Exhibit 3(d)
National Accounts - Broker-Dealers Licensed
to Sell Variable Annuities and/or Variable
Life Insurance under Federal Securities and
State Insurance Laws
BROKER-DEALER SELLING AGREEMENT
THE PENN MUTUAL LIFE INSURANCE COMPANY (hereinafter called "Penn
Mutual") and Xxxxxx, Xxxxxxxx & Xxxx, Inc. (hereinafter called
"Distributor") enter into this Agreement with __________________
_______________________ (hereinafter called "Broker-Dealer") on
this date ______________, 19_______ agree as follows:
W I T N E S S E T H :
WHEREAS, Penn Mutual is in the business of issuing annuity and
life insurance contracts to the public;
WHEREAS, Distributor is a wholly owned subsidiary of Penn Mutual,
is registered as a broker-dealer under the Securities Exchange
Act of 1934, is a member of the National Association of
Securities Dealers, Inc., and is assisting Penn Mutual in the
distribution of such contracts;
WHEREAS, Broker-Dealer is properly licensed to sell variable
annuity and variable life insurance contracts under the insurance
laws of the state(s) in which Broker-Dealer will act under this
agreement, is registered as a Broker-Dealer under the Securities
Exchange Act of 1934 and is a member of the National Association
of Securities Dealer, Inc.;
NOW THEREFORE, in consideration of these premises and mutual
covenants herein contained, the parties agree as follows:
1. Appointment of 1.1 Subject to the terms and conditions of this
agreement, Penn Mutual and Distributor appoint Broker-
Broker-Dealer Dealer as a non-exclusive Broker-Dealer for the
solicitation of applications for, and the servicing of,
annuity and/or variable life insurance contracts
identified in the schedule(s) attached hereto, and
Broker-Dealer accepts such appointment. The annuity
and/or variable life insurance contracts identified in
the schedules(s) are referred to herein as "Contracts".
1.2 Broker-Dealer and its representatives shall be
independent contractors as to Penn Mutual and
Distributor and, subject to the terms and conditions of
this agreement, free to exercise their own judgment as
to the time, place and means of performing all acts
hereunder. Nothing in this agreement is intended to
create a relationship of employer and employee as
between Penn Mutual or Distributor, on the one hand, and
representatives of Broker-Dealer on the other.
2. Sale of Contracts. 2.1 Broker-Dealer shall use its best efforts to solicit
applications for Contracts from persons for whom the
Contracts are suitable,and to service such Contracts in
accordance with the terms and conditions of this
agreement.
2.2 All applications for Contracts shall be made on
application forms authorized by Penn Mutual. Broker-
Dealer shall diligently review all such applications for
accuracy and completeness and shall take all reasonable
and appropriate measures to assure that applications
submitted to Penn Mutual are accurate and complete.
2.3 All payments collected by Broker-Dealer for Penn
Mutual shall be received in trust and shall be remitted
immediately together with all required documentation, to
Penn Mutual at the address indicated on the application
or to such other address as Penn Mutual may specify in
writing. All checks or money orders for payment under
Contracts shall be drawn to the order of Penn Mutual.
2.4 All applications are subject to acceptance or
rejection by Penn Mutual in its sole discretion. Penn
Mutual may at any time in its sole discretion
discontinue issuing the Contracts or change the form and
content of new Contracts to be issued.
2.5 In soliciting applications for Contracts, Broker-
Dealer may not accept risks of any kind for or on behalf
of Penn Mutual and may not bind Penn Mutual by promise
or agreement or alter any Contract in any way.
3. Compensation. 3.1 In consideration of and as full compensation for the
services performed in accordance with this agreement,
Broker-Dealer will receive compensation from Penn Mutual
as set forth in the schedule(s) attached to this
agreement.
3.2. Should Penn Mutual for any reason return any
payment made under a Contract to the payor, Broker-
Dealer shall repay Penn Mutual the total amount of any
compensation which Penn Mutual may have paid with
respect to such payment.
3.3 Broker-Dealer may not withhold or deduct any part of
any premium or other payment due Penn Mutual for payment
of compensation under this agreement or for any other
purpose. The right of Broker-Dealer to receive any
compensation under this agreement shall at all times be
subordinate to the right of Penn Mutual or Distributor
to offset or apply such compensation against any
indebtedness of Broker-Dealer to Penn Mutual or
Distributor.
3.4 Penn Mutual may, in its sole discretion, change the
amount, terms and conditions, of compensation with
respect to payment received by Penn Mutual under
Contracts.
3.5 Penn Mutual shall not be obligated to pay any
compensation which would be in violation of applicable
laws of any jurisdiction, anything in this agreement to
the contrary notwithstanding.
4. Compliance With 4.1 Broker-Dealer and its representative shall not
solicit applications for Contracts in any state or
Insurance Laws jurisdiction unless they are duly licensed and qualified
to do so under the insurance laws and regulations of the
and Regulations. state or jurisdiction and unless Penn Mutual has
notified Broker-Dealer that the Contracts have been
approved for sale in the state or jurisdiction.
4.2 Penn Mutual may at any time, in its sole discretion,
withhold or withdraw authority of any representative of
Broker-Dealer to solicit applications for the Contracts.
Upon Penn Mutual giving written notice to Broker-Dealer
of its withdrawal of authority of a representative to
solicit applications, Broker-Dealer shall immediately
cause any such representative to cease all such
solicitations.
4.3 Broker-Dealer shall notify Penn Mutual in writing
immediately of the termination of the employment or
affiliation of an employee or representative who is an
appointed agent of Penn Mutual pursuant to this
agreement.
4.4 Broker-Dealer shall keep accurate and complete books
and records of all transactions relating to the
solicitation of applications and for servicing
Contracts. The books and records shall be made available
to Penn Mutual for inspection upon reasonable request.
4.5 If Broker-Dealer solicits applications for variable
life insurance contracts under this agreement, Broker-
Dealer and its representative shall observe the
Standards of Suitability for the Sale of Variable Life
Insurance set forth on the reverse side of the schedule
attached hereto identifying such contacts.
4.6 Broker-Dealer and its representatives shall comply
with all applicable insurance laws and regulations in
soliciting applications for and servicing Contracts.
Broker-Dealer shall be fully responsible for all acts of
its representatives in soliciting applications for and
servicing Contracts.
5. Compliance With 5.1 Broker-Dealer shall not solicit applications for
variable annuity or variable life insurance contracts
Securities Laws. unless Penn Mutual or Distributor has notified Broker-
Dealer that a registration statement required under the
Securities Act of 1933 is effective as to such contracts
and unless Broker-Dealer is duly registered as a broker-
dealer under the Securities Exchange Act of 1934, is a
member in good standing of the National Association of
Securities Dealers, Inc. and is duly licensed under any
applicable
securities laws of the state or jurisdiction in which
Broker-Dealer engages in such activity.
5.2 Penn Mutual or Distributor shall furnish Broker-
Dealer with copies of the current prospectuses (and
current supplements thereto) required to be used in
soliciting application for variable annuity and/or
variable life insurance contracts.
5.3 Broker-Dealer and its representatives shall comply
with all applicable securities laws and regulations and
with the rules of the National Association of
Securities Dealers, Inc. in soliciting applications for
and servicing variable annuity and/or variable life
insurance contracts. Broker-Dealer shall be fully
responsible for all acts of its representatives in
soliciting applications for and servicing variable
annuity and/or variable life insurance contracts.
6. Advertisements, 6.1 Broker-Dealer shall not print, publish, distribute
or use any advertisements, sales literature or other
Sales Literature writing relating to the Contracts unless such
advertisements, sales literature or other writing shall
have first been approved in writing by Penn Mutual and
Distributor.
6.2 Broker-Dealer shall exercise care not to
misrepresent the Contracts or Penn Mutual and shall
make no oral or written representation which is
inconsistent with the terms of the Contracts or with
the information in any prospectus or sales literature
furnished by Penn Mutual or it misleading in any way.
7. Indemnification. 7.1 Broker-Dealer shall indemnify or hold harmless Penn
Mutual and Distributor and each director and officer of
Penn Mutual and Distributor against any losses, claims,
damages or liabilities, including but not limited to
reasonable attorneys' fees and court cost to which Penn
Mutual or Distributor and any such director or officer
may become subject, under the Securities Act of 1933 or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out
of or are based upon any unauthorized use of sales
materials or any verbal or written misrepresentations
or any unlawful sales practices, or the failure of
Broker-Dealer, its officers, employees or
representative to comply with the provisions of this
agreement or the willful misfeasance, bad faith,
negligence or misconduct of Broker-Dealer, its
officers, employees, or representatives in the
solicitation of applications for and the servicing of
Contracts.
7.2 Penn Mutual and Distributor shall indemnify and
hold harmless Broker-Dealer and each officer or
director of Broker-Dealer against any losses, claims,
damages or liabilities, joint or several, including but
not limited to reasonable attorneys' fees and court
cost, to which Broker-Dealer or such officer or
director becomes subject, under the Securities Act of
1933 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, required
to be stated therein or necessary to make the
statements therein not misleading, contained in any
registration statement or any post-effective amendment
or supplement to the prospectus, or in any sales
material written by Penn Mutual or Distributor.
7.3 In the event Penn Mutual suffers a loss resulting
from Broker-Dealer activities, Broker-Dealer hereby
assigns any proceeds received under its fidelity bond
to Penn Mutual to the extent of such losses. If there
is any deficiency amount, whether due to a deductible
or otherwise, Broker-Dealer shall promptly pay Penn
Mutual such amount on demand and Broker-Dealer shall
indemnify and hold harmless Penn Mutual from any such
deficiency and from the costs of collection thereof
(including reasonable attorneys' fees).
8. Complaints, 8.1 Broker-Dealer shall promptly notify Penn Mutual and
Distributor of any allegation that Broker-Dealer or any
Investigations of its representatives violated any law, regulation or
rule in soliciting applications for or servicing
& Proceedings. Contracts,and shall provide Penn Mutual with full
details, including copies of all legal documents
pertaining thereto.
8.2 Broker-Dealer shall cooperate fully with Penn
Mutual and Distributor in any regulatory investigation
or proceeding or judicial proceeding involving the
solicitation of application for and servicing Contracts
by Broker-Dealer or any of its representatives.
9. Nonwaiver. 9.1 Forbearance by Penn Mutual or Distributor to enforce
any rights under this agreement shall not be construed
as a waiver of any of the terms and conditions of this
agreement and the same shall remain in full force and
effect. No waiver of any provision of this agreement
shall be deemed to be a waiver of any other provision,
whether or not similar, nor shall any waiver of a
provision of this agreement be deemed to constitute a
continuing waiver.
10. Amendment. 10.1 Penn Mutual reserves the right to amend this
Agreement at any time. Broker-Dealer's submission of an
application for a Contract after notice of any such
amendment shall constitute agreement of Broker-Dealer to
such amendment.
11. Termination and 11.1 This agreement may be terminated by any party, with
or without cause, upon giving written notices to the
Assignment. other parties. This agreement shall automatically
terminate if Broker-Dealer is adjudicated as bankrupt or
avails itself of any insolvency act or if a permanent
receiver or trustee in bankruptcy is appointed for the
property of Broker-Dealer. Upon termination of this
agreement, with or without cause, all authorizations,
rights and obligations shall cease, except the rights
and obligations set forth in sections 7 and 8 of this
agreement and the obligations to settle account
hereunder, including the immediate forwarding of all
payments received by Broker-Dealer under Contract to
Penn Mutual, and except as may be expressly stated
otherwise in this agreement.
11.2 This agreement may not be assigned without the
written consent of all parties.
12. Governing Law. 12.1 This agreement shall be construed in accordance
with and governed by the laws of the Commonwealth of
Pennsylvania.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their officers designated
below on the day and year first written.
___________________________________________________
___________________
Name of Broker-Dealer
By:
___________________________________________________
__________________
Signature
___________________________________________________
________________
Name
___________________________________________________
________________
Title
THE PENN MUTUAL LIFE INSURANCE COMPANY
By:
___________________________________________________
_______________
Signature
___________________________________________________
________________
Name
___________________________________________________
________________
Title
XXXXXX, XXXXXXXX & XXXX, INC.
By:
___________________________________________________
Signature
___________________________________________________
Name
___________________________________________________
Title
SCHEDULE A TO THE FOLLOWING SELLING AGREEMENTS:
BROKER-DEALER SELLING AGREEMENT
BROKER-DEALER SELLING AGREEMENT - FORM A-2
CORPORATE INSURANCE AGENT
SELLING AGREEMENT - FORM A-1
(EDITION OF OCTOBER, 1997)
Subject to the conditions and limitations of the
Broker's Selling Agreement, Broker is authorized to
solicit applications for the following contracts
issued by Penn Mutual (hereinafter referred to as
"contracts"), prior to termination of Broker's
Selling Agreement. No fee shall be paid with respect
to a purchase payment made after the Broker's Selling
Agreement has been terminated. Amounts transferred
among contracts are not purchase payments within the
meaning of the Broker's Selling Agreement or this
Schedule. This Schedule replaces and supersedes any
and all prior Schedules attached to the Broker's
Selling Agreement.
1. INDIVIDUAL FIXED ANNUITY CONTRACTS - DIVERSIFIER
II Subject to the conditions and limitations of the
Broker's Selling Agreement and this Schedule, Broker
shall be paid a fee for placing or servicing a
Diversifier II Individual Variable and Fixed Annuity
Contract equal to 6% of any purchase payment made
under such contract and a fee for placing and
servicing a Diversifier II Fixed-Only Annuity
Contract equal to 5% of any purchase payment under
such contract. If the Annuitant or Contractowner
(other than a trustee of a qualified plan) is over
age 81 on the date the Diversifier II contract is
issued, the fee shall be limited as follows: 80% of
such fee if the Annuitant or contractowner is age 82;
60% of such fee if the Annuitant or contractowner is
age 83; 40% of such fee if the Annuitant or
contractowner is age 84; 20% of such fee if the
Annuitant or contractowner is age 85.
2. INDIVIDUAL FIXED ANNUITY CONTRACTS - TRADEWIND
Subject to the conditions and limitations of the
Broker's Selling Agreement and this Schedule, Broker
shall be paid a fee for placing or servicing
TradeWind Annuity (TM) Contract equal to 6% of any
purchase payment under such contact. If the Annuitant
or Contractowner (other than a trustee of a qualified
plan) is over age 81 on the date the TradeWind (TM)
contract is issued, the fee shall be limited as
follows: 80% of such fee if the Annuitant or
contractowner is age 82; 60% of such fee if
the Annuitant or contractowner is age 83; 40% of such
fee if the Annuitant or contractowner is age 84; 20%
of such fee if the Annuitant or contractowner is age
85.
3. SINGLE PREMIUM IMMEDIATE ANNUITIES Subject to the
conditions and limitations of the Broker's Selling
Agreement and this Schedule, Broker shall be paid a
fee for placing a Single Premium Immediate Annuity
equal to 4% of the single premium received under such
contract.
4. GROUP COVERAGES Subject to the conditions and
limitations of the Broker's Selling Agreement and
this Schedule, Broker shall be paid a fee for
placing, or servicing group annuity policies,
specifically, a group annuity contract of Penn Mutual
on Contract Forms D1-1088 (N.Y.), D1-1088A (N.Y.) and
any other policies in the D1-1088 series, (a contract
on any such form being hereinafter called a
"Diversifier I Flex Group Annuity"), placed in force
through Broker under this agreement in amounts
equivalent to a percentage of such premiums. Such
percentage or table of percentages shall be as agreed
in amounts equivalent to a percentage of such
premiums. Said written documentation of Xxxxxx's fee
shall be submitted to Penn Mutual with the
Diversifier I Flex Group Annuity application on a
form signed by the plan trustee and agreed to by the
Penn Mutual home office. No compensation shall be
payable pursuant to this agreement which would be in
excess of the limits of Section 4228 of the Insurance
Law of the State of New York for the sale of
insurance products.
5. VARIABLE ESTATEMAX
During the period the Broker-Dealer Selling Agreement
is in effect, and subject to and in accordance with
the provisions thereof, Broker-Dealer shall be
compensated as follows with respect to a policy of
Penn Mutual know as the Last Survivor Flexible
Premium Adjustable Variable Life Insurance Policy
(Policy Forms VALJ-94(S) and VALJ-94(U)), (a policy
on any such form being hereinafter called a "Variable
EstateMax Policy"), that is placed in force under
this agreement. With respect to each Variable
EstateMax Policy, Broker-Dealer may elect to receives
fees under Option 1 or 2. If no option is selected
the default will be Option 1. Once each policy is in
force, no changes will be permitted to the choice of
compensation.
A. OPTION 1.
---------
(a) Basic First Year Compensation
-----------------------------
A fee for the first policy year of 50% of A plus 2.0% of B where A is
equal to the lesser of:
(i) the premium paid in year 1
(ii) the target premium for the policy, or
(iii) the lesser of the premium scheduled to be paid in year 1 or 2,
and B is equal to the excess of the premium paid in year 1 over A.
Target premiums are maintained on file in Penn Mutual's Home Office.
(b) Renewal Compensation
--------------------
A fee for the second through fifteenth years equal to 2.0% of the
premium paid for the policy year in question, and a fee for the
sixteenth and later policy years equal to 1.2% of the premium paid for
the policy year in question.
B. OPTION 2
--------
(a) Basic First Year Compensation
-----------------------------
Basic First Year Compensation is the same as in Option 1.
(b) Renewal Compensation
--------------------
Additionally, for the second through tenth policy years equal to 1.0% of
the premium paid for the policy year in question, and no fee for the
eleventh and later policy years. Additionally, for the second through
tenth policy years, an fee equal to 0.008333% of the policy value on
each monthly anniversary. Monthly anniversary is defined as the day in
each calendar month which is the same day of the month as the Policy
Date. For the eleventh and later policy years, fee equal to 0.020833% of
the policy value on each monthly anniversary. Policy value is as defined
in the policy.
C. EXPENSE ALLOWANCE
-----------------
For each calendar month while Broker-Dealer Selling Agreement is en
effect and before its termination, Broker-Dealer shall be entitled to the
expense from Penn Mutual described below, provided that the amount payable
as an expense allowance shall be limited to the total of reasonable
business expenses incurred by Broker-Dealer that are directly related to
the sale or service of Penn Mutual policies, and provided further that no
such allowance shall be payable to Broker-Dealer that would cause the total
of such allowances to exceed the limits of Section 4228 of the Insurance
Law of the State of New York. No payment pursuant to this agreement will be
used by Broker-Dealer to effect compensation for the sale of insurance in
excess of the limits of said Section 4228. Such allowance shall be 60% of
an amount equal to the Basic First Year Compensation during the calendar
month for which this allowance is being calculated.
D. COMPENSATION CHARGEBACKS
------------------------
A percentage of total compensation (including expense allowance, if any)
will be charged back for lapses, surrenders or if a policy is unwound
during the first policy year and during the 12 policy months following an
increase. The percentage is shown below and will vary depending on the
policy month of lapse/surrender/unwind.
Month of Chargeback
Lapse/Surrender/ Percentage
Unwind
------
0-6 100%
7-12 50%
6. CORNERSTONE VARIABLE UNIVERSAL LIFE
During the period the Broker-Dealer Selling Agreement is in effect, and subject
to and in accordance with the provisions thereof, Broker-Dealer shall be
compensated as follows with respect to a policy of Penn Mutual know as the
Flexible Premium Adjustable Variable Life Insurance Policy (Policy Forms VU-
90(S) and VU-90(U)), (a policy on any such form being hereinafter called a
"Cornerstone VUL Policy"), that is placed in force through Agent under this
agreement:
A. OPTION 1
--------
(a) Basic First Year Compensation
-----------------------------
A fee for the first policy year of 50% of A plus 3.75% of B where
A is equal to the lesser of:
(i) the premium paid in year 1
(ii) the target premium for the policy, or
(iii) the lesser of the premium scheduled to be paid in year
1 or 2, and B is equal to the excess of the premium paid in
year 1 over A. Target premiums are maintained on file in Penn
Mutual's Home Office.
If the insured is over attained age 75 when the policy is issued, the
fee for the first policy year will be limited to 35% of A plus 3.75%
of B.
(b) Renewal Compensation
--------------------
A fee for the second and third policy years of 4% (4.0% where the
insured has an attained age greater than 75) of an amount equal to
premium paid for the policy year in question, a fee for the fourth
through fifteenth years, equal to 4.0% of the premium paid for the
policy year in question, and a fee for the sixteenth and later policy
years equal to 1.2% of the premium paid for the policy year in question.
(c) Basic Compensation on Increases
-------------------------------
In the case of an increase in the Specified Amount of insurance, a fee
of 46% (31% where the insured has an attained age greater than 75 of C
where: C is equal to the lesser of:
(i) the premium paid in the twelve months following the
effective date of the increase,
(ii) the target premium for the amount of the increase, or
(iii) the increase in the scheduled premium.
B. OPTION 2
--------
(a) Basic First Year Compensation
-----------------------------
Basic First Year Compensation is the same as in Option 1.
(b) Renewal Compensation
--------------------
A fee for the second through tenth policy years equal to 3.0% of the
premium paid for the policy year in question, and no fee for the
eleventh and later policy years. Additionally, for the second through
tenth policy years, an fee equal to 0.008333% of the policy value on
each monthly anniversary. Monthly anniversary is defined as the day in
each calendar month which is the same day of the month as the Policy
Date. For the eleventh and later policy years, fee equal to 0.020833% of
the policy value on each monthly anniversary. Policy value is as defined
in the policy.
(c) Basic Compensation on Increases
-------------------------------
In the case of an increase in the Specified Amount of insurance, a fee
of 47% (32% where the insured has an attained age greater than 75) of C
where:
C is equal to the lesser of:
(i) the premium paid in the twelve months following the effective
date of the increase
(ii) the target premium for the amount of the increase, or
(iii) the increase in the scheduled premium.
C. EXPENSE ALLOWANCE
-----------------
For each calendar month while Broker-Dealer Selling Agreement is en effect
and before its termination, Broker-Dealer shall be entitled to the expense
from Penn Mutual described below, provided that the amount payable as an
expense allowance shall be limited to the total of reasonable business
expenses incurred by Broker-Dealer that are directly related to the sale or
service of Penn Mutual policies, and provided further that no such
allowance shall be payable to Broker-Dealer that would cause the total of
such allowances to exceed the limits of Section 4228 of the Insurance Law
of the State of New York. No payment pursuant to this agreement will be
used by Broker-Dealer to effect compensation for the sale of insurance in
excess of the limits of said Section 4228. Such allowance shall be 60% of
an amount equal to the Basic First Year Compensation during the calendar
month for which this allowance is being calculated.
D. COMPENSATION CHARGEBACKS
------------------------
A percentage of total compensation (including expense allowance, if any)
will be charged back for lapses, surrenders or if a policy is unwound
during the first policy year and during the 12 policy months following an
increase. The percentage is shown below and will vary depending on the
policy month of lapse/surrender/unwind.
Month of Chargeback
Lapse/Surrender/ Percentage
Unwind
------
0-3 100%
4-6 75%
7-9 50%
10-12 25%
7. CORNERSTONE VARIABLE UNIVERSAL LIFE II
During the period the Broker-Dealer Selling Agreement is in effect, and subject
to and in accordance with the provisions thereof, Broker-Dealer shall be paid a
fee for soliciting applications and servicing a policy of Penn Mutual known as
the Flexible Premium Adjustable Variable Universal Life Insurance Policy (Policy
Forms VU-94(S) and VU-94(U)), (a policy on any such form being hereinafter
called a "Cornerstone VUL II Policy"), that is placed in force before
termination of this agreement. With respect to each Cornerstone VUL II Policy,
Broker-Dealer may elect to receives fees under Option 1 or 2. If no option is
selected the default will be Option 1. Once each policy is in force, no changes
will be permitted to the choice of compensation.
A. OPTION 1
--------
(a) Basic First Year Compensation
-----------------------------
A fee for the first policy year equal to 50% of A plus 3.3% of B where
A is equal to the lesser of:
(i) the premium paid in year 1
(ii) the target premium for the policy, or
(iii) the lesser of the premium scheduled to be paid in year 1
or 2, and
B is equal to the excess of the premium paid in year 1 over A. Target
premiums are maintained on file in Penn Mutual's Home Office. If the
insured is over attained age 75 when the policy is issued, the fee for
the first policy year will be limited to 35% of A plus 3.3% of B.
(b) Renewal Compensation
--------------------
A fee for the second through fifteenth years equal to 3.0% of the
premium paid for the policy year in question, and a fee for the
sixteenth and later policy years equal to 1.2% of the premium paid for
the policy year in question.
(c) Basic Compensation on Increases
-------------------------------
In the case of an increase in the Specified Amount of insurance, a fee
of 47% (32% where the insured has an attained age greater than 75) of C
where:
C is equal to the lesser of:
(i) the premium paid in the twelve months following the effective
date of the increase
(ii) the target premium for the amount of the increase, or
(iii) the increase in the scheduled premium.
B. OPTION 2
--------
(a) Basic First Year Compensation
-----------------------------
Basic First Year Compensation is the same as in Option 1.
(b) Renewal Compensation
--------------------
A fee for the second through tenth policy years equal to
2.0% of the premium paid for the policy year in question, and no fee for
the eleventh and later policy years. Additionally, for the second
through tenth policy years, an fee equal to 0.008333% of the policy
value on each monthly anniversary. Monthly anniversary is defined as the
day in each calendar month which is the same day of the month as the
Policy Date. For the eleventh and later policy years, fee equal to
0.020833% of the policy value on each monthly anniversary. Policy value
is as defined in the policy.
(c) Basic Compensation on Increases
-------------------------------
In the case of an increase in the Specified Amount of insurance, a fee
of 47% (32% where the insured has an attained age greater than 75) of C
where:
C is equal to the lesser of:
(i) the premium paid in the twelve months following the effective
date of the increase
(ii) the target premium for the amount of the increase, or
(iii) the increase in the scheduled premium.
C. EXPENSE ALLOWANCE
-----------------
For each calendar month while Broker-Dealer Selling Agreement is
en effect and before its termination, Broker-Dealer shall be
entitled to the expense from Penn Mutual described below, provided
that the amount payable as an expense allowance shall be limited to
the total of reasonable business expenses incurred by Broker-Dealer
that are directly related to the sale or service of Penn Mutual
policies, and provided further that no such allowance shall be
payable to Broker-Dealer that would cause the total of such
allowances to exceed the limits of Section 42289 of the Insurance
Law of the State of New York. No payment pursuant to this agreement
will be used by Broker-Dealer to effect compensation for the sale of
insurance in excess of the limits of said Section 4228. Such
allowance shall be 60% of an amount equal to the Basic First Year
Compensation during the calendar month for which this allowance is
being calculated.
D. COMPENSATION CHARGEBACKS
------------------------
A percentage of total compensation (including expense allowance, if
any) will be charged back for lapses, surrenders or if a policy is
unwound during the first policy year and during the 12 policy months
following an increase. The percentage is shown below and will vary
depending on the policy month of lapse/surrender/unwind.
Month of Lapse/ Chargeback
Surrender/ Unwind Percentage
----------------- ----------
0-3 100%
4-6 75%
7-9 50%
10-12 25%
8. REPLACEMENT OF PENN MUTUAL POLICES
It is agreed that the compensation otherwise payable to Broker-Dealer for any
policy shall be reduced in accordance with the replacement control program in
effect at the time such policy is placed in force. It is anticipated that such
replacement control program may be changed form time to time as to policies in
force after such change.
9. POLICY DELIVERY RECEIPT
It is agreed that the Broker-Dealer shall be responsible for obtaining a signed
policy delivery receipt in accordance with Company policy.
