EXHIBIT 99.3(a)
Distribution Agreement between Pacific Mutual
and Pacific Mutual Distributors, Inc. ("PMD")
(formerly Pacific Equities Network)
DISTRIBUTION AGREEMENT
AGREEMENT made as of the 2nd day of January, 1996, by and between Pacific Mutual
Life Insurance Company, a California company, ("Pacific Mutual") on its own
behalf and on behalf of its Separate Account A (the "Separate Account"), and
Pacific Equities Network, a California corporation ("PEN").
WHEREAS, Pacific Mutual has established and maintains the Separate Account, a
separate investment account, for the purpose of selling variable annuity
contracts ("Contracts") to commence after the effectiveness of the Registration
Statement relating thereto filed with the Securities and Exchange Commission on
Form N-4 pursuant to the Securities Act of 1933, as amended (the "1933 Act"),
through PEN, acting as general agent of Pacific Mutual;
WHEREAS, the Separate Account is or will be registered as a unit investment
trust under the Investment Company Act of 1940 (the "1940 Act");
WHEREAS, PEN is registered as a broker-dealer under the Securities Exchange Act
of 1934 (the "1934 Act") and is a member of the National Association of
Securities Dealers, Inc. ("NASD"); and
WHEREAS, Pacific Mutual desires to retain PEN as the distributor and principal
underwriter to provide for the sale and distribution to the public of any
Contracts issued by Pacific Mutual and funded by interests in the General
Account of Pacific Mutual and in the Separate Account and PEN is willing to
render such services;
NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter
set forth, the parties agree as follows:
1. Principal Underwriter. Pacific Mutual hereby appoints PEN, during the term of
this Agreement, subject to the registration requirements of the 1933 Act and the
1940 Act and the provisions of the 1934 Act, to be the distributor and principal
underwriter for the sale of any Contracts to the public in each state and other
jurisdiction in which the Contracts may be lawfully sold. Pacific Mutual also
appoints PEN as its independent general agent for sale of its Contracts
(including any riders which Pacific Mutual may make available in connection
therewith or any contracts for which the Contracts may be exchanged or
converted) and for sale of such other annuity contracts or insurance contracts
as Pacific Mutual may, from time to time, authorize in writing by amendment
hereto. PEN shall offer the Contracts for sale and distribution at premium rates
set by Pacific Mutual.
Notwithstanding any other provision of this Agreement, it is understood and
agreed that Pacific Mutual shall at all times retain the ultimate responsibility
for and control of all functions performed pursuant to this Agreement, and for
marketing any and all Contracts, and reserves the right to direct, approve or
disapprove any action hereunder taken on its behalf by PEN.
1. Selling Agreements. PEN is hereby authorized to enter into separate written
agreements, on such terms and conditions as PEN determines are not inconsistent
with this Agreement, with such
organizations which agree to participate as a general agent and/or broker-dealer
in the distribution of the Contracts and to use their best efforts to solicit
applications for Contracts. Any such broker-dealer (hereinafter "Broker") shall
be both registered as a broker-dealer under the 1934 Act and a member of the
NASD. Except as provided in Section 3 hereof, PEN shall be responsible for
ensuring that Broker and its agents of representatives and general agent and its
sub-agents soliciting applications for Contracts shall be duly and appropriately
licensed, registered and otherwise qualified for the sale of any such Contracts
(and the riders and other contracts offered in connection therewith) under the
annuity laws and any applicable blue sky laws of each state or other
jurisdiction in which such Contracts may be lawfully sold and in which Pacific
Mutual is licensed to sell such Contracts. Pacific Mutual shall undertake to
appoint Broker's qualified agents or representatives and general agent's
subagents as life insurance agents of Pacific Mutual, provided that Pacific
Mutual reserves the right to refuse to appoint any proposed representative,
agent, or sub-agent, or once appointed, to terminate such appointment. PEN shall
be responsible for ensuring that Broker and general agent supervise its agents,
representatives, or sub-agents.
2. Life Insurance Agents. Pacific Mutual shall be responsible for ensuring that
Broker and its agents or representatives and general agent and its subagents
meet all qualifications and hold any licenses or authorizations that may be
required for the solicitation or sale of any Contracts under the insurance laws
of the applicable jurisdictions.
3. Suitability. Pacific Mutual desires to ensure that Contracts will be sold to
purchasers for whom the Contract will be suitable. PEN shall take reasonable
steps to ensure that the various representatives of Broker and sub-agents of
general agents shall not make recommendations to an applicant to purchase a
Contract in the absence of reasonable grounds to believe the purchase of the
Contract is suitable for such applicant. While not limited to the following, a
determination of suitability shall be based on information furnished to a
representative or sub-agent after reasonable inquiry of such applicant
concerning the applicant's other security holdings, retirement and investment
objectives, financial situation and needs, and the likelihood that the applicant
will continue to make any premium payments contemplated by the Contracts and
will keep the Contract in force for a sufficient period of time so that Pacific
Mutual's acquisition costs are amortized over a reasonable period of time.
4. Conformity with Registration Statement and Approved Sales Materials. In
performing its duties as distributor, PEN will act in conformity with the
registration statement and with the instructions and directions of Pacific
Mutual, the requirements of the 1933 Act, the 1940 Act, the 1934 Act, and all
other applicable federal and state laws and regulations. PEN shall not give any
information nor make any representations, concerning any aspect of the Contract
or of Pacific Mutual's operations to any persons or entity unless such
information or representations are contained in the registration statement and
the pertinent prospectus filed with the Securities and Exchange Commission, or
are contained in sales or promotional literature approved by Pacific Mutual. PEN
will not use and will take reasonable steps to ensure Broker will not use any
sales promotion material and advertising which has not been previously approved
by Pacific Mutual.
5. Applications. Completed applications for Contracts solicited by such Broker
through its agents or representatives or by general agent through its sub-agents
shall be transmitted directly to Pacific
Mutual. All payments under the Contracts shall be made by check to Pacific
Mutual or by other method acceptable to Pacific Mutual, and if received by PEN,
shall be held at all times in a fiduciary capacity and remitted promptly to
Pacific Mutual. All such payments will be the property of Pacific Mutual.
Pacific Mutual has the sole authority to approve or reject such applications or
payments and maintains ultimate responsibility for underwriting. Anything in
this Agreement to the contrary notwithstanding, Pacific Mutual retains the
ultimate right to control the sale of the Contracts and to appoint and discharge
life insurance agents of Pacific Mutual.
6. Standard of Care. PEN shall be responsible for exercising reasonable care in
carrying out the provisions of this Agreement.
7. Reports and Records. PEN shall be responsible for maintaining and preserving
accurate records relating to matters pertaining to this Agreement and the Broker
and general agent and their agents, representatives or sub-agents who are
licensed, registered and otherwise qualified to sell the Contracts, as required
by applicable laws and regulations, or as Pacific Mutual may reasonable request
for its own record-keeping or accounting purposes; calculating and furnishing
the fees payable to Brokers or general agents; and for furnishing periodic
reports to Pacific Mutual as to the sale of Contracts made pursuant to this
Agreement. The books, accounts and records of Pacific Mutual, the Separate
Account and PEN shall be maintained so as to clearly and accurately disclose the
nature and details of the transactions.
8. Investigation and Procedures. PEN and Pacific Mutual agree to cooperate fully
in any regulatory investigation or proceeding or judicial proceeding arising in
connection with any Contracts distributed under this Agreement. PEN further
agrees to furnish regulatory authorities with any information or reports in
connection with such services which may be requested in order to ascertain
whether the operations of Pacific Mutual and the Separate Account are being
conducted in a manner consistent with applicable laws and regulations. PEN and
Pacific Mutual further agree to cooperate fully in any securities regulatory
investigation or proceeding with respect to Pacific Mutual, PEN, their
affiliates and their agents or representatives to the extent that such
investigation or proceeding is in connection with any Contracts distributed
under this Agreement. Without limiting the foregoing:
(a) PEN will be notified promptly of any customer complaint or notice of any
regulatory investigation or proceeding or judicial proceeding received by
Pacific Mutual with respect to PEN or any agent, representative, or sub-agent of
a Broker or general agent or which may affect Pacific Mutual's issuance of any
contract sold under this Agreement; and
(b) PEN will promptly notify Pacific Mutual of any customer complaint or notice
of any regulatory investigation or proceeding received by PEN or its affiliates
with respect to PEN or any agent, representative, or sub-agent of a Broker or
general agent in connection with any Contract distributed under this Agreement
of any activity in connection with any such contract.
In the case of a customer complaint, PEN and Pacific Mutual will cooperate in
investigating such complaint and any response will be sent to the other party to
this Agreement for approval not less than five business days prior to its being
sent to the customer or regulatory authority, except that if
a more prompt response is required, the proposed response shall be communicated
by telephone, telegraph or telecopier.
1. Indemnification. Pacific Mutual hereby agrees to indemnify and hold harmless
PEN and its officers and directors, and employees for any expenses (including
legal expenses), losses, claims, damages, or liabilities incurred by reason of
any untrue or alleged untrue statement or representation of a material fact or
any omission or alleged omission to state a material fact required to be stated
to make other statements not misleading, if made in reliance on any prospectus,
registration statement, post-effective amendment thereof, or sales materials
supplied or approved by Pacific Mutual or the Separate Account. Pacific Mutual
shall reimburse each such person for any legal or other expenses reasonably
incurred in connection with investigating or defending any such loss, liability,
damage, or claim. However, in no case shall Pacific Mutual be required to
indemnify for any expenses, losses, claims, damages or liabilities which have
resulted from the willful misfeasance, bad faith, negligence, misconduct, or
wrongful act of PEN.
PEN hereby agrees to indemnify and hold harmless Pacific Mutual, its officers,
directors, and employees, and the Separate Account for any expenses, losses,
claims, damages, or liabilities arising out of or based upon any of the
following in connection with the offer or sale of any Contract: 1) except for
such statements made in reliance on any prospectus, registration statement or
sales material supplied or approved by Pacific Mutual or the Separate Account,
any untrue or alleged untrue statement or representation made; 2) any failure to
deliver a currently effective prospectus; 3) the use of any unauthorized sales
literature by any officer, employee, agent, or sub-agent of PEN, Broker or
general agent; or 4) any willful misfeasance, bad faith, negligence, misconduct
or wrongful act. Pen shall reimburse each such person for any legal or other
expenses reasonably incurred in connection with investigating or defending any
such loss, liability, damage, or claim.
Promptly after receipt by a party entitled to indemnification ("Indemnified
Party") of notice of the commencement of any action, if a claim for
indemnification in respect thereof is to be made against Pacific Mutual or PEN
("Indemnifying Party") such Indemnified Party will notify Indemnifying Party in
writing of the commencement thereof, but failure to notify the Indemnifying
Party of any claim shall not relieve it from any liability which it may have to
the person against whom such action is brought otherwise than on account of this
Agreement contained in this Section 10. The Indemnifying Party will be entitled
to participate in the defense of the Indemnified Party, but such participation
will not relieve such Indemnifying Party of the obligation to reimburse the
Indemnified Party for reasonable legal and other expenses incurred by such
Indemnified Party in defending himself.
1. Agent of Pacific Mutual or Separate Account. Any person, even though also an
officer, director, employee, or agent of PEN, who may be or become an officer,
director, employee, or agent of Pacific Mutual or the Separate Account shall be
deemed, when rendering services to Pacific Mutual or the Separate Account or
acting in any business of Pacific Mutual or the Separate Account, to be
rendering such services to or acting solely for Pacific Mutual or the Separate
Account and not as an officer, director, employee, or agent or one under the
control or direction of PEN even though paid by PEN. Likewise, any person, even
though also an officer, director, employee, or agent of Pacific Mutual or the
Separate Account, who may be or become an officer, director, employee, or agent
of
PEN shall be deemed when rendering services to PEN or acting in any business of
PEN to be rendering such services to or acting solely for PEN and not as an
officer, director, employee, or agent or one under the control or direction of
Pacific Mutual or the Separate Account even though paid by Pacific Mutual or the
Separate Account.
2. Books and Records. It is expressly understood and agreed that all documents,
reports, records, books, files, and other materials relating to this Agreement
and the services to be performed hereunder shall be the sole property of Pacific
Mutual and the Separate account and that any such property held by PEN shall be
held by PEN only as agent, during the effective term of this Agreement. This
material shall be delivered to Pacific Mutual upon the termination of this
Agreement free from any claim or retention of rights by PEN. During the term of
this Agreement and for a period of three years from the date of termination of
this Agreement, PEN will not disclose or use any records or information and will
regard and preserve as confidential all information related to the business of
Pacific Mutual or the Separate account that may be obtained by PEN from any
source as a result of this Agreement and will disclose such information only if
Pacific Mutual or the Separate Account has authorized such disclosure, or if
such disclosure is expressly required by applicable federal or state regulatory
authorities. PEN further acknowledges and agrees that, in the event of a breach
or threatened breach by it of the provisions of this Section 12, Pacific Mutual
will have no adequate remedy in moneys or damages and, accordingly, Pacific
Mutual shall be entitled in its discretion to seek an injunction against such
breach. However, no specification in this Agreement of a specific legal or
equitable remedy shall be construed as a waiver or prohibition against any other
legal or equitable remedy in the event of a breach of a provision of this
Agreement.
3. Employees. PEN will not employ, except with the prior written approval of the
Commissioner of Insurance of the State of California, in any material connection
with the handling of the Separate Account's assets any person who, to the
knowledge of PEN:
(a) in the last 10 years has been convicted of any felony or misdemeanor arising
out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of Sections
1341, 1342, or 1343 of Xxxxx 00, Xxxxxx Xxxxxx Code; or
(b) within the last 10 years has been found by any state regulatory authority to
have violated or has acknowledged violation of any provision of any state
insurance law involving fraud, deceit, or knowing misrepresentation; or
(c) within the last 10 years has been found by any federal or state regulatory
authorities to have violated or have acknowledged violation of any provision of
federal or state securities laws involving fraud, deceit, or knowing
misrepresentation.
4. Termination. This Agreement shall terminate automatically upon its assignment
without the prior written consent of both parties. This Agreement may be
terminated at any time, for any reason, by either party on 60 days' written
notice to the other party, without the payment of any penalty. Upon termination
of this Agreement, all authorizations, rights and obligations shall cease except
the obligation to settle accounts hereunder, including commissions on premiums
subsequently received for Contracts in effect at time of termination, and the
agreements contained in Sections 9 and 10
hereof.
5. Regulation. This Agreement shall be subject to the provisions of the 1940 Act
and the 1934 Act and the rules, regulations and rulings thereunder, and of the
applicable rules and regulations of the NASD, and applicable state insurance law
and other applicable law, from time to time in effect, and the terms hereof
shall be interpreted and construed in accordance therewith.
6. Independent Contractor. PEN shall act as an independent contractor and
nothing herein contained shall constitute PEN or its agents, officers or
employees as agents, officers, or employees of Pacific Mutual in connection with
the sale of any Contract.
7. Notices. Notices of any kind to be given to PEN by Pacific Mutual or the
Separate account shall be in writing and shall be duly given if mailed, first
class postage prepaid, or delivered to PEN at 000 Xxxxxxx Xxxxxx Xxxxx, Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000, or at such other address or to such individual as shall
be specified by PEN. Notices of any kind to be given to Pacific Mutual or the
Separate Account shall be in writing and shall be duly given if mailed, first
class postage prepaid, or delivered to them at 700 Newport Center Drive, Post
Office Box 9000, Xxxxxxx Xxxxx, Xxxxxxxxxx 00000, at or at such other address or
to such individual as shall be specified by Pacific Mutual.
If any provisions of this Agreement shall be held or made invalid by a court
decision, statute rule or otherwise, the remainder of this Agreement shall not
be affected thereby.
1. Entire Agreement; Amendments. This Agreement (a) sets forth the entire
understanding of the parties with respect to the subject matter hereof; (b)
incorporates and merges any and all previous agreements, understandings, and
communications, oral or written; and (c) may not be modified, amended, or waived
except by a written instrument duly executed by the party against whom such
modification, amendment, or waiver is sought to be enforced.
2. Counterparts. This Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.
3. Governing Law. This Agreement shall be construed and enforced in accordance
with and governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By: /s/ X. X. XXXXXX
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Chairman and Chief Executive Officer
ATTEST:
/s/ XXXXXX X. MILFS
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Secretary
PACIFIC EQUITIES NETWORK
By: /s/ XXXXXX X. XXXXXXXX
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President
WITNESS:
/s/ XXXXXX X. MILFS
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