1
Exhibit (b)(3)
DISTRIBUTION AGREEMENT
AGREEMENT dated as of ___________, 1998 by and between LIFE INSURANCE
COMPANY OF THE SOUTHWEST ("Insurer"), a Vermont insurance company, on its
behalf and on behalf of each separate account identified in Schedule 1 hereto,
and EQUITY SERVICES, INC. ("Distributor"), a Vermont corporation.
WITNESSETH:
WHEREAS, Distributor is a broker-dealer that engages in the
distribution of variable annuity contracts and other investment products; and
WHEREAS, Insurer desires to issue certain variable annuity contracts
described more fully below to the public through Distributor acting as
principal underwriter;
NOW, THEREFORE, in consideration of their mutual promises, Insurer and
Distributor hereby agree as follows:
1. Definitions
a. Contracts -- The class or classes of variable annuity
contracts set forth on Schedule 1 to this Agreement as in effect at the time
this Agreement is executed, and such other classes of variable annuity
contracts that may be added to Schedule 1 from time to time in accordance with
Section 11.b of this Agreement, and including any riders to such Contracts and
any other policies offered in connection therewith. For this purpose and under
this Agreement generally, a "class of Contracts" shall mean those Contracts
issued by Insurer on the same contract form or forms and covered by the same
Registration Statement.
b. Registration Statement -- At any time that this Agreement is
in effect, each currently effective registration statement filed with the SEC
under the 1933 Act on a prescribed form, or currently effective post-effective
amendment thereto, as the case may be, relating to a class of Contracts,
including financial statements included in, and all exhibits to, such
registration statement or post-effective amendment. For purposes of Section 9
of this Agreement, the term "Registration Statement" means any document which
is or at any time was a Registration Statement within the meaning of this
Section 1.b.
c. Prospectus -- The prospectus included within a Registration
Statement, except that, if the most recently filed version of the prospectus
(including any supplements thereto) filed pursuant to Rule 497 under the 1933
Act subsequent to the date on which a Registration Statement became effective
differs from the prospectus included within such Registration Statement at the
time it became effective, the term "Prospectus" shall refer to the most
recently filed prospectus filed under Rule 497 under the 1933 Act, from and
after the date on which it shall have been filed. For purposes of Section 9 of
this Agreement, the term "any Prospectus" means any document which is or at any
time was a Prospectus within the meaning of this Section 1.c.
d. Fund -- An investment company in which the Variable Account
invests.
e. Variable Account -- A separate account supporting a class or
classes of Contracts and specified on Schedule 1 as in effect at the time this
Agreement is executed, or as it may be amended from time to time in accordance
with Section 11.b of this Agreement.
-1-
2
f. 1933 Act -- The Securities Act of 1933, as amended.
g. 1934 Act -- The Securities Exchange Act of 1934, as amended.
h. 1940 Act -- The Investment Company Act of 1940, as amended.
i. SEC -- The Securities and Exchange Commission.
j. NASD -- The National Association of Securities Dealers, Inc.
k. Regulations -- The rules and regulations promulgated by the
SEC under the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time
this Agreement is executed or thereafter promulgated.
l. Selling Broker-Dealer -- A person or entity registered as a
broker-dealer and licensed as a life insurance agent or affiliated with a
person or entity so licensed, and authorized to distribute the Contracts
pursuant to a sales agreement as provided for in Section 4 of this Agreement.
m. Representative -- When used with reference to Distributor or a
Selling Broker-Dealer, an individual who is an associated person, as that term
is defined in the 1934 Act, thereof.
n. Application -- An application for a Contract.
o. Premium -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
p. Customer Service Center -- The service center identified in
the Prospectus as the location at which Premiums and Applications are accepted.
2. Authorization and Appointment
a. Scope of Authority. Insurer hereby authorizes Distributor on
an exclusive basis, and Distributor accepts such authority, subject to the
registration requirements of the 1933 Act and the 1940 Act and the provisions
of the 1934 Act and conditions herein, to be the distributor and principal
underwriter for the sale of the Contracts to the public in each state and other
jurisdiction in which the Contracts may lawfully be sold during the term of
this Agreement. Insurer hereby authorizes Distributor to grant authority to
Selling Broker-Dealers to solicit Applications and Premiums to the extent
Distributor deems appropriate and consistent with the marketing program for the
Contracts or a class of Contracts, subject to the conditions set forth in
Section 4 of this Agreement. The Contracts shall be offered for sale and
distribution at premium rates set from time to time by Insurer. Distributor
shall market the Contracts actively, directly and/or through Selling
Broker-Dealers in accordance with Section 4 of this Agreement, subject to
compliance with applicable law, including rules of the NASD.
b. Limits on Authority. Distributor shall act as an independent
contractor and nothing herein contained shall constitute Distributor or its
agents, officers or employees as agents, officers or employees of Insurer
solely by virtue of their activities in connection with the
-2-
3
sale of the Contracts hereunder. Distributor and its Representatives shall not
have authority, on behalf of Insurer: to make, alter or discharge any Contract
or other insurance policy or annuity entered into pursuant to a Contract; to
waive any Contract forfeiture provision; to extend the time of paying any
Premium; or to receive any monies or Premiums (except for the sole purpose of
forwarding monies or Premiums to Insurer). Distributor shall not expend, nor
contract for the expenditure of, the funds of Insurer. Distributor shall not
possess or exercise any authority on behalf of Insurer other than that
expressly conferred on Distributor by this Agreement.
3. Solicitation Activities
a. Distributor Representatives. No Distributor Representative
shall solicit the sale of a Contract unless at the time of such solicitation
such individual is duly registered with the NASD and duly licensed with all
applicable state insurance and securities regulatory authorities, and is duly
appointed as an insurance agent of Insurer.
b. Solicitation Activities. All solicitation and sales
activities engaged in by Distributor and the Distributor Representatives with
respect to the Contracts shall be in compliance with all applicable federal and
state securities laws and regulations and NASD rules, as well as all applicable
insurance laws and regulations and the Insurer's rules and procedures (to the
extent not inconsistent with the foregoing). In particular, without limiting
the generality of the foregoing:
(1) Neither Distributor nor any Distributor
Representative shall offer, attempt to offer, or solicit Applications for, the
Contracts in any state or other jurisdiction unless Insurer has notified
Distributor that such Contracts may lawfully be sold or offered for sale in
such state, and has not subsequently revised such notice.
(2) Neither Distributor nor any Distributor
Representative shall give any information or make any representation in regard
to a class of Contracts in connection with the offer or sale of such class of
Contracts that is not in accordance with the Prospectus for such class of
Contracts, or in the then-currently effective prospectus or statement of
additional information for a Fund, or in current advertising materials for such
class of Contracts authorized by Insurer.
(3) All Premiums paid by check or money order that are
collected by Distributor or any of its Representatives shall be remitted
promptly, and in any event not later than noon of the next business day
following receipt of such Premium, in full, together with any Applications,
forms and any other required documentation, to the Insurer. Checks or money
orders in payment of Premiums shall be drawn to the order of the Insurer. If
any Premium is held at any time by Distributor, Distributor shall hold such
Premium in a fiduciary capacity and such Premium shall be remitted promptly,
and in any event not later than noon of the next business day following receipt
of such Premium, to Insurer. Distributor acknowledges that all such Premiums,
whether by check, money order or wire, shall be the property of Insurer.
Distributor acknowledges that Insurer shall have the unconditional right to
reject, in whole or in part, any Application or Premium.
c. Representations and Warranties of Distributor. Distributor
represents and warrants to Insurer that Distributor is and shall remain
registered during the term of this Agreement as a broker- dealer under the 1934
Act, is a member with the NASD, and is duly registered under applicable state
securities laws, and that Distributor is and shall remain during the term of
this Agreement in compliance with Section 9(a) of the 1940 Act.
-3-
4
4. Selling Broker-Dealers. Insurer shall ensure that sales of the
Contracts by Selling Broker-Dealers comply with the following conditions.
a. Every Selling Broker-Dealer shall be both registered as a
broker-dealer with the SEC and a member of the NASD and licensed as an
insurance agent with authority to sell variable products or associated with an
insurance agent so licensed. Any individuals to be authorized to act on behalf
of Selling Broker-Dealer shall be duly registered with the NASD as
representatives of Selling Broker-Dealer with authority to sell variable
products, and shall be licensed as insurance agents with authority to sell
variable products. Insurer shall verify that Selling Broker-Dealer and its
Representatives are duly licensed under applicable state insurance law to sell
the Contracts (or, if Broker-Dealer is not so licensed, that it is associated
with a person or entity so licensed).
b. Every Selling Broker-Dealer (or, if applicable, its associated
general insurance agency) and each of its Representatives who proposes to
market the Contracts shall have been appointed by Insurer, provided that
Insurer reserves the right to refuse to appoint any proposed person, or once
appointed, to terminate such appointment.
c. Every Selling Broker-Dealer must enter into a written sales
agreement with Distributor which sales agreement, among other things, will
require such Selling Broker-Dealer to use its best efforts to solicit
applications for Contracts and to comply with applicable laws and regulations,
including the Insurer's rules and regulations as reflected in the Insurer's
rules and procedures or otherwise communicated to agents appointed by Insurer,
and will contain such other provisions as the Distributor deems to be
consistent herewith.
d. In view of Insurer's desire to ensure that Contracts will be
sold to purchasers for whom the Contracts will be suitable, the written Sales
Agreement shall require that Selling Broker-Dealers and their Representatives
not make recommendations to an applicant to purchase a Contract in the absence
of reasonable grounds to believe that the purchase of the Contract is suitable
for the applicant. While not limited to the following, a determination of
suitability shall be based on information supplied by an applicant after a
reasonable inquiry concerning the applicant's other security holdings,
investment objectives, financial situation and needs, and the likelihood that
the applicant will continue to make any premium payments contemplated by the
Contract applied for and will keep the Contract in force for a sufficient
period of time so that Insurer's acquisition costs are amortized over a
reasonable period of time.
5. Marketing Materials
a. Preparation and Filing. Insurer and Distributor will work
jointly on the design and preparation of all promotional, sales and advertising
material relating to the Contracts. Distributor shall be responsible for
filing such material, as required, with the NASD and any state securities
regulatory authorities. Insurer shall be responsible for filing all
promotional, sales or advertising material, as required, with any state
insurance regulatory authorities. Insurer shall be responsible for preparing
the Contract Forms and filing them with applicable state insurance regulatory
authorities and obtaining any required approvals, and for preparing the
Prospectuses and Registration Statements and filing them with the SEC and state
regulatory authorities, to the extent required. The parties shall notify each
other expeditiously of any comments provided by the SEC, NASD or any securities
or insurance regulatory authority on
-4-
5
such material, and will cooperate expeditiously in resolving and implementing
any comments, as applicable.
b. Use in Solicitation Activities. Insurer shall be responsible
for furnishing Distributor with such Applications, Prospectuses and other
materials for use by Distributor and any Selling Broker-Dealers in their
solicitation activities with respect to the Contracts. Insurer shall notify
Distributor of those states or jurisdictions which require delivery of a
statement of additional information with a prospectus to a prospective
purchaser.
6. Compensation and Expenses
a. Insurer shall pay compensation for sales of the Contracts in
accordance with Schedule 2 hereto. Until Distributor requests otherwise,
Insurer shall pay compensation payable to Distributor Representatives and to
Selling Broker-Dealers, on Distributor's behalf, subject to the provisions of
Section 7 of this Agreement and applicable NASD rules.
b. Insurer shall pay all expenses in connection with:
(1) the preparation and filing of each Registration
Statement (including each pre-effective and post-effective amendment thereto)
and the preparation and filing of each Prospectus (including any preliminary
and each definitive Prospectus);
(2) the preparation, issuance and administration of the
Contracts;
(3) any registration, qualification or approval or other
filing of the Contracts or Contract forms required under the securities or
insurance laws of the states in which the Contracts will be offered.
(4) all registration fees for the Contracts payable to
the SEC;
(5) the printing and mailing of definitive Prospectuses
for the Contracts and any supplements thereto for distribution to existing
Contract Owners;
(6) the printing and mailing of all promotional materials
relating to the Contracts;
(7) NASD filing fees (to the extent the Insurer requests
expedited review).
c. Distributor shall pay the following expenses related to its
distribution of the Contracts:
(1) NASD filing fees (to the extent expedited review is
not requested by Insurer); and
(2) any other expenses incurred by Distributor or its
employees for the purpose of carrying out the obligations of Distributor
hereunder.
7. Compliance
-5-
6
a. Maintaining Registration and Approvals. Insurer shall be
responsible for maintaining the registration of the Contracts with the SEC and
any state securities regulatory authority with which such registration is
required, for gaining and maintaining approval of the Contract forms where
required under the insurance laws and regulations of each state or other
jurisdiction in which the Contracts are to be offered, and for ensuring that
the Contracts comply with the provisions of the federal securities laws and
rules thereunder.
b. Sales Load Compliance. Insurer shall be responsible for ensuring
that the sales load assessed on the Contracts and compensation paid for the
sales of the Contracts comply with the 1940 Act and rules, regulations and
interpretations thereunder, and NASD rules.
c. Confirmations and 1934 Act Compliance. Insurer, as agent for
Distributor, shall confirm to each applicant for and purchaser of a Contract in
accordance with Rule 10b-10 under the 1934 Act acceptance of Premiums and such
other transactions as are required by Rule 10b-10 or administrative
interpretations thereunder. Insurer shall maintain and preserve such books and
records with respect to such confirmations and all other required books of
account and related financial records relating to the distribution of the
Contracts in conformity with the requirements of Rules 17a-3 and 17a-4 under
the 1934 Act to the extent such requirements apply. Insurer shall maintain all
such books and records and hold such books and records on behalf of and as
agent for Distributor whose property they are and shall remain, and
acknowledges that such books and records are at all times subject to inspection
by the SEC in accordance with Section 17(a) of the 1934 Act.
d. Issuance and Administration of Contracts. Insurer shall be
responsible for issuing the Contracts and administering the Contracts and the
Variable Account, including all Contract Owner communications, in accordance
with applicable law, provided, however, that Distributor shall have full
responsibility for the securities activities of all persons employed by the
Insurer who are engaged directly or indirectly in the Contract operations, and
for the training, supervision and control of such persons to the extent of such
activities.
8. Investigations, Proceedings and Customer Complaints
a. Investigations and Proceedings. Distributor and Insurer shall
cooperate fully in any securities or insurance regulatory investigation or
proceeding or judicial proceeding arising in connection with the offering, sale
or distribution of the Contracts distributed under this Agreement. Without
limiting the foregoing, Insurer and Distributor shall notify each other
promptly of any notice of any regulatory investigation or proceeding or
judicial proceeding received by either party with respect to the Contracts.
b. Customer Complaints. Distributor and Insurer shall cooperate
fully in responding to any customer complaints. Distributor and Insurer, will
promptly provide to the other a copy of all customer complaints received by
either of them concerning or related to the Contracts. With respect to such
complaint, Distributor and Insurer shall determine which party shall be
responsible for responding to such complaint. Such determination shall take
into account the nature of the complaint, the violation alleged, and relevant
laws and facts. Distributor and Insurer will timely provide information as
needed to enable the other to respond to such complaints.
9. Indemnification
-6-
7
a. By Insurer. Insurer shall indemnify and hold harmless
Distributor and each person who controls or is associated with Distributor
within the meaning of such terms under the federal securities laws, and any
officer, director, employee or agent of the foregoing, 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), to which Distributor and/or any such person may become
subject, under any statute or regulation, any NASD rule or interpretation, at
common law or otherwise, insofar as such losses, claims, damages or
liabilities:
(1) 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 (i) Registration Statement or in any Prospectus or
(ii) blue-sky application or other document executed by Insurer specifically
for the purpose of qualifying any or all of the Contracts for sale under the
securities laws of any jurisdiction; provided that Insurer shall not be liable
in any such case to the extent that such loss, claim, damage or liability
arises out of, or is based upon, an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon information
furnished in writing to Insurer by Distributor specifically for use in the
preparation of any such Registration Statement or any such blue-sky application
or any amendment thereof or supplement thereto;
(2) result from any breach by Insurer of any provision of
this Agreement.
This indemnification agreement shall be in addition to any
liability that Insurer may otherwise have; provided, however, that no person
shall be entitled to indemnification pursuant to this provision if such loss,
claim, damage or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the person seeking indemnification.
b. By Distributor. Distributor shall indemnify and hold harmless
Insurer and each person who controls or is associated with Insurer within the
meaning of such terms under the federal securities laws, and any officer,
director, employee or agent of the foregoing, 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), to which Insurer and/or any such person may become subject under any
statute or regulation, any NASD rule or interpretation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(1) 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 in order to
make the statements therein not misleading, in light of the circumstances in
which they were made, contained in any (i) Registration Statement or in any
Prospectus, or (ii) blue-sky application or other document executed by Insurer
specifically for the purpose of qualifying any or all of the Contracts for sale
under the securities laws of any jurisdiction; in each case to the extent, but
only to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon information furnished in
writing by Distributor to Insurer specifically for use in the preparation of
any such Registration Statement or any such blue-sky application or any
amendment thereof or supplement thereto;
(2) result because of any use by Distributor or any
Distributor Representative of promotional, sales or advertising material not
authorized by Insurer or any verbal or written misrepresentations by
Distributor or any Distributor Representative inconsistent with materials
-7-
8
forwarded by Insurer or any unlawful sales practices concerning the Contracts
by Distributor or any Distributor Representative under federal securities laws
or NASD regulations; or
(3) result from any breach by Distributor of any
provision of this Agreement.
This indemnification shall be in addition to any liability
that Distributor may otherwise have; provided, however, that no person shall be
entitled to indemnification pursuant to this provision if such loss, claim,
damage or liability is due to the willful misfeasance, bad faith, gross
negligence or reckless disregard of duty by the person seeking indemnification.
c. General. Promptly after receipt by a party entitled to
indemnification ("indemnified person") under this Section 9 of notice of the
commencement of any action as to which a claim will be made against any person
obligated to provide indemnification under this Section 9 ("indemnifying
party"), such indemnified person shall notify the indemnifying party in writing
of the commencement thereof as soon as practicable thereafter, but failure to
so notify the indemnifying party shall not relieve the indemnifying party from
any liability which it may have to the indemnified person otherwise than on
account of this Section 9. The indemnifying party will be entitled to
participate in the defense of the indemnified person but such participation
will not relieve such indemnifying party of the obligation to reimburse the
indemnified person for reasonable legal and other expenses incurred by such
indemnified person in defending himself or itself.
The indemnification provisions contained in this Section 9
shall remain operative in full force and effect, regardless of any termination
of this Agreement. A successor by law of Distributor or Insurer, as the case
may be, shall be entitled to the benefits of the indemnification provisions
contained in this Section 9.
10 Termination. This Agreement shall terminate automatically if it is
assigned by a party without the prior written consent of the other party. This
Agreement may be terminated at any time for any reason or for no reason by
either party upon 60 days' written notice to the other party, without payment
of any penalty. (The term "assigned" shall not include any transaction exempted
from Section 15(b)(2) of the 1940 Act.) This Agreement may be terminated
immediately at the option of either party to this Agreement upon the other
party's material breach of any provision of this Agreement or of any
representation or warranty made in this Agreement, unless such breach has been
cured within 10 days after receipt of notice of breach from the non-breaching
party. 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 the time of termination or issued pursuant to Applications signed prior to
termination.
11. Miscellaneous
a. Binding Effect. This Agreement shall be binding on and shall
inure to the benefit of the respective successors and assigns of the parties
hereto provided that neither party shall assign this Agreement or any rights or
obligations hereunder without the prior written consent of the other party.
b. Schedules. The parties to this Agreement may amend Schedule 1
to this Agreement from time to time to reflect additions of any class of
Contracts and Variable Accounts. The provisions of this Agreement shall be
equally applicable to each such class of
-8-
9
Contracts and each Variable Account that may be added to the Schedule, unless
the context otherwise requires. Insurer may amend Schedule 2 unilaterally,
from time to time. Any other change in the terms or provisions of this
Agreement shall be by written agreement between Insurer and Distributor.
c. Rights, Remedies, etc, are 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, which the
parties hereto are entitled to under state and federal laws. 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.
d. Notices. All notices hereunder are to be made in writing and
shall be given:
if to Insurer, to:
D. Xxxxxxx Xxxxxx, Esq.
c/o National Life Insurance Company
One National Life Drive
Montpelier, Vermont 05604
if to Distributor, to:
Xxxxxxx X. Teese, Vice President - Compliance
Equity Services, Inc.
National Life Drive
Montpelier, Vermont 05604
or such other address as such party may hereafter specify in
writing. Each such notice to a party shall be either hand delivered or
transmitted by registered or certified United States mail with return receipt
requested, or by overnight mail by a nationally recognized courier, and shall
be effective upon delivery. Failure to provide written notice shall not
constitute a defense to any action unless the party who did not receive written
notice was materially prejudiced thereby.
f. Interpretation; Jurisdiction. This Agreement constitutes the
whole agreement between the parties hereto with respect to the subject matter
hereof, and supersedes all prior oral or written understandings, agreements or
negotiations between the parties with respect to such subject matter. No prior
writings by or between the parties with respect to the subject matter hereof
shall be used by either party in connection with the interpretation of any
provision of this Agreement. This Agreement shall be construed and its
provisions interpreted under and in accordance with the internal laws of the
state of Vermont without giving effect to principles of conflict of laws.
g. Severability. This is a severable Agreement. In the event
that any provision of this Agreement would require a party to take action
prohibited by applicable federal or state law or prohibit a party from taking
action required by applicable federal or state law, then it is the intention of
the parties hereto that such provision shall be enforced to the extent
permitted under the law, and, in any event, that all other provisions of this
Agreement shall remain valid and duly enforceable as if the provision at issue
had never been a part hereof.
-9-
10
h. Section and Other 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.
i. Counterparts. This Agreement may be executed in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
j. Regulation. This Agreement shall be subject to the provisions
of the 1933 Act, 1934 Act and 1940 Act and the Regulations and the rules and
regulations of the NASD, from time to time in effect, including such exemptions
from the 1940 Act as the SEC may grant, and the terms hereof shall be
interpreted and construed in accordance therewith.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by such authorized officers on the date specified below.
LIFE INSURANCE COMPANY OF THE SOUTHWEST
By:
-----------------------------
Name:
Title:
EQUITY SERVICES, INC.
By:
-----------------------------
Name:
Title:
-10-
11
SCHEDULE 1
REGISTRATION VARIABLE
VARIABLE CONTRACT FORM STATEMENT ACCOUNT
1. Variable Annuity Form S-6 File No. 333-19583 National Variable
Contract Annuity Account II
-11-
12
SCHEDULE 2
SCHEDULE OF SALES COMMISSION
The commission schedules are as follow:
SCHEDULE 1
Issue Comm. Expense
Age Rate Allowance Total
--- ---- --------- --------
0-79 3.50% 3.00% 6.50%
80-85 3.50% 0.00% 3.50%
Trail No Trail
SCHEDULE 2
Issue Comm. Expense
Age Rate Allowance Total
--- ---- --------- ---------
0-79 3.50% 1.75% 5.25%
80-85 2.75% 0.00% 2.75%
Trail 0.25%
SCHEDULE 3
Issue Comm. Expense
Age Rate Allowance Total
--- ---- --------- ---------
0-79 3.50% 0.00% 3.50%
80-85 1.75% 0.00% 1.75%
Trail 0.50%
During an introductory period, a Schedule 1 commission of 7.0% (3.50%
commission, 3.50% expense allowance) for ages 0-79 and 4.00% (3.50%
commission, 0.50% expense allowance) for ages 80-85 will be paid.
-12-
