------------------------------
4 ALLOCATION How I want my payments allocated.
- --------------------------------------------------------------------------------
Complete Section 4a. Future payments will be allocated according
to this selection unless changed by me.
4a / /ALLOCATE MY PAYMENT AS FOLLOWS: Use whole percentages.
YOUR TOTAL ALLOCATION MUST EQUAL 100%.
[ ____% AIM V.I. Cap. App. ____% Fed Am Ldrs Fnd II
____% AIM V.I. Value ____% Fed High Inc Bnd II
____% AIT Money Market ____% Fed Prime Mon Fnd II
____% Alger Am. Growth ____% Templeton Int'l Eqty
____% Alger Am. Sm. Cap. ____% Templeton Glbl Asst
____% Alger Am. Lv. Allcp. ____% MFS Gr. w/ Income
____% Dreyfus Cap. App. ____% MFS Utilities
____% Dreyfus Qual. Bond ____% Oppenheimer Main St. Growth
& Income
____% Dreyfus Soc. Resp. Growth
____% Oppenheimer Small Cap Growth/VA
____% Evergrn VA Eqty Indx
____% Oppenheimer Strategic Bon/VA
____% Evergrn VA Fund
____% Fixed Account
____% Evergrn VA Glbl Ldrs
____% Evergrn VA Sm Cp Vl 100% TOTAL ]
Deductions of all charges will be made pro rata according to the value of
each account and the Fixed Account unless otherwise specified in the
"Remarks" section of the application.
- --------------------------------------------------------------------------------
4b AUTOMATIC ACCOUNT REBALANCING
- --------------------------------------------------------------------------------
/ / I elect Automatic Account Rebalancing among the variable accounts to the
allocation specified in Section 4a of the main application.
/ / Month / /Quarterly / /Semi-Annually / /Annually
11365 FUIT PAGE 1
<PAGE>
- --------------------------------------------------------------------------------
4C DOLLAR COST AVERAGING
- --------------------------------------------------------------------------------
Select one account from which to transfer money. Be sure you have money
allocated to this account in Section 4a.
Transfer $____________________ [($100 minimum)]
EVERY: / / Month / / Quarter / / 6 Months / / 12 Months
FROM: [/ / Fixed Account / / Allmerica Money Market Fund]
[THIS ACCOUNT CANNOT BE SELECTED IN THE ALLOCATION BELOW.]
[TO:
____% AIM V.I. Cap. App. ____% Fed Am Ldrs Fnd II
____% AIM V.I. Value ____% Fed High Inc Bnd II
____% AIT Money Market ____% Fed Prime Mon Fnd II
____% Alger Am. Growth ____% Templeton Int'l Eqty
____% Alger Am. Sm. Cap. ____% Templeton Glbl Asst
____% Alger Am. Lv. Allcp. ____% MFS Gr. w/ Income
____% Dreyfus Cap. App. ____% MFS Utilities
____% Dreyfus Qual. Bond ____% Oppenheimer Main St. Growth & Income
____% Dreyfus Soc. Resp. ____% Oppenheimer Small Cap Growth/VA
Growth ____% Oppenheimer Strategic Bon/VA
____% Evergrn VA Eqty Indx ____% Fixed Account
____% Evergrn VA Fund
____% Evergrn VA Glbl Ldrs
____% Evergrn VA Sm Cp Vl 100% TOTAL ]
- --------------------------------------------------------------------------------
5 INSURANCE
- --------------------------------------------------------------------------------
5a I WANT $_______________ IN LIFE INSURANCE COVERAGE.
5b I WANT INSURANCE COVERAGE TO BE: (Choose one)
/ / Option 1 Level - Insurance coverage remains constant.
/ / Option 2 Adjustable - Insurance coverage changes with
the value of your policy
/ / Option 3 Level - Cash Value Accumulation Test
5c I WANT THE FOLLOWING ADDITIONAL INSURANCE BENEFITS:
[/ / Waiver of payment upon disability
/ / Other Insured Rider (Complete Supplementary Application)
/ / Guaranteed Death Benefit Rider]
- --------------------------------------------------------------------------------
6 BENEFICIARY
- --------------------------------------------------------------------------------
The Primary Beneficiary is the person or entity who will receive the policy
proceeds. The Contingent Beneficiary is the person or entity who will receive
the policy proceeds should the Primary Beneficiary not survive the insured.
_____________________________________________________________________________
Name of Primary Beneficiary Relationship to Insured
_____________________________________________________________________________
Name of Contingent Beneficiary Relationship to Insured
If the beneficiary is a trust, please specify trust date.
M/_______ D/_______ Y/_______
- --------------------------------------------------------------------------------
7 REPLACEMENT OF OTHER CONTRACTS
- --------------------------------------------------------------------------------
WILL THE PROPOSED POLICY REPLACE ANY EXISTING ANNUITY OR LIFE INSURANCE
CONTRACT?
/ / Yes / / No
If yes, list company name and policy number.
_____________________________________________________________________________
_____________________________________________________________________________
Total life insurance in force $_______________.
- --------------------------------------------------------------------------------
8 INFORMATION ABOUT THE INSURED
- --------------------------------------------------------------------------------
8a I HAVE HAD AN ILLNESS OR INJURY DURING THE PAST SIX MONTHS THAT HAS
PREVENTED ME FROM WORKING FIVE CONSECUTIVE DAYS.
/ / Yes / / No If yes, please explain:
__________________________________________________________________________
__________________________________________________________________________
8b PLEASE PROVIDE THE NAME OF LAST PHYSICIAN CONSULTED, DATE AND REASON FOR
CONSULTATION.
__________________________________________________________________________
__________________________________________________________________________
8c DURING THE PAST THREE YEARS I HAD A MOTOR VEHICLE LICENSE SUSPENDED OR
REVOKED OR WAS CONVICTED OF EITHER DRIVING WHILE INTOXICATED OR OF MORE
THAN ONE MOVING VIOLATION.
/ / Yes / / No If yes, please explain:
__________________________________________________________________________
__________________________________________________________________________
8d DURING THE PAST TWO YEARS I HAVE PARTICIPATED IN OR I INTEND TO
PARTICIPATE IN:
/ / Scuba diving / / Parachuting / / Motor racing
/ / Hang gliding or similar flying activity
__________________________________________________________________________
__________________________________________________________________________
8e DURING THE PAST TWO YEARS I HAVE FLOWN AS OR I INTEND TO FLY AS A TRAINEE,
PILOT OR CREW MEMBER.
/ / Yes / / No
8f DURING THE PAST 24 MONTHS, I HAVE USED TOBACCO IN ANY FORM.
/ / Yes / /No
8g I CURRENTLY USE:
/ / Cigars / / Pipe / / Chewing tobacco / / Cigarettes
/ / Other tobacco product
(Please specify)______________________________
8h I WILL BE TRAVELING OUTSIDE OF THE UNITED STATES OR CANADA IN THE NEXT SIX
MONTHS:
/ / Yes / / No, If yes, please indicate country:
__________________________________________________________________________
[8i CURRENT EMPLOYMENT.
Name of Employer ___________________________________
Occupation and Responsibilities _______________________
_________________________________________________________________________]
[8j INCOME.
My annual earned income is $__________________
My annual unearned income is $__________________
My net worth is $__________________]
11365 FUIT PAGE 2
<PAGE>
- --------------------------------------------------------------------------------
9 TELEPHONE ACCESS
- --------------------------------------------------------------------------------
Unless I did not accept the Telephone Access privilege, I understand that
Allmerica Financial Life Insurance and Annuity Company is authorized to honor
telephone requests by me, or by individuals authorized by me, to transfer
account values among sub-accounts and to change the allocation of my future
payments. I also understand that the withdrawal of funds from my account
cannot be transacted by telephone or fax instructions.
/ / I do not accept this Telephone Access privilege.
- --------------------------------------------------------------------------------
[10 REMARKS ]
- --------------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACKNOWLEDGMENTS AND SIGNATURES
- --------------------------------------------------------------------------------
NOTICE TO ARKANSAS/NEW JERSEY/OHIO RESIDENTS ONLY:
"Any person who includes any false or misleading information on an
application for an insurance policy/certificate is subject to criminal and
civil penalties."
NOTICE TO COLORADO/KENTUCKY/MAINE/NEW MEXICO/ PENNSYLVANIA/WASHINGTON, D.C.
RESIDENTS ONLY: "Any person who knowingly and with intent to defraud any
insurance company or other person files an application for insurance or
statement of claim containing any materially false information or conceals
for the purpose of misleading, information concerning any fact material
thereto commits a fraudulent insurance act, which is a crime and subjects
such person to criminal and civil penalties."
NOTICE TO FLORIDA RESIDENTS ONLY: "Any person who knowingly and with intent
to injure, defraud, or deceive any insurer files a statement of claim or an
application containing false, incomplete, or misleading information is guilty
of a felony of the third degree."
THIS VARIABLE LIFE POLICY IS NOT: A BANK DEPOSIT OR OBLIGATION; FEDERALLY
INSURED; ENDORSED BY ANY BANK OR GOVERNMENT AGENCY.
[GRAPHIC] [GRAPHIC]
I acknowledge receipt of current Prospectuses describing the [flexible
premium variable life insurance policy] I am applying for, and the underlying
Funds.
I UNDERSTAND THAT ANY DEATH BENEFITS IN EXCESS OF THE FACE AMOUNT AND ANY
POLICY VALUE OF THE [FLEXIBLE PREMIUM VARIABLE LIFE INSURANCE POLICY] APPLIED
FOR, MAY INCREASE OR DECREASE TO REFLECT THE INVESTMENT EXPERIENCE OF THE
SUB-ACCOUNTS OF THE VARIABLE ACCOUNT. THE POLICY VALUE ALLOCATED TO THE FIXED
ACCOUNT WILL ACCUMULATE INTEREST AT A RATE SET BY THE COMPANY WHICH WILL NOT
BE LESS THAN THE MINIMUM GUARANTEED RATE OF [4%] ANNUALLY. THERE IS NO
GUARANTEED MINIMUM POLICY VALUE. THE POLICY VALUE MAY DECREASE TO THE POINT
WHERE THE POLICY WILL LAPSE AND PROVIDE NO FURTHER DEATH BENEFIT WITHOUT
ADDITIONAL PREMIUM PAYMENTS.
It is agreed that: (1) The application consists of this application form, the
medical questionnaire and the supplemental application to apply for insurance
on family members, if it applies; (2) The representations are true and
complete to the best of my knowledge and belief; (3) No liability exists and
the insurance applied for will not take effect until the policy is delivered
and the premium is paid during the lifetime of the proposed insured(s) and
then only if the proposed insured(s) has (have) not consulted or been treated
by any physician or practitioner of any healing art nor had any tests listed
in the application since its completion; but, if the premium is paid prior to
delivery of the policy and a temporary insurance agreement is delivered by
the representative, insurance will be effective subject to terms of the
temporary insurance agreement; and (4) No registered representative or
broker is authorized to amend, alter, or modify the terms of this agreement.
-----------------------------------------------------------------------------
Signature of Insured Date
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Signature of Owners (if other than Insured) Date
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Signed at City State
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Official Title/Capacity
- --------------------------------------------------------------------------------
FOR REGISTERED REPRESENTATIVE USE ONLY
- --------------------------------------------------------------------------------
Does the policy applied for replace an existing annuity or life insurance
policy?
/ / Yes / / No
If yes, attach replacement forms as required.
As Registered Representative, I certify witnessing the signature of the
applicant and that the information in this application has been accurately
recorded, to the best of my knowledge and belief.
Based on the information furnished by the Owner or Insured in this
application, I certify that I have reasonable grounds for believing the
purchase of the policy applied for is suitable for the Owner. I further
certify that the Prospectuses were delivered and that no written sales
materials other than those furnished or approved by the Company were used.
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Signature of Registered Representative Date
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Print Name of Registered Representative TR Code/Reg Rep #
( ) ( )
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Telephone FAX
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Name of Broker/Dealer Branch #
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Branch Office Street Address
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City State Zip
- --------------------------------------------------------------------------------
FOR HOME OFFICE USE ONLY
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11365 FUIT PAGE 3
<PAGE>
FIRST UNION
VARIABLE LIFE APPLICATION
ALLMERICA FINANCIAL
[LOGO] ALLMERICA LIFE INSURANCE AND 440 Lincoln Street
FINANCIAL-Registered Trademark- ANNUITY COMPANY Worcester, MA 01653
- --------------------------------------------------------------------------------
APPLICATION FOR SIMPLIFIED UNDERWRITING
- --------------------------------------------------------------------------------
PROPOSED INSURED NAME: Sex: / / Male / / Female
Address: Date of Birth:
State of Birth:
Telephone No.: Proposed Insured S.S. No.:
PROPOSED OWNER NAME: Proposed Owner S.S. No.:
Address:
PRIMARY BENEFICIARY: Relationship to Insured:
CONTINGENT BENEFICIARY: Relationship to Insured:
INSURANCE AMOUNT APPLIED FOR: $
INSURANCE COVERAGE OPTION: / /Option 1 Level--Coverage remains constant
/ /Option 2 Adjustable--Coverage changes with the
value of policy
/ /Option 3 Level--Cash Value Accumulation Test
REPLACEMENT: / /Yes / /No Will the proposed policy replace any existing
annuity or life insurance contract?
(a) Current amount of life insurance in effect: $
(b) Company Name: (c) Policy No.:
TELEPHONE ACCESS: / /Accept / /Decline
- --------------------------------------------------------------------------------
GIVE DETAILS TO ALL YES ANSWERS IN REMARKS. INCLUDE ALL DATES AND DIAGNOSES.
- --------------------------------------------------------------------------------
1. Has the proposed insured within the last two years or does the proposed
insured in the future intend to:
/ /Yes / /No (a) fly as a pilot, student or crew member in any type of
aircraft?
/ /Yes / /No (b) engage in underwater diving, parachuting, hang gliding,
auto, boat or motor cycle racing?
/ /Yes / /No (c) travel or reside outside of the United States or Canada?
2. Has the proposed insured ever had or been advised to receive treatment for:
/ /Yes / /No (a) heart trouble, high blood pressure, diabetes, cancer,
tumor, epilepsy, asthma, emphysema or any disorder of
the blood vessels?
/ /Yes / /No (b) disease or disorder of the stomach, intestine, liver,
lungs, kidneys, brain, prostate or reproductive organs?
/ /Yes / /No (c) alcohol or drug abuse or any mental or nervous
condition?
3. / /Yes / /No Has the proposed insured ever tested positive on an Acquired
Immune Deficiency Syndrome (AIDS) related test?
4. / /Yes / /No Has the proposed insured used tobacco in any form in the
past 24 months?
5. / /Yes / /No For reasons not already provided, in the last 12 months has
the proposed insured received or been advised to receive, or
in the future anticipate receiving, any medical treatment,
medical testing, hospitalization or surgery?
6. / /Yes / /No In the last 12 months, has the proposed insured used any
prescription drugs?
REMARKS:
<TABLE>
<S><C>
Amount paid with this application: $ 1035 Exchange/Transfer of Assets / /Yes / /No
Future payments of $ Paid: / /Annually / /Semi-Annually / /Quarterly / /Monthly
ALLOCATION OF INITIAL PAYMENT: DOLLAR COST AVERAGING: / /Yes / /No
Source Account:
Dollar Amount:
AIM V.I. Cap. App. % %
AIM V.I. Value % %
AIT Money Market % %
Alger Am. Growth % %
Alger Am. Sm. Cap. % %
Alger Am. Lv. Allcp. % %
Dreyfus Cap. App. % %
Dreyfus Qual. Bond % %
Dreyfus Soc. Resp. Growth % %
Evergrn VA Eqty Indx % %
Evergrn VA Fund % %
Evergrn VA Glbl Ldrs % %
Evergrn VA Sm Cp VI % %
Fed Am Ldrs Fnd II % %
Fed High Inc Bnd II % %
Fed Prime Mon Fnd II % %
Templeton Int'l Eqty % %
Templeton Glbl Asst % %
MFS Gr. w/ Income % %
MFS Utilities % %
Oppenheimer Main St. Growth & Income % %
Oppenheimer Small Cap Growth/VA % %
Oppenheimer Strategic Bon/VA % %
Fixed Account % %
100% TOTAL
DOLLAR COST AVERAGING FREQUENCY: / /Monthly / /Quarterly / /Semi-Annually / /Annually
AUTOMATIC ACCOUNT REBALANCING: / /Yes / /No If Yes: / /Monthly / /Quarterly / /Semi-Annually / /Annually
* Future payments will be allocated in accordance with the allocation of the initial payment unless otherwise specified.
* Deductions of all charges will be made pro rata according to the value of each account and the Fixed Account.
</TABLE>
White - Allmerica Yellow - FUIG Pink - Agent Blue - Customer
11367
<PAGE>
ACKNOWLEDGMENTS AND SIGNATURES
NOTICE TO ARKANSAS/NEW JERSEY/OHIO RESIDENTS ONLY: "Any person who includes any
false or misleading information on an application for an insurance
policy/certificate is subject to criminal and civil penalties."
NOTICE TO COLORADO/KENTUCKY/MAINE/NEW MEXICO/PENNSYLVANIA/WASHINGTON D.C.
RESIDENTS ONLY: "Any person should knowingly and with intent to defraud any
insurance company or other person files an application for insurance or conceals
for the purpose of misleading, information concerning any fact material thereto
commits a fraudulent insurance act, which is a crime and subjects such person to
criminal and civil penalties."
NOTICE TO FLORIDA RESIDENTS ONLY: "Any person who knowingly and with intent to
injure, defraud, or deceive any insurer files a statement of claim or an
application containing false, incomplete, or misleading information is guilty of
a felony of the third degree."
THIS LIFE POLICY IS NOT: A BANK DEPOSIT OR OBLIGATION; FEDERALLY INSURED;
ENDORSED BY ANY BANK OR GOVERNMENTAL AGENCY.
TELEPHONE ACCESS PRIVILEGE: If I accepted the telephone access privilege, I
understand that Allmerica Financial Life Insurance and Annuity Company is
authorized to honor telephone requests by me, or by individuals authorized by
me, to transfer account values among sub-accounts and to change the allocation
of my future payments. I also understand that the withdrawal of funds from my
policy cannot be transacted by telephone or fax instructions.
I acknowledge receipt of current Prospectus describing the ___________ policy
I am applying for, and the underlying Funds.
I understand that any death benefits in excess of the face amount and any
policy value of the [flexible premium variable life insurance policy] applied
for, may increase or decrease to reflect the investment experience of the
sub-accounts of the variable account. The policy value allocated to the Fixed
Account will accumulate interest at a rate set by the Company which will not
be less than the minimum guaranteed rate of 4% annually. There is no
guaranteed minimum policy value. The policy value may decrease to the point
where the policy will lapse and provide no further death benefit without
additional premium payments.
It is agreed that: (1) The application consists only of this application form;
(2) the representations are true and complete to the best of my knowledge and
belief; (3) No liability exists and the insurance applied for will not take
effect until the policy is delivered and the premium is paid during the lifetime
of the proposed insured and then only if proposed insured has not consulted or
been treated by any physician or practitioner of any healing art nor had any
test listed in the application since its completion; but, if the premium is paid
prior to the delivery of the policy and a temporary life insurance agreement is
delivered by the representative, insurance will be effective subject to the
terms of the temporary life insurance agreement; and (4) No registered
representative or broker is authorized to amend, alter or modify the terms of
this agreement.
Signed at Date:
----------------------------------- ------------------
- ---------------------------------------------
Signature of Proposed Insured
- --------------------------------------------- [GRAPHIC] [GRAPHIC]
Owner (if other than Proposed Insured)
- --------------------------------------------------------------------------------
REPLACEMENT AND CERTIFICATION
- --------------------------------------------------------------------------------
REPORT BY AGENCY OFFICE
Agent Code #
TO THE BEST OF YOUR KNOWLEDGE IS A REPLACEMENT INVOLVED? / / Yes / / No
As a Registered Representative, I certify witnessing the signature of the
applicant and that the questions on this application have been asked, answered
and accurately recorded, to the best of my knowledge and belief. Based on the
information furnished by the Owner or Insured in this application, I certify
that I have reasonable grounds for believing the purchase of the policy applied
for is suitable for the Owner. I further certify that the Prospectuses were
delivered and that no written sales materials other than those furnished and
approved by the Company were used.
-------------------------------------------------------------
Signature of Registered Representative Date
-------------------------------------------------------------
Print Name
White - Allmerica Yellow - FUIG Pink - Agent Blue - Customer
11367
<PAGE>
March 15, 2000
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
RE: SEPARATE ACCOUNT FUVUL OF ALLMERICA FINANCIAL
LIFE INSURANCE AND ANNUITY COMPANY
Gentlemen:
In my capacity as Assistant Vice President and Counsel of Allmerica Financial
Life Insurance and Annuity Company (the "Company"), I have participated in the
preparation of this Pre-Effective Amendment No.1 to the Registration Statement
on Form S-6 under the Securities Act of 1933 with respect to the Company's
individual flexible premium variable life insurance policies.
I am of the following opinion:
1. The Separate Account FUVUL is a separate account of the Company validly
existing pursuant to the Delaware Insurance Code and the regulation
issued thereunder.
2. The assets held in the Separate Account FUVUL equal to the reserves and
other Policy liabilities of the Policies which are supported by the
Separate Account FUVUL Account are not chargeable with liabilities
arising out of any other business the Company may conduct.
3. The individual flexible premium variable life insurance policies, when
issued in accordance with the Prospectus contained in this
Pre-Effective Amendment No.1 to the Registration Statement and upon
compliance with applicable local law, will be legal and binding
obligations of the Company in accordance with their terms and when sold
will be legally issued, fully paid and non-assessable.
In arriving at the foregoing opinion, I have made such examination of law and
examined such records and other documents as in my judgment are necessary or
appropriate.
I hereby consent to the filing of this opinion as an exhibit to this
Pre-Effective Amendment No.1 to the Registration Statement of the Separate
Account FUVUL on Form S-6 filed under the Securities Act of 1933 and amendment
under the Investment Company Act of 1940.
Very truly yours,
/s/ Sheila B. St. Hilaire
Sheila B. St. Hilaire
Assistant Vice President and Counsel
<PAGE>
March 15, 2000
Allmerica Financial Life Insurance and Annuity Company
440 Lincoln Street
Worcester, MA 01653
RE: SEPARATE ACCOUNT FUVUL OF ALLMERICA FINANCIAL
LIFE INSURANCE AND ANNUITY COMPANY
Gentlemen:
This opinion is furnished in connection with the filing by Allmerica Financial
Life Insurance and Annuity Company of this Initial Registration Statement on
Form S-6 of its flexible premium variable life insurance policies ("Policies")
allocated to the Separate Account FUVUL under the Securities Act of 1933. The
Prospectus included in this Pre-Effective Amendment No.1 to the Registration
Statement describes the Policies. I am familiar with and have provided actuarial
advice concerning the preparation of this Pre-Effective Amendment No.1 to the
Registration Statement, including exhibits.
In my professional opinion, the illustrations of death benefits and cash values
included in Appendix D of the Prospectus, based on the assumptions stated in the
illustrations, are consistent with the provisions of the Policy. The rate
structure of the Policies has not been designed so as to make the relationship
between premiums and benefits, as shown in the illustrations, appear more
favorable to a prospective purchaser of a Policy for a person age 30 or a person
age 45 than to prospective purchasers of Policies for people at other ages or
underwriting classes.
I am also of the opinion that the aggregate fees and charges under the Policy
are reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company
I hereby consent to the use of this opinion as an exhibit to the Pre-Effective
Amendment No.1 to the Registration Statement.
Sincerely,
/s/ William H. Mawdsley
William H. Mawdsley, FSA, MAAA
Vice President and Actuary
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Pre-Effective Amendment No. 1 of Separate Account FUVUL of Allmerica Financial
Life Insurance and Annuity Company on Form S-6 of our report dated February 1,
2000, relating to the financial statements of Allmerica Financial Life Insurance
and Annuity Company, which appear in such Prospectus. We also consent to the
reference to us under the heading "Independent Accountants" in
such Prospectus.
/s/ PRICEWATERHOUSECOOPERS LLP
PricewaterhouseCoopers LLP
Boston, Massachusetts
March 20, 2000
