1
EXHIBIT 3(b)
PACIFIC MUTUAL LIFE INSURANCE COMPANY
VARIABLE CONTRACT SELLING AGREEMENT
This Agreement ("Agreement") is made as of _______________________,
19__ by and among PACIFIC MUTUAL LIFE INSURANCE COMPANY ("Pacific Mutual"),
PACIFIC MUTUAL DISTRIBUTORS, INC. ("Distributor"), a broker/dealer registered
with the Securities and Exchange Commission ("SEC") pursuant to the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and a member of the National
Association of Securities Dealers Regulation, Inc. ("NASD"),
________________________________________________________ ("Broker/Dealer"), and
each undersigned agency included on the attached Schedule (jointly and
severally referred to herein as "Agency"); Broker/Dealer and Agency jointly and
severally hereinafter referred to collectively as "Selling Entities".
This Agreement is for the purpose of providing for the distribution of
certain variable life insurance policies and/or annuity contracts set forth in
Schedule A hereto and of any successor additional SEC registered products (as
discussed in Paragraph 3 of this Agreement) issued by Pacific Mutual and
distributed by Distributor through representatives who are both (a) state
insurance licensed and appointed agents of Pacific Mutual and associated with
the Agency and (b) NASD registered representatives of Broker/Dealer who are
appropriately licensed both with the NASD and with the relevant states. The
variable life insurance and/or annuity contracts set forth in Schedule A
hereto, as such Schedule may be amended and/or restated from time to time to
include any successor or additional SEC registered insurance products, and
together with any riders or endorsements to such policies and contracts,
certificates relating to such policies and contracts, supplemental contracts,
and forms, are referred to collectively herein as the "Contracts".
1. APPOINTMENT
In consideration of the mutual promises and covenants contained in
this Agreement, Pacific Mutual and Distributor appoint Selling Entities and
those persons associated with Selling Entities who are NASD registered
representatives of Broker/Dealer and state insurance licensed agents of Agency
and appointed by Pacific Mutual to solicit and procure applications for the
Contracts.
These appointments are not deemed to be exclusive in any manner and
extend only to those jurisdictions, set forth in Schedule B hereto as such
Schedule B may be amended from time to time by Pacific Mutual in its sole
discretion, where the Contracts specified in such Schedule B have been approved
for sale.
From time to time, Pacific Mutual will provide Selling Entities with
information regarding the jurisdictions in which Pacific Mutual is authorized
to solicit applications for the Contracts and any limitations on the
availability of such Contracts in any jurisdiction.
2. RESPONSIBILITIES
Selling Entities are authorized to collect the premium on the
Contracts and must remit such premiums to Pacific Mutual in the manner set
forth in the applicable Compensation Schedule set forth in the applicable
Schedule D. Contract applications shall be taken only on preprinted,
state-appropriate application forms in accordance with state, federal and
self-regulatory laws, rules, regulations and guidelines, supplied by Pacific
Mutual. All completed applications, supporting documents and payments are the
sole property of Pacific Mutual and must be promptly delivered to Pacific
Mutual. All applications are subject to acceptance by Pacific Mutual at its
sole discretion.
3. NEW PRODUCTS
Distributor may propose and Pacific Mutual may issue additional or
successor products, in which event Broker/Dealer will be informed in writing of
the new product and its related Compensation Schedule. If Broker/Dealer does
not indicate approval of the new product(s) or the terms contained in its
related Compensation Schedule, Broker/Dealer will be deemed to have thereby
rejected the proposal(s) to distribute such new product(s). If Broker/Dealer
approves the new product, the Compensation Schedule will be deemed accepted and
1
2
shall be attached to and made a part of this Agreement as an amendment or
addendum to the applicable Schedule D, or as a new Schedule D hereto, and (b)
to the amendment of Schedules A and B to this Agreement to name such new
product(s) and to identify where their offer and sale has been approved.
4. SUBAGENTS
Agency is authorized to appoint Subagents to solicit sales of the
Contracts ("Subagents"); provided, however, that Pacific Mutual shall have the
right in its sole discretion to terminate the appointment of any Subagent upon
notice from Pacific Mutual to Agency. Agency warrants that no Subagent shall
commence solicitation nor aid, directly or indirectly, in the solicitation of
any application for any Contract unless, at the time of such solicitation or
aid, such Subagent is appropriately licensed for such product under applicable
insurance laws and is an NASD registered representative of Broker/Dealer.
Selling Entities each represent that they have, for each Subagent,
fulfilled all requirements set forth in the form of general letter of
recommendation set forth in Schedule C hereto; and agree, upon reasonable
request by Pacific Mutual, to furnish proof of such fulfillment as Pacific
Mutual may require.
Any direct contact with Subagents will require the prior approval of
the Broker/Dealer.
5. SALES MATERIAL
No party to this Agreement nor any of their respective Subagents,
officers, directors, employees, affiliates, representatives or agents shall
utilize in their marketing efforts for the Contracts any written brochure,
prospectus, descriptive literature, printed and published material,
audio-visual material or standard letters without the prior consent of the
other party; provided, however, that an updated printed prospectus, statement
of additional information, and any supplement or amendment thereto, and annual
and semi-annual reports may be used without specific approval. In order for
any party to review and approve materials not produced by the other party, the
submitting party must provide the other party with evidence that any material
proposed to be used was filed with the NASD in accordance with applicable rules
and copies of correspondence with the NASD relating to the proposed material.
Pacific Mutual and Distributor will not publicize the name of the
Selling Entities in required regulatory filings without the prior consent of
the Selling Entities, such consent not to be unreasonably withheld.
6. RECORDS
In accordance with the requirements of federal and state laws and
rules of applicable self-regulatory organizations ("SROs") as defined in the
Exchange Act including but not limited to the Rules of Fair Practice of the
NASD ("NASD Rules"), Selling Entities shall maintain complete records
concerning the sale of the Contracts, information regarding the customs
relating to the sale and/or servicing of the Contracts, including the manner
and extent of distribution of any sales, marketing or other solicitation
material, shall make such records and files available to staff of Pacific
Mutual or Distributor at such times as Pacific Mutual or Distributor may
reasonably request and shall make such material available to personnel of state
insurance departments, the NASD or other regulatory agency, including the SEC,
Office of the Comptroller of Currency and Office of Thrift Supervision that
have regulatory authority over Pacific Mutual or Distributor.
7. DELIVERY OF PROSPECTUSES
Selling Entities warrant that solicited and unsolicited transactions,
specifically including any solicitation effected by any Subagent, will be made
by use of a currently effective prospectus, that a prospectus will be delivered
concurrently with each sales presentation or upon confirmation of a sale and
that no statements shall be made to a client superseding or controverting any
statement made in the prospectus. Pacific Mutual and Distributor shall furnish
Selling Entities, at no cost to Selling Entities, reasonable quantities of
prospectuses and such other material as Pacific Mutual and Distributor deem
necessary to aid in the solicitation of Contracts.
8. BROKER/DEALER REPRESENTATIONS
The representations, warranties and covenants of Broker/Dealer set
forth in this Agreement are continuous during the term of this Agreement and
Broker/Dealer agrees to notify each of Pacific Mutual and
2
3
Distributor immediately, in writing, if, at any time during the course of this
Agreement, any of the representations, warranties or covenants set forth herein
become inaccurate or untrue of the facts related thereto.
Broker/Dealer represents, warrants and covenants that:
(a) Broker/Dealer is registered with the SEC as a broker/dealer
under the Exchange Act, a member of the NASD and will, throughout the duration
of this Agreement, remain in compliance with the requirements of the NASD and
of the Exchange Act, including but not limited to laws requiring that the
Broker/Dealer and each of its Subagents/registered representatives be
appropriately securities registered, insurance licensed and appointed by
Pacific Mutual, and such other applicable federal or state laws;
(b) Broker/Dealer is affiliated with Agency, is an associated
person of Broker/Dealer which is an entity properly licensed under the
insurance laws of the jurisdiction(s) in which Broker/Dealer will act under
this Agreement; and Agency is an associated person of Broker/Dealer.
(c) Broker/Dealer has established, pursuant to NASD Bylaws and
Conduct Rules, rules, procedures, and supervisory and inspection techniques
necessary to train and to supervise diligently the activities of its NASD
registered representatives who are state insurance licensed and appointed
agents of Pacific Mutual;
(d) Broker/Dealer shall ensure that no registered representative
of Broker/Dealer, including any Subagent, shall sell or recommend for sale any
Contract to any person without reasonable grounds for believing, after
appropriate inquiry, that the purchase of that Contract is suitable for that
person;
(e) Upon request by Pacific Mutual and Distributor, Broker/Dealer
will furnish such appropriate records as are necessary to document the
training, licensing and diligent supervision required by subparagraph (b)
above, and client suitability determinations required by subparagraph (c)
above.
9. AGENCY REPRESENTATIONS
The representations, warranties and covenants of Agency set forth in
this Agreement are continuous during the term of this Agreement and Agency
agrees to notify each of Pacific Mutual and Distributor immediately, in
writing, if, at any time during the course of this Agreement, any of the
representations, warranties or covenants set forth herein become inaccurate or
untrue of the facts related thereto.
Agency represents, warrants and covenants that it will, and will cause
each Subagent to, comply fully with the requirements of state insurance law and
applicable federal laws, including but not limited to assuring appropriate
state insurance licensing and appointment by Pacific Mutual, and will establish
rules and procedures necessary to supervise diligently the activities of
licensed and appointed agents of Pacific Mutual associated with Agency. Upon
request by Pacific Mutual or Distributor, Agency will furnish such appropriate
records as are necessary to document such diligent supervision.
10. PACIFIC MUTUAL REPRESENTATIONS
Pacific Mutual represents that the prospectus(es) and registration
statement(s) relating to the Contracts that are and shall be in effect from
time to time contain no untrue statements of material fact and do not omit to
state material facts, the omission of which makes any statement contained in
such prospectus(es) and registration statement(s) misleading.
11. COMPENSATION
11.1 Pacific Mutual, through Distributor, will remit to
Broker/Dealer or Agency compensation as set forth in the applicable Schedule D
hereto, which payments or termination thereof shall be governed by the
administrative rules established by Pacific Mutual in its sole discretion.
Selling Entities shall pay all Subagents. Pacific Mutual reserves the right
not to pay compensation on a Contract, the premium for which is paid in whole
or in part by the loan or surrender value of any other life insurance policy or
annuity contract issued by Pacific Mutual.
3
4
11.2 Pacific Mutual may offset, against any claim for commission
and any other compensation payable to Broker/Dealer or Agency under this
Agreement, any existing or future indebtedness of, respectively, Broker/Dealer
or Agency, whether fixed or contingent, whether such indebtedness arises under
this Agreement or otherwise. Such indebtedness shall constitute a first lien
against any such compensation. Neither Broker/Dealer nor Agency may offset,
against any such indebtedness, any compensation accruing under this Agreement.
12. COMPLAINTS AND INVESTIGATIONS
All parties to this Agreement agree to cooperate fully in any banking,
insurance or securities regulatory investigation or proceeding or judicial
proceeding with respect to Pacific Mutual, Distributor, Broker/Dealer and/or
Agency, their affiliates and their agents or representatives to the extent that
such investigation or proceeding is in connection with the Contracts
distributed under this Agreement. Without limiting the foregoing:
(a) Each party to this Agreement shall promptly notify the other
parties to this Agreement of any complaint or comment regarding the Contracts
and/or any allegation that Selling Entities or any of its Subagents/
representatives violated any law, regulation or rule in soliciting applications
for or servicing the Contracts. Selling Entities shall promptly investigate
such complaint or allegation, take appropriate remedial measures and notify
Pacific Mutual and Distributor of same. Selling Entities shall provide Pacific
Mutual and Distributor with full details of and correspondence relating to any
of the foregoing, including copies of all legal documents pertaining thereto.
(b) Selling Entities shall cooperate fully with Pacific Mutual and
Distributor in any regulatory proceeding or judicial proceeding involving the
solicitation of applications for or the servicing of Contracts by the Selling
Entities or any of their representatives.
13. INDEMNIFICATION
13.1 Pacific Mutual and Distributor agree to indemnify and hold
harmless Selling Entities, their officers, directors, agents and employees,
against any and all losses, claims, damages, or liabilities to which they may
become subject under the Securities Act, the Exchange Act, the Investment
Company Act of 1940, or other federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission to state a material fact required to be stated or necessary to
make the statements made not misleading in the registration statement for the
Contracts or for the shares of Pacific Select Fund (the "Fund") filed pursuant
to the Securities Act, or any prospectus included as a part thereof, as from
time to time amended and supplemented, or in any advertisement or sales
literature provided by Pacific Mutual and Distributor.
13.2 Selling Entities agree to, jointly and severally, hold
harmless and indemnify Pacific Mutual and Distributor and any of their
respective affiliates, employees, officers, agents and directors (collectively,
"Indemnified Persons") against any and all claims, liabilities and expenses
(including, without limitation, losses occasioned by any rescission of any
Contract pursuant to a "free look" provision or by any return of initial
purchase payment in connection with an incomplete application), including,
without limitation, reasonable attorneys' fees and expenses and any loss
attributable to the investment experience under a Contract, that any
Indemnified Person may incur from liabilities resulting or arising out of or
based upon (a) any untrue or alleged untrue statement other than statements
contained in the registration statement or prospectus relating to any Contract,
(b) (i) any inaccurate or misleading, or allegedly inaccurate or misleading
sales material used in connection with any marketing or solicitation relating
to any Contract, other than sales material provided preprinted by Pacific
Mutual or Distributor, and (ii) any use of any sales material that either has
not been specifically approved in writing by Pacific Mutual or Distributor or
that, although previously approved in writing by Pacific Mutual or Distributor,
has been disapproved, in writing by either of them, for further use, or (c) any
act or omission of a Subagent, director, officer or employee of Selling
Entities, including, without limitation, any failure of Selling Entities or any
Subagent to be registered as required as a broker/dealer under the 1934 Act, or
licensed in accordance with the rules of any applicable SRO or insurance
regulator.
4
5
14. FIDELITY BOND
Selling Entities each represent and covenant that all
directors, officers, employees and Subagents of Selling Entities licensed
pursuant to this Agreement or who have access to funds of Pacific Mutual are and
will continue to be covered by a blanket fidelity bond including coverage for
larceny, embezzlement and other defalcation, issued by a bonding company rated
A- or better from A.M. Best or equivalent rating from another nationally
recognized statistical rating organization. This bond shall be maintained at
Broker/Dealer's and/or Agency's expense. Such bond shall be at least equivalent
to the minimal coverage required under the NASD Rules, and endorsed to extend
coverage to life insurance and annuity transactions. Selling Entities
acknowledge that Pacific Mutual may require evidence that such coverage is in
force, and Broker/Dealer or Agency shall promptly give notice to Pacific Mutual
of any notice of cancellation or change of coverage.
Selling Entities each assign any proceeds received from the fidelity
bond company, error and omissions or other liability coverage, to Pacific
Mutual to the extent of Pacific Mutual's loss due to activities covered by the
bond. If there is any deficiency, Selling Entities will promptly pay Pacific
Mutual the amount of such deficiency on demand. Selling Entities each shall
indemnify and hold harmless Pacific Mutual from any such deficiency and from
the cost of collection.
15. LIMITATIONS OF AUTHORITY
The Contract forms are the sole property of Pacific Mutual. No person
or party other than Pacific Mutual has the right or authority to: (i) make,
alter, modify, discharge or rescind any policy, Contract, certificate,
supplemental contract or form issued by Pacific Mutual; (ii) waive or modify
any provision with respect to any Contract or policy; (iii) incur indebtedness
or liability, or expend or contract for expenditure of any funds on behalf of
Pacific Mutual or the Contracts; (iv) extend the time for payment of any
premiums, bind Pacific Mutual to reinstate any terminated Contracts, or accept
notes for payment of premiums; (v) enter into any proceeding in a court of law
or before a regulatory agency in the name of or on behalf of Pacific Mutual; or
(vi) institute or file any response to any legal proceeding in connection with
any matter pertaining to the Contracts on behalf of Pacific Mutual without the
prior written consent of Pacific Mutual (except that if Selling Entities
themselves are named as a party or parties in such proceedings each named party
may enter into legal proceedings on its own behalf without the written consent
of Pacific Mutual).
16. GENERAL PROVISIONS
16.1 WAIVER
Failure of any of the parties to insist promptly upon strict
compliance with any of the obligations of any other party under this Agreement
will not be deemed to constitute a waiver of the right to enforce strict
compliance.
16.2 INDEPENDENT CONTRACTORS
Selling Entities are each an independent contractor and not an
employee or subsidiary of Pacific Mutual or Distributor. Nothing contained in
this Agreement or otherwise shall be deemed to make any registered
representative of Broker/Dealer or any Subagent appointed by Agency an employee
or agent of Pacific Mutual or Distributor for tax or any other purposes.
Neither Pacific Mutual nor Distributor shall have any responsibility for
training or supervision of any such Subagent or registered representative or of
any other employee or affiliate of any Selling Entities.
16.3 ASSIGNMENT
No assignment of this Agreement or of commissions or other payments
under this Agreement shall be valid without prior written consent of Pacific
Mutual and Selling Entities. Any purported assignment in violation of this
Paragraph 16.3 is void.
16.4 NOTICE
Any notice required or otherwise given pursuant to this Agreement may
be given electronically by facsimile or electronic mail (but not orally by
telephone) or by mail, postage paid, (including any express mail service),
transmitted to the last address communicated by the receiving party to the
other parties to this Agreement. The current address for mailing purposes of
this Agreement shall be set forth on the signature page.
5
6
16.5 SEVERABILITY
To the extent this Agreement may be in conflict with any applicable
law or regulation, this Agreement shall be construed in a manner consistent
with such law or regulation. The invalidity or illegality of any provisions of
this Agreement shall not be deemed to affect the validity or legality of any
other provision of this Agreement.
16.6 AMENDMENT
Except as expressly provided herein, this Agreement may be amended
only by a writing signed by all parties. The Schedules hereto may be amended
by Pacific Mutual or Distributor upon 10 days' written notice to Broker/Dealer
which shall be deemed received the earlier of actual receipt or 10 days after
mailing or transmission. The submission of an application for the Contracts by
Selling Entities after the date of any such amendment shall constitute such
party's agreement to such amendment. No amendment will impair the right to
receive commissions as accrued with respect to Contracts issued and
applications procured prior to the amendment.
16.7 TERMINATION
This Agreement may be terminated by any party for any reason upon 30
days' prior written notice. It may be terminated, for cause, by any party
immediately. Termination of this Agreement shall not impair the right to
receive commissions accrued with respect to applications procured prior to the
termination except as otherwise specifically provided in the applicable
Schedule D hereto.
16.8 SURVIVAL
All representations and warranties made in or pursuant to this
Agreement and the provisions of Paragraphs 11, 12 and 14.10 of this Agreement
shall survive the termination of this Agreement.
16.9 ARBITRATION AND GOVERNING LAW
The parties agree that, to the extent permitted by law, any
controversy related to the Agreement or breach thereof shall be submitted to
arbitration conducted under the Code of Arbitration of the NASD. This
Agreement shall be construed in accordance with the laws of the State of
California, without giving effect to the conflict of law provisions thereof.
Broker/Dealer and Agency consent to the jurisdiction of the courts of the State
of California and to the jurisdiction of federal courts located within
California.
16.10 PROPRIETARY INFORMATION
Selling Entities acknowledge that information pertaining to any
Distributor program or service is proprietary in nature and belongs exclusively
to Distributor. Selling Entities agree that they will not disclose any
information concerning Distributor programs or services to any person, for
consideration or otherwise, unless (a) Pacific Mutual or Distributor has
authorized such disclosure in writing or (b) if such disclosure is expressly
required by state or federal regulatory authorities and Pacific Mutual and
Distributor have received notice, in writing, of such disclosure.
16.11 ENTIRE AGREEMENT
This Agreement shall constitute the entire agreement among the parties
and supersedes all prior agreements and understandings, whether written or
verbal.
6
7
By signing below, each of the undersigned agrees to have read and be
bound by the terms and conditions of this Agreement. Each of the undersigned
acknowledges receipt of a copy of this Agreement.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
By:_________________________________________________________
Name:_______________________________________________________
Title:______________________________________________________
By:_________________________________________________________
Name:_______________________________________________________
Title:______________________________________________________
PACIFIC MUTUAL DISTRIBUTORS, INC.
000 Xxxxxxx Xxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
By:_________________________________________________________
Name:_______________________________________________________
Title:______________________________________________________
By:_________________________________________________________
Name:_______________________________________________________
Title:______________________________________________________
7
8
_________________________________ _________________________________
GENERAL AGENT GENERAL AGENT
By:______________________________ By:______________________________
Signature Signature
Title:___________________________ Title:___________________________
Date:____________________________ Date:____________________________
_________________________________ _________________________________
GENERAL AGENT GENERAL AGENT
By:______________________________ By:______________________________
Signature Signature
Title:___________________________ Title:___________________________
Date:____________________________ Date:____________________________
_________________________________ _________________________________
GENERAL AGENT GENERAL AGENT
By:______________________________ By:______________________________
Signature Signature
Title:___________________________ Title:___________________________
Date:____________________________ Date:____________________________
_________________________________ _________________________________
GENERAL AGENT GENERAL AGENT
By:______________________________ By:______________________________
Signature Signature
Title:___________________________ Title:___________________________
Date:____________________________ Date:____________________________
_________________________________ _________________________________
GENERAL AGENT GENERAL AGENT
By:______________________________ By:______________________________
Signature Signature
Title:___________________________ Title:___________________________
Date:____________________________ Date:____________________________
8
9
SCHEDULE A
PACIFIC MUTUAL LIFE INSURANCE COMPANY
CONTRACTS COVERED BY THIS AGREEMENT
Contract Name Contract Number
------------- ---------------
Pacific Innovations 96-00
Date:_____________________________
1
10
SCHEDULE B
JURISDICTIONS IN WHICH
PACIFIC MUTUAL LIFE INSURANCE COMPANY
IS APPROVED FOR SALE OF CONTRACTS
COVERED BY THIS AGREEMENT
CONTRACT JURISDICTIONS
-------- -------------
Pacific Innovations [To be completed at signing]
Date:_____________________________
1
11
SCHEDULE C
GENERAL LETTER OF RECOMMENDATION
Selling Entities hereby certify to Pacific Mutual that all of the following
requirements will be fulfilled in conjunction with the submission of
licensing/appointment papers for all applicants as Subagents ("Applicant")
submitted by Agency. Selling Entities will, upon request, forward proof of
compliance with same to Pacific Mutual in a timely manner, including but not
limited to general background check information, NASD background
information/reports, fingerprint reports, etc. Selling Entities will promptly
forward Form U-5 termination notice with respect to Applicant if Broker/Dealer
is required to file one for Applicant.
1. We have made a thorough and diligent inquiry and investigation
relative to each applicant's identity, residence and business reputation and
declare that each applicant is personally known to us, has been examined by us,
is known to be of good moral character, has a good business reputation, is
reliable, is financially responsible and is worthy of a license. Our inquiries
and investigations were sufficient to meet the requirements of requisite state
insurance regulation, federal securities regulation and NASD requirements.
Each individual is trustworthy, competent, and qualified to act as an agent for
Pacific Mutual, and to hold himself out in good faith to the general public.
We vouch for each applicant.
2. We have on file a X-000, X-000 or U-4 form which was completed by each
applicant. We have fulfilled all the necessary investigative requirements for
the registration of each applicant as a registered representative through our
NASD member firm, and each applicant is presently registered as an NASD
registered representative.
The above information in our files indicates no fact or condition
which would disqualify the applicant from receiving a license, and all the
findings of all investigative information is favorable.
3. We certify that all educational requirements have been met for the
specific state in which each applicant is requesting a license, and that all
such persons have fulfilled the appropriate examination, education and training
requirements.
4. If the applicant is required to submit his or her picture, signature,
and securities registration in the state in which he or she is applying for a
license, we certify that those items forwarded to Pacific Mutual are those of
the applicant and that the securities registration and any insurance licenses
are true copies of the original.
5. We hereby warrant that the applicant is not applying for a license
with Pacific Mutual in order to place insurance chiefly or solely on his or her
life or property, lives or property of his or her relatives, or property or
liability of his or her associates.
6. We certify that each applicant will receive close and adequate
supervision in compliance with Selling Entities' written supervisory
procedures, and that we will make inspection when needed of any or all risks
written by these applicants, to the end that the insurance interest of the
public will be properly protected.
7. We will not permit any applicant to transact insurance as an agent
until duly licensed therefor. No applicants have been given a contract or
furnished supplies, nor have any applicants been permitted to write, solicit
business or act as an agent in any capacity, and they will not be so permitted
until the certificate of authority or license applied for is received.
8. We certify that Selling Entities and applicant shall have entered into
a written agreement pursuant to which: (i) applicant is appointed a Subagent of
Agency and a registered representative of Broker/Dealer; (ii) applicant agrees
that his/her selling activities relating to securities-regulated Contracts
shall be under the supervision and control of Broker/Dealer and his/her selling
activities relating to all other Contracts shall be under the supervision and
control of Agency; and (iii) applicant's right to continue to sell such
Contracts is subject to his/her continued compliance with such agreement and
any procedures, rules or regulations implemented by Selling Entities.
1
12
SCHEDULE D-1
COMPENSATION SCHEDULE FOR
PACIFIC INNOVATIONS ANNUITY - INDIVIDUAL FLEXIBLE PREMIUM
VARIABLE ACCUMULATION DEFERRED ANNUITY
(FORM 96-00)
This Schedule D-1 is attached to and made a part of the Agreement to which it
is attached. It is subject to the terms and conditions of the Agreement.
Pursuant to the Selling Agreement, Pacific Mutual and Distributor have the
right to terminate or amend this Schedule D-1 at their sole discretion (See
Paragraph 16.6). In no event shall Pacific Mutual be liable for the payment of
any compensation with respect to any solicitation made, in whole or in part, by
any person no appropriately licensed and registered prior to the commencement
of such solicitation.
Selling Entities shall forward to Pacific Mutual the first full payment
collected by Agency and Broker/Dealer, without deduction for compensation.
Selling Entities agree to promptly deliver Contracts and hold Pacific Mutual
harmless from and against any claim arising from market loss resulting from
delivery by Agency to the Contract owner as a result of late delivery.
After a change of Compensation Schedule or a change of Broker/Dealer,
compensation due on existing Contracts shall be payable to the Agency or
Broker/Dealer in accordance with the Schedule D-1 in effect at that time.
Moreover, when a Contract owner terminates a Broker/Dealer, no further
commissions or compensation due on existing Contracts after termination shall
be payable to the Agency or Broker/Dealer after the notice of termination is
received and accepted by Pacific Mutual.
1. COMPENSATION ELECTION
The undersigned Broker/Dealer may elect below the compensation schedule under
which commission payments will be based. Broker/Dealer may elect to be paid
under Option A and/or Option B. If both Option A and Option B are elected,
compensation will be payable under the Option elected by the Subagent/Registered
Representative. If the Registered Representative does not elect an Option for
compensation under an individual Contract, compensation will be paid under the
default Option elected by Broker/Dealer. If no Option is indicated below, this
Selling Agreement will be treated as if both Options were elected. If no
default Option is elected, Option B will be the default Option.
OPTION A OPTION B
-------- --------
Commission percent of premium
(See [paragraph] 2): 6.50% 5.50%
Trail Commission (See [paragraph] 3): --- 0.25%, thereafter
Commission reduction age (See [paragraph] 4): 75 75
Option Elected: [ ] [ ]
Default Option: [ ] [ ]
2. COMMISSION CALCULATION: Commissions based on premium will be
calculated only on premium actually received and accepted by Pacific Mutual.
Commissions will be paid only on an earned basis.
3. TRAIL COMMISSION: Under Option B, no trail commissions will be paid
until after the end of the first Contract year. At that time, quarterly trail
commissions will be paid at the annual rate of 0.25% of the Contract's
accumulated value less any Contract debt at the beginning of the Contract
quarter, starting with the fifth Contract quarter. Trail commissions will be
payable on the next commission cycle at the beginning of each Contract quarter,
provided the Contract is in force on such commission cycle date.
1
13
4. COMMISSION RATE CHANGE: The commission rate on premium received will
be reduced by 0.2% for each year the annuitant's attained age exceeds age 75 to
age 85. For example, at age 80, the commission rate is 5.5% under Option A and
4.5% under Option B. If there are joint annuitants, the younger annuitant's
attained age will be used. For purposes of this section, attained age shall be
determined as of the date that premium is actually received by Pacific Mutual.
Attained age shall be as defined in the Contract.
5. COMPENSATION PAYMENTS: Compensation on initial premium will be due to
the Agency and/or Broker/Dealer at the time of issuance of the Contract and for
all other premium payments at the time of the receipt and acceptance of premium
by Pacific Mutual. The amount, if any, and the time of payment of compensation
on replacements, changes, exchanges and other special cases and programs will
be governed by Pacific Mutual's underwriting and administrative rules then in
effect. If the agent or their immediate family purchases a Contract, they may
elect to have their commission withheld and instead an amount equal to Option A
will be credited to the Contract. With respect to any Contract, or group of
Contracts, that either Pacific Mutual or Distributor may, in its sole
discretion, determine to be a special case, or for which at the time the
application is submitted, the aggregate premium payment is greater than
$500,000, Pacific Mutual and Distributor may determine that the commissions in
this Schedule D-1 do not apply and establish an alternative commission schedule
for such Contract or group of Contracts.
In the event Selling Entities become Agency or Broker/Dealer of record with
respect to a Contract sold through another agency or broker/dealer,
compensation for that contract will be based upon the compensation option
election at time of sale of Contract, irrespective of Agency's or
Broker/Dealer's choice of compensation.
6. COMMISSION CHARGEBACKS: In the event a Contract for which a
commission has been paid is returned to Pacific Mutual or Distributor pursuant
to a "free look" right in the Contract, Selling Entities shall reimburse
Distributor 100% of commissions paid. In the event a Contract for which a
commission has been paid is deemed to be distributed or surrendered by the
Contract owner or a premium refunded by Pacific Mutual, Selling Entities shall
reimburse Distributor 100% of commissions paid if the distribution, surrender
or premium refund occurs within the first six months of the Contract and 50% of
commissions paid if the distribution, surrender or premium refund occurs within
the second six months of the Contract. In the event a Contract for which a
commission has been paid is rescinded by Pacific Mutual, decided by Pacific
Mutual in its sole discretion, Selling Entities shall reimburse Distributor
100% of the commissions paid. In the event Pacific Mutual determines that any
Subagent/Registered Representative or Selling Entities engage in any sales
practice which is detrimental to Pacific Mutual (as determined by Pacific
Mutual), Pacific Mutual may elect to charge back commissions associated with
the sale of Contracts associated with such practice or activity.
Distributor may deduct reimbursement amounts from any compensation otherwise
due to Broker/Dealer and/or Agency by Pacific Mutual and/or Distributor. If
the amount to be deducted exceeds compensation otherwise due, Broker/Dealer
will promptly reimburse Distributor before the next commission cycle or within
10 business days from the date of mailing of a written demand for
reimbursement, whichever is later. Broker/Dealer and Agency are jointly and
severally liable for such chargebacks.
2
