Page 1
BROKER DEALER NAME
10/04/07
BROKER-DEALER
MARKETING AND SERVICING AGREEMENT
FOR
VARIABLE LIFE CONTRACTS
This Broker-Dealer Marketing and Servicing Agreement for Variable Life Contracts
(the "Agreement") is dated this ______ day of ________________, 2007 by and
between Princor Financial Services Corporation ("Princor"), and Principal Life
Insurance Company (the "Insurer"), respectively the distributor and issuer for
and of the Policies hereinafter described, and BROKER DEALER ( "Broker-Dealer")
(individually, a "Party" and collectively, the "Parties") The Parties enter into
this Agreement for the purpose of appointing the Broker-Dealer to perform the
services hereunder described, subject to the following provisions:
1. Except as otherwise provided below, Princor hereby appoints the
Broker-Dealer to provide sales assistance with respect to, and to cause
applications to be solicited for the purchase of variable life policies
issued by the Insurer (the "Policies" or "Policy"). Broker-Dealer accepts
such appointment and agrees to use its best efforts to provide sales
assistance to registered representatives of the Broker-Dealer and to cause
applications for the purchase of Policies to be solicited by such
registered representatives. Broker-Dealer agrees to pay a commission to
such registered representatives. Commissions will be paid to the registered
representative's broker-dealer of record.
Insurer represents that the Policies, including any related separate
accounts, shall comply with the registration and other applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the
Investment Company Act of 1940 (the "40 Act") and the rules and regulations
thereunder, including the terms of any order of the Securities and Exchange
Commission (the "SEC") with respect thereto. Insurer further represents
that the Policy prospectuses included in the Insurer's registration
statement, post-effective amendments, and any supplements thereto, as filed
or to be filed with the SEC, as of their respective effective dates,
contain or will contain all statements and information required to be
stated therein by the 1933 Act and in all respects conform or will conform
to the requirements thereof, and no prospectus, nor any supplement thereof,
includes or will include any untrue statement of a material fact, or omits
or will omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, provided, however,
that the foregoing representations shall not apply to information contained
in or omitted from any prospectus or supplement in reliance upon and in
conformity with written information furnished to the Insurer by the
Broker-Dealer specifically for use in preparation thereof. The foregoing
representations also shall not apply to information contained in or omitted
from any prospectus or supplement of any underlying mutual fund.
2. The Broker-Dealer will promptly forward to the appropriate office of
Princor, or its authorized designee, all Policy applications along with
other documents, if any, and any payments received with such applications
and will have no rights of set off for any reason. Any Policy application
which is rejected, together with any payment made and other documents
submitted, shall be returned to the Broker-Dealer.
3. Insurer, on behalf of Princor, shall pay compensation to Broker-Dealer as
set out in Exhibits A through F, attached to this Agreement; provided,
however, that Princor and Insurer reserve the right to revise the payments
for services described in the Exhibits to this Agreement at any time upon
the mailing of written notice to Broker-Dealer. Broker-Dealer agrees to
return promptly to Insurer all compensation received for any Policy
returned within the "free look" period as specified in the Policy.
4. In those states where Broker-Dealer cannot obtain an insurance license,
Broker-Dealer represents and warrants that: it will effect the sale of the
Policy through a validly licensed insurance representative ("Compensation
Representative") who has entered into an agreement with Broker-Dealer for
this purpose; it authorizes Insurer to pay any compensation owed to
Broker-Dealer from sales of a Policy to such Compensation Representative;
it remains fully responsible for recordkeeping and supervision of the
solicitation and/or sale of the Policy; all compensation received by
Compensation Representative in accordance with this section will be
distributed by Compensation Representative only to duly licensed and
registered representatives who have been appointed by the Insurer to
solicit for applications for the Policies.
5. Broker-Dealer represents that it is a registered broker-dealer under the
Securities Exchange Act of 1934, a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD"), and is registered as a
broker-dealer under state law to the extent required in order to provide
the services described in this Agreement. Broker-Dealer agrees to abide by
all rules and regulations of the NASD Regulation, Inc. ("NASDR"), including
its Conduct Rules, and to comply with all applicable state and federal laws
and the rules and regulations of authorized regulatory agencies affecting
the sale of the Policies, including the prospectus delivery requirements
under the 1933 Act for the Policies and any underlying mutual fund. The
Broker-Dealer is responsible for prospectus delivery requirements only on
initial sale. The Insurer and underwriter will be responsible for
prospectus delivery annually after the original sale.
Broker-Dealer agrees to notify Princor promptly of any change, termination,
or suspension of its status as a broker-dealer or NASD member.
Broker-Dealer shall immediately notify Princor with respect to i) the
initiation and disposition of any form of disciplinary action by the NASDR
or any other agency or instrumentality having jurisdiction with respect to
the subject matter hereof against Broker-Dealer or any of its
representatives, employees or agents; ii) the issuance of any form of
deficiency notice made part of the public record by the NASDR or any such
agency regarding Broker-Dealer's training, supervision or sales practices;
and/or iii) the effectuation of any consensual order with respect thereto.
6. In connection with the solicitation of applications for the purchase of
Policies, Broker-Dealer agrees to indemnify and hold harmless Princor and
the Insurer from any damage or expense as a result of (a) the negligence,
misconduct or wrongful act of Broker-Dealer or any employee, representative
or agent of the Broker-Dealer and/or (b) any actual or alleged violation of
any securities or insurance laws, regulations or orders and/or (c) any
actual or alleged obligation of the Compensation Representative under terms
of the agreement between the Broker-Dealer and the Compensation
Representative, including claims by one or more of the Broker-Dealer's
representatives for compensation due or to become due on account of such
representatives' sales of the Policy and any claims or controversy between
Broker-Dealer and Compensation Representative as to rights to compensation.
Any indebtedness or obligation of the Broker-Dealer to Princor or the
Insurer, whether arising hereunder or otherwise, and any liabilities
incurred or moneys paid by Princor or the Insurer to any person as a result
of any misrepresentation, wrongful or unauthorized act or omission,
negligence of or failure of Broker-Dealer or its employees, producers, and
registered representatives to comply with this Agreement, shall be set off
against any compensation payable under this Agreement. Notwithstanding the
foregoing, Broker-Dealer shall not indemnify and hold harmless Princor and
the Insurer from any damage or expense on account of the negligence,
misconduct or wrongful act of Broker-Dealer or any employee, representative
or producer of Broker-Dealer if such negligence, misconduct or wrongful act
arises out of or is based upon any untrue statement or alleged untrue
statement of material fact, or the omission or alleged omission of a
material fact in: (i) any registration statement, including any prospectus
or any post-effective amendment thereto; or (ii) any material prepared
and/or supplied by Princor or the Insurer for use in conjunction with the
offer or sale of Policies, or (iii) any state registration or other
document filed in any state or jurisdiction in order to qualify any
Policies under the securities laws of such state or jurisdiction. The terms
of this provision shall not be impaired by termination of this Agreement.
7. In connection with the solicitation of applications for the purchase of
Policies, Princor and the Insurer agree to indemnify and hold harmless
Broker-Dealer from any damage or expense on account of the negligence,
misconduct or wrongful act of Princor or the Insurer or any employee,
representative or producer of Princor or the Insurer, including but not
limited to, any damage or expense which arises out of or is based upon any
untrue statement or alleged untrue statement of material fact, or the
omission or alleged omission of a material fact in: (i) any registration
statement, including any prospectus or any post-effective amendment
thereto; or (ii) any material prepared and/or supplied by Princor or the
Insurer for use in conjunction with the offer or sale of the Policies; or
(iii) any state registration or other document filed in any state or other
jurisdiction in order to qualify any Policy under the securities laws of
such state or jurisdiction and/or any actual or alleged violation of any
securities or insurance laws, regulations or orders. The terms of this
provision shall not be impaired by termination of this Agreement.
8. The Broker-Dealer will itself be, or will select persons associated with it
who are trained and qualified to solicit applications for purchase of
Policies in conformance with applicable state and federal laws. Any such
persons shall be registered representatives of the Broker-Dealer in
accordance with the rules of the NASDR, be licensed to offer the Policies
in accordance with the insurance laws of any jurisdiction in which such
person solicits applications and be licensed with and appointed by the
Insurer to solicit applications for the Policies. Broker-Dealer will
supervise its representatives to insure that purchase of a Policy is not
recommended to an applicant in the absence of reasonable grounds to believe
that the purchase of a Policy is suitable for that applicant. Broker-Dealer
shall pay the fees to regulatory authorities in connection with obtaining
necessary securities licenses and authorizations for registered
representatives to solicit applications for the purchase of Policies.
Insurer is responsible for fees in connection with the appointment of
registered representatives as producers of the Insurer.
9. The activities of all registered representatives, employees and agents
(the"producers") will be under the direct supervision and control of the
Broker-Dealer. The right of producers to solicit applications for the
purchase of Policies is subject to their continued compliance with the
rules and procedures which may be established by the Broker-Dealer, or the
Insurer, including, but not limited to, those set forth in this Agreement.
10. The Broker-Dealer shall ensure that applications for the purchase of
Policies are solicited only in the states where the Policies are qualified
for sale, and only in accordance with the terms and conditions of the then
current prospectus applicable to the Policies and will make no
representations not included in the prospectus, Statement of Additional
Information, or in any authorized supplemental material supplied by
Princor. With regard to the Policies, the Broker-Dealer shall not use or
permit its producers to use any sales promotion materials or any form of
advertising other than that supplied or approved by Princor. The Insurer
and Princor shall provide only approved supplemental material, advertising
and sales materials, including illustrations, for Broker-Dealer use.
11. Broker-Dealer shall ensure that the prospectus delivery requirements under
the 1933 Act and all other applicable securities and insurance laws, rules
and regulations are met and that delivery of any prospectus for the
Policies will be accompanied by delivery of the prospectus for the
underlying mutual funds, and, where required by state law, the Statement of
Additional Information for the underlying mutual funds. The Insurer or
Princor shall inform the Broker-Dealer of those states which require
delivery of a Statement of Additional Information with the prospectus on
initial sale.
12. Broker-Dealer understands and agrees that in performing the services
covered by this Agreement, it is acting in the capacity of an independent
contractor and not as an agent or employee of Princor or the Insurer and
that it is not authorized to act for, or make any representation on behalf
of, Princor or the Insurer except as specified herein. Broker-Dealer
understands and agrees that the Insurer shall execute telephone
transactions only in accordance with the terms and conditions of the then
current prospectus applicable to the Policies and agrees that in
consideration for the Broker-Dealer's right to exercise the telephone
transaction services neither Princor nor the Insurer will be liable for any
loss, injury or damage incurred as a result of acting upon, nor will they
be held responsible for the authenticity of any telephone instructions
containing unauthorized, incorrect or incomplete information. Broker-Dealer
agrees to indemnify and hold harmless Princor and the Insurer against any
loss, injury or damage resulting from any telephone transactions
instruction containing unauthorized, incorrect or incomplete information
received from Broker-Dealer or any of its registered representatives.
(Telephone instructions are recorded on tape.)
13. This Agreement may not be assigned by the Broker-Dealer without the prior
written consent of Princor.
14. Any Party hereto may cancel this Agreement at any time upon written notice.
This Agreement shall automatically terminate if Broker-Dealer voluntarily
or involuntarily ceases to be or is suspended from being, a member in good
standing of the NASD. In addition, Princor and Insurer reserve the right to
terminate this Agreement in the event that any registered representative,
employee or agent of Broker-Dealer is suspended, disciplined or found to be
in violation of governing insurance or securities laws, rules or
regulations. Failure of any party to terminate this Agreement for any of
the causes set forth in this Agreement shall not constitute a waiver of the
right to terminate this Agreement at a later time for any such causes.
15. Confidentiality. Each Party acknowledges that, in the course of performing
its duties under this Agreement or otherwise, it may receive or learn
information about individuals who have applied for or purchased financial
products or financial services from the other Party, including, but not
limited to, personal, financial and/or health information ("Confidential
Information"). Each Party agrees that it will not use or disclose to any
affiliate or third party, either orally or in writing, any Confidential
Information of the other Party for any purpose other than the purpose for
which the Confidential Information was provided to that Party. Without
limiting any of the foregoing, each Party agrees to take all precautions
that are reasonably necessary to protect the security of the other Party's
Confidential Information. Each Party agrees to restrict access to the other
Party's Confidential Information to those employees who need to know that
information to perform their duties under this Agreement. Each Party
further agrees that, upon request of the other Party, it will return to the
Party making such request all tangible items containing any Confidential
Information of the other Party, including all copies, abstractions and
compilations thereof, without retaining any copies of the items required to
be returned. The obligations of this paragraph extend to the employees,
agents, affiliates and contractors of each Party, and each Party shall
inform such persons of their obligations hereunder.
Notification obligation. Each Party shall, upon learning of any
unauthorized disclosure or use of any of the other Party's Confidential
Information, notify the other Party promptly and cooperate fully with such
Party to protect such Confidential Information.
Disclosure required by law. If Broker-Dealer believes it is required by law
or by a subpoena or court order to disclose any Confidential Information,
Broker-Dealer, prior to any disclosure, shall promptly notify Insurer in
writing attaching a copy of the subpoena, court order or other demand and
shall make all reasonable efforts to allow Insurer an opportunity to seek a
protective order or other judicial relief.
Non-restricted information. Except as stated in the final sentence of this
paragraph, nothing in this Agreement shall be construed to restrict
disclosure or use of information that: (a) was in the possession of or
rightfully known by the recipient, without an obligation to maintain its
confidentiality, prior to receipt from the other Party; (b) is or becomes
generally known to the public without violation of this Agreement; (c) is
obtained by the recipient in good faith from a third party having the right
to disclose it without an obligation of confidentiality; (d) is
independently developed by the receiving party without the participation of
individuals who have had access to the other Party's confidential or
proprietary information. The Parties acknowledge that certain laws
governing Confidential Information about individuals are more restrictive
than the foregoing statements and they agree to comply in all respects with
such laws.
Compliance with law. Each Party agrees, In connection with its performance
under this Agreement, to comply with all applicable laws, including but not
limited to laws protecting the privacy of non-public personal information
about individuals.
Survival. The provisions of this Agreement relating to confidentiality
shall survive termination or expiration of this Agreement.
16. This Agreement on the part of the Broker-Dealer runs to Princor and the
Insurer and is for the benefit of and enforceable by each. We may modify
this Agreement at any time by written notice to you. Any notice shall be
deemed to have been given on the date upon which it was either delivered
personally or by fax or e-mail transmission to the other party or to any
office or member thereof, or was mailed post-paid to his or its address as
shown herein.
17. This Agreement shall be governed by and construed in accordance with the
laws of the State of Iowa.
18. Anti-Money Laundering and Know Your Customer Compliance: The parties
acknowledge that they are financial institutions subject to the USA Patriot
Act of 2001 and the Bank Secrecy Act (collectively, the "AML Acts"), which
require, among other things, that financial institutions adopt compliance
programs to guard against money laundering. Princor and Broker-Dealer
further acknowledge that they are in compliance and will continue to comply
with the AML Acts and applicable anti-money laundering rules of
self-regulatory organizations, including Rule 3011 of the NASD, in all
relevant respects. Broker-Dealer represents that, in compliance with
applicable laws and rules, it has adopted a Customer Identification Program
and further covenants and agrees that it will verify the identity of each
of its customers who purchases a Policy from Broker-Dealer's registered
representatives. Each of the parties hereto further acknowledges that it
has a current 314(b) notice on file with FinCEN in accordance with section
314(b) of the USA Patriot Act and agrees to refile such notice annually (or
as otherwise required to remain current in accordance with applicable
regulations) during the term of this Agreement.
This Broker-Dealer Marketing and Servicing Agreement for Variable Life Contracts
is agreed to as of the date shown on the first page of the Agreement by
BROKER DEALER NAME
By:
------------------------------------------------
Title: __________________________________
Date: ___________________________________
Princor Financial Services Corporation
By: ____________________________________
Xxxxx Xxxxxxxxxx
Operations Officer
Date: __________________________________
Principal Life Insurance Company
By:
-------------------------------------------------
Xxxx Xxxxx
Sales Support Officer - Marketer Services
Date:
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EXHIBIT A - Compensation Schedule
For VUL Accumulator II
Insurance Company or Distributor ("we") will pay compensation on premiums we
receive on sales of VUL Accumulator II ("Policy") made pursuant to the Agreement
according to the schedule below. We will pay compensation only if the Policy is
in effect and this Agreement is in effect and active.
We may, by written notice to Broker-Dealer (1) change this Compensation
Schedule; (2) discontinue the issuance of any form of Policy; and/or (3) fix or
change the amount of compensation on Policies issued in exchange for previously
issued policies.
The date of receipt of premium payments will determine the Policy Year for
purposes of determining the applicable commission rate.
The target premium is determined according to a rate per $1,000 of face amount
and may vary depending on such factors as age, gender, and underwriting
classification. The target premium will be set forth in the illustration.
First Year Commissions
1. We will pay first year commissions of 50% on received premiums up to the
target premium amount. If VUL Accumulator II is sold with the Accounting Benefit
Rider, we will reduce the first year commissions to 30% on received premiums up
to the target premium amount.
2. We will pay first year commissions of 2.5% on received premiums in excess
of the target premium amount.
Renewal Commissions
We will pay renewal commissions of 2.5% on all premiums received in Policy
Years 2-5.
Trail Compensation (Asset Based Compensation)
We will pay Trail Compensation commencing at the end of the first quarter of
Policy Year 6 and every quarter thereafter. The percentage of Trail Compensation
will be based on the Policy's net policy value ("NPV") as shown in the following
table:
================= =================================== ============================================================================
YEAR TOTAL % NPV TRAIL COMPENSATION BREAKDOWN OF NPV TRAIL COMPENSATION
----------------- ----------------------------------- ----------------------------------------------------------------------------
----------------- ----------------------------------- ----------------------------------------------------------------------------
6-10 0.25% o 0.15%* vested to original selling agent
o 0.10%* non-vested to servicing agent
----------------- ----------------------------------- ----------------------------------------------------------------------------
----------------- ----------------------------------- ----------------------------------------------------------------------------
11+ 0.15% o 0.10%* vested to original selling agent
o 0.05%* non-vested to servicing agent
----------------- ----------------------------------- ----------------------------------------------------------------------------
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*One fourth of the annual Trail Compensation rate is multiplied by the total NPV
on the last day of the contract quarter starting at the end of the first quarter
in Policy Year 6.
Servicing agent means the agent appointed by us and accepted by the policyowner
as its servicing agent. If the policyowner requests a change in the Servicing
Agent or if we decide that a change would be in the best interests of the
policyowner, the service fees will be paid to the new Servicing Agent.
Compensation on Increases
Increase is defined as a face amount increase. We will compare the increased
face amount of a Policy against the highest face amount of the Policy over the
latest three-year period to determine if there is a Policy face amount increase
in the current year.
We will pay first year commissions at the rates set forth above on those
premiums received in the first 12 months following the date of a face amount
increase that are greater than the premiums on which first year commissions were
previously paid. The maximum premium on which the target first year commission
rate will be paid is the total target premium of the Policy after a face amount
increase has occurred.
Cost of living increases are not paid to a producer if the producer's contract
terminates. Cost of living increases will be paid to the Servicing Agent.
Compensation Where VUL Accumulator II Replaces Other Life Policies Issued by
Insurance Company
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A. First year commission: We will pay first year commissions ("FYC") on a new
VUL Accumulator II Policy (the "Replacement Policy") that replaces an
existing life policy issued by Insurance Company (the "Replaced Policy") in
an amount that is the sum of 1, 2 and 3 below:
1. On the Amount of Replaced Policy Premiums Received:
We will pay first year commissions on the amount of Replaced
Policy Premiums as follows:
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Type of Replacement Compensation Rate
-------------------------------------------------------------- -----------------------------------------------------------------
-------------------------------------------------------------- -----------------------------------------------------------------
Permanent to Permanent in Policy Years 2.5% on all Replaced Policy Premium amounts
1-4
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Permanent to Permanent in Policy Years 5 and later 20% of the FYC rates set forth above up to target premium of
the Replacement Policy; 2.5% on premiums in excess of target
premium of the Replacement Policy
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-------------------------------------------------------------- -----------------------------------------------------------------
Term to Permanent 100% of the FYC rates set forth above for premium received up
to and in excess of target premium of the Replacement Policy
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--------------------------------------------------------------------------------------------------------------------------------
Permanent - includes all other life products available for sale that are not
Term products.
Term - includes Term-Other (10 year term or 20 year term), Term-ART (Annually
Renewable Term) or any other product classified as Term.
2. On the Amount of Replacement Policy Premiums in excess of the Amount
of Replaced Policy Premium
We will pay first year commissions at the rates set forth above
on the amount of Replacement Policy Premiums (excluding the cash
value transfer) that exceed the amount of Replaced Policy
premiums. "Target premium" shall refer to the target premium of
the Replacement Policy.
3. On the Amount of cash values conserved and transferred into the
Replacement Policy:
o 3% of cash values transferred from a non-updated policy
o 1% of cash values transferred from an updated policy
In situations where a policy loan is carried over to the
Replacement Policy, no commission will be paid on the unscheduled
premium deposit created for the purpose of carrying over the loan.
B. Renewal Commissions and Trail Compensation. We will pay renewal commissions
at the rates set forth above on all premiums received in Policy Years 2-5 and
trail compensation at the rates set forth above in Policy Years 6 and later.
C. Commissions will not be paid when partial surrender amounts are used to fund
premium increases or new business.
D. For special situations, as defined by the Insurance Company, involving
replacement of life policies issued by Insurance Company, Insurance Company
reserves the right to modify commissions payable on replacements outlined above.
First Year Commission Charge Back
Commission charge back for Policies with face amounts of $500,000 or greater and
with a face amount reduction of 35% or more is based on a decreasing scale over
a period of five years. The first year commissions are reduced if the following
occurs:
o The illustration shows face amount decrease(s) greater than 35% of the total
face value or; o The cumulative face amount decreases(s) are greater than 35% of
the total face amount and; o The total face amount is greater than or equal to
$500,000.
First year commissions will be reduced by taking the difference between the
commission paid and the commission that would have been paid had the face amount
been issued at the decreased amount, multiplied by the appropriate percentage of
commission reduction listed in the table below:
===================== ================= ================== ================== ================== ================== ===============
Issue/Increase Year 1 Year 2 Year 3 Year 4 Year 5 Year(s) 6+
Duration
--------------------- ----------------- ------------------ ------------------ ------------------ ------------------ ---------------
--------------------- ----------------- ------------------ ------------------ ------------------ ------------------ ---------------
Percentage of FYC N/A* 80% 60% 40% 20% No Charge
Reduction
===================== ================= ================== ================== ================== ================== ===============
*Face Amount decreases are not allowed in Policy Year 1.
The face amount at issue and each increase in face amount has its own five-year
commission chargeback schedule. A face amount decrease, processed the same year
as a face amount increase, large enough to cancel out the increase,
automatically reverses the first year commission paid on the increase.
Face amount increases or decreases that are a result of partial surrenders or
death benefit option charges are not applicable when assessing commission charge
backs.
EXHIBIT B
Compensation Schedule for SVUL
Principal Life Insurance Company ("Insurance Company") and/or Princor Financial
Services Corporation ("Distributor") (collectively "we" or "us") will pay
compensation on premiums we receive on sales of Survivor Variable Universal Life
("SVUL" or "Policy") made pursuant to the Agreement according to the schedule
below. We will pay compensation only if the Policy is in effect and this
Agreement is in effect and active.
We may, by written notice to Broker-Dealer (1) change this Compensation
Schedule; (2) discontinue the issuance of any form of Policy; and/or (3) fix or
change the amount of compensation on Policies issued in exchange for previously
issued policies.
The date of receipt of premium payments will determine the Policy Year for
purposes of determining the applicable commission rate.
The target premium is determined according to a rate per $1,000 of face amount
and may vary depending on such factors as age, gender, and underwriting
classification. The target premium for the Policy is based on the joint
equivalent age (JEA) of the insured lives, which may take into account the age,
gender and underwriting classification of each insured. The target premium will
be set forth in the illustration.
First Year Commissions
1. We will pay first year commissions of 50% on received premiums up to
the target premium amount.
2. We will pay first year commissions of 3% on received premiums in
excess of the target premium amount.
Renewal Commissions
We will pay renewal commissions of 2% on all received premiums in Policy Years
2-10.
Service Fees
We will pay service fees of 1% on all received premiums in Policy Years 2 and
later to the Servicing Agent.
Servicing Agent means the agent appointed by us and accepted by the policyowner
as its servicing agent. If the policyowner requests a change in the Servicing
Agent or if we decide that a change would be in the best interests of the
policyowner, the service fees will be paid to the new Servicing Agent.
Compensation on Increases
Increase is defined as a face amount increase. We will compare the increased
face amount of a Policy against the highest face amount of the Policy over the
latest three-year period to determine if there is a Policy face amount increase
in the current year.
We will pay first year commissions at the rates set forth above on those
received premiums in the first 12 months following the date of a face amount
increase that are greater than the premiums on which first year commissions were
previously paid. The maximum premium on which the target first year commission
rate will be paid is the total target premium of the Policy after a face amount
increase has occurred
Compensation Where SVUL Replaces Other Life Policies Issued by Insurance Company
A. First year commission: We will pay first year commissions ("FYC") on a new
SVUL Policy (the "Replacement Policy") that replaces an existing life
policy issued by Insurance Company (the "Replaced Policy") in an amount
that is the sum of 1, 2 and 3 below:
1. On the Amount of Replaced Policy Premiums Received:
We will pay first year commissions on the amount of Replaced
Policy Premiums as follows:
---------------------------------------------- -----------------------------------------------------------------------------------
Type of Replacement Compensation Rate
---------------------------------------------- -----------------------------------------------------------------------------------
---------------------------------------------- -----------------------------------------------------------------------------------
Permanent to Permanent in Policy Years 2% on all Replaced Policy Premium amounts
1-4
---------------------------------------------- -----------------------------------------------------------------------------------
---------------------------------------------- -----------------------------------------------------------------------------------
Permanent to Permanent in Policy Years 5 and 20% of the FYC rates set forth
above up to target premium of the Replacement Policy; later 3% on premiums in
excess of target premium of the Replacement Policy
---------------------------------------------- -----------------------------------------------------------------------------------
---------------------------------------------- -----------------------------------------------------------------------------------
Term to Permanent 100% of the FYC rates set forth above for premium received up to and in excess of
target premium of the Replacement Policy
Permanent - includes all other life products available for sale that are not
Term products.
Term - includes Term-Other (10 year term or 20 year term), Term-ART (Annually
Renewable Term) or any other product classified as Term.
2. On the Amount of Replacement Policy Premiums in excess of the
Amount of Replaced Policy Premium
We will pay first year commissions at the rates set forth above on the
amount of Replacement Policy Premiums (excluding the cash value
transfer) that exceed the amount of Replaced Policy premiums. "Target
premium" shall refer to the target premium of the Replacement Policy.
3. On the Amount of cash values conserved and transferred into the
Replacement Policy:
o 3% of cash values transferred from a non-updated policy
o 1% of cash values transferred from an updated policy
In situations where a policy loan is carried over to the Replacement
Policy, no commission will be paid on the unscheduled premium deposit
created for the purpose of carrying over the loan.
B. Renewal Commissions and Service Fees
We will pay renewal commissions at the rates set forth above on all
received premiums in Policy Years 2-10 and service fees at the rates set
forth above in Policy Years 2 and later.
C. Commissions will not be paid when partial surrender amounts are used to
fund premium increases or new business.
D. For special situations, as defined by the Insurance Company, involving
replacement of life policies issued by Insurance Company, Insurance Company
reserves the right to modify commissions payable on replacements outlined
above.
First Year Commission Charge Back
Commission charge back for Policies with face amounts of $500,000 or greater and
with a face amount reduction of 35% or more is based on a decreasing scale over
a period of five years. The first year commissions are reduced if the following
occurs:
o The illustration shows face amount decrease(s) greater than 35% of the total
face value or; o The cumulative face amount decreases(s) are greater than 35% of
the total face amount and; o The total face amount is greater than or equal to
$500,000.
First year commissions will be reduced by taking the difference between the
commission paid and the commission that would have been paid had the face amount
been issued at the decreased amount, multiplied by the appropriate percentage of
commission reduction listed in the table below:
===================== ================= ================== ================== ================== ================== ===============
Issue/Increase Year 1 Year 2 Year 3 Year 4 Year 5 Year(s) 6+
Duration
--------------------- ----------------- ------------------ ------------------ ------------------ ------------------ ---------------
--------------------- ----------------- ------------------ ------------------ ------------------ ------------------ ---------------
Percentage of FYC N/A* 80% 60% 40% 20% No Charge
Reduction
===================== ================= ================== ================== ================== ================== ===============
*Face Amount decreases are not allowed in Policy Year 1.
The face amount at issue and each increase in face amount has its own five-year
commission chargeback schedule. A face amount decrease, processed the same year
as a face amount increase, large enough to cancel out the increase,
automatically reverses the first year commission paid on the increase.
Face amount increases or decreases that are a result of partial surrenders or
death benefit option charges are not applicable when assessing commission charge
backs.
EXHIBIT C
Expense Reimbursement Schedule
Principal Life Insurance Company ("Insurance Company") and/or Princor Financial
Services Corporation ("Distributor") (collectively "we" or "us") will reimburse
the Broker-Dealer for expenses incurred by it on sales of certain Policies made
pursuant to the Agreement. The Policies and rates are set forth in the schedule
below.
We may, by written notice to you, (1) change this expense reimbursement
schedule; (2) discontinue the issuance of any form of Policy; and/or (3) fix or
change the amount of compensation or expense reimbursements on Policies issued
in exchange for previously issued Policies.
New York Insurance Department Limitations
Broker-Dealer and we agree that the maximum payment under this Agreement shall
be subject to the terms of a plan we submitted to and was approved by the New
York State Insurance Department. The determination of whether payments exceed
the maximum amount permissible shall be solely our responsibility. Any amounts
paid by us to you that are deemed to exceed the maximum amount permissible shall
become a debt from you to us. We reserve the right to set-off any such
indebtedness against any amount payable under this Agreement or any other
contract you have with us or any of our affiliates.
Expense Reimbursement Amounts
We agree to pay you an expense reimbursement allowance on premiums received
during the first Policy year as follows:
======================= ========================================================================================
PRODUCT EXPENSE ALLOWANCE
----------------------- ----------------------------------------------------------------------------------------
----------------------- ----------------------------------------------------------------------------------------
VUL Accumulator II 25% of premiums we receive
up to the target premium. Allowance is
reduced to 15% if Accounting Benefit
Rider (ABR) is used.
----------------------- ----------------------------------------------------------------------------------------
----------------------- ----------------------------------------------------------------------------------------
SVUL 25% of premiums we receive up to target premium.
----------------------- ----------------------------------------------------------------------------------------
----------------------- ----------------------------------------------------------------------------------------
Executive VUL 3% of premium we receive up to the target premium.
----------------------- ----------------------------------------------------------------------------------------
----------------------- ----------------------------------------------------------------------------------------
Benefit VUL 5% of premium we receive up to the target premium.
Allowance is reduced to 3% if the
Accounting Benefit Rider (ABR) is used.
----------------------- ----------------------------------------------------------------------------------------
----------------------- ----------------------------------------------------------------------------------------
VUL Income 25% of premiums we receive up to the target premium.
----------------------- ----------------------------------------------------------------------------------------
----------------------- ----------------------------------------------------------------------------------------
VUL Income Plus 15% of premiums we receive up to the target
premium.
======================= ========================================================================================
EXHIBIT D
Compensation Schedule For Executive VUL
Principal Life Insurance Company ("Insurance Company") and/or Princor Financial
Services Corporation ("Distributor") (collectively "we" or "us") will pay
compensation on premiums we receive on sales of Executive VUL ("Policy") made
pursuant to the Agreement according to the schedule below. We will pay
compensation only if the Policy is in effect and this Agreement is in effect and
active.
We may, by written notice to Broker-Dealer (1) change this Compensation
Schedule; (2) discontinue the issuance of any form of Policy; and/or (3) fix or
change the amount of compensation on Policies issued in exchange for previously
issued policies.
The date of receipt of premium payments will determine the Policy Year for
purposes of determining the applicable commission rate.
First Year Commissions
1. We will pay first year commissions of 12% on received premiums up to the
target premium amount.
2. We will pay first year commissions of 1% on received premiums in excess
of target premium amount.
3. No first year commission will be paid on external exchange/rollover
monies received that are in excess of target premium amount.
The target premium is determined according to a rate per $1,000 of face amount
and may vary depending on such factors as age, gender and underwriting
classification. The target premium will be set forth in the illustration.
Renewal Commissions
We will pay a renewal commission of 4.25% on received premiums up to the target
premium amount and 1.5% of received premiums in excess of the target premium
amount in Policy Years 2-5. We will pay a renewal commission of 1.5% on received
premiums up to target premium amount and 0% on received premiums in excess of
the target premium amount in Policy Years 6-10.
Trail Compensation (Asset Based Compensation)
We will pay Trail Compensation commencing at the end of the first quarter of
Policy Year 6 and every quarter thereafter. The percentage of Trail Compensation
will be based on the Policy's net policy value ("NPV") as shown in the following
table:
================= =================================== ============================================================================
YEAR TOTAL % NPV TRAIL COMPENSATION BREAKDOWN OF NPV TRAIL COMPENSATION
----------------- ----------------------------------- ----------------------------------------------------------------------------
----------------- ----------------------------------- ----------------------------------------------------------------------------
6+ 0.075% o 0.050%* vested to original selling agent
o 0.025%* non-vested to servicing agent
----------------- ----------------------------------- ----------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
*One fourth of the annual Trail Compensation rate is multiplied by the total NPV
on the last day of the contract quarter starting at the end of the first quarter
in Policy Year 6.
==================================================================================================================================
Servicing agent means the agent appointed by us and accepted by the policy owner
as its servicing agent. If the policy owner requests a change in the Servicing
Agent or if we decide that a change would be in the best interests of the policy
owner, the service commissions will be paid to the new Servicing Agent.
Compensation on Increases
Most underwritten increases in face will result in first year commissions for
premium attributable to the face increase. We allow up to 12 months from the
effective date of an underwritten face increase to pay first year commissions.
Non-underwritten increases in face due to preferred MEC underwriting rules will
not receive first year commissions (i.e. no new target premium is generated). We
will compare the increased face amount of the policy against the highest face
amount over the lifetime to determine if there is a face amount increase during
the current year. If so, a new target premium is based on the face amount
increase above the highest lifetime face amount, which may or may not equal the
requested face increase. If the new resulting face amount is less than the
highest face amount over the lifetime, no new target premium is calculated. To
determine first year commissions versus renewals, premiums paid are split in
proportion to the target premium of each face increase.
Compensation Where Executive VUL Replaces Other Life Policies Issued by
Insurance Company
A. First Year Commissions. We will pay first year commissions on a new
Executive VUL Policy (the "Replacement Policy") that replaces an existing
life policy issued by Insurance Company (the "Replaced Policy") as follows:
1. On the Amount of Replaced Policy Premiums Received:
We will pay first year commissions on the amount of Replaced Policy
Premiums received (excluding the cash value transfer) as follows:
a. 3% on received premiums up to the target premium amount b. 1.5%
on received premiums in excess of the target premium amount.
2. On the Amount of Replacement Policy Premiums Received in excess of the
Amount of Replaced Policy Premium
We will pay first year commissions at the rates set forth above on the
amount of Replacement Policy Premiums received (excluding the cash
value transfer) that exceeds the amount of Replaced Policy premiums.
"Target premium" shall refer to the target premium of the Replacement
Policy.
In situations where a policy loan is carried over to the Replacement
Policy, no commission will be paid on the unscheduled premium deposit
created for the purpose of carrying over the loan.
B. Renewal Commissions and Trail Compensation 1. On the Amount of Replaced
Policy Premiums Received:
We will pay renewal commissions of 3% on received premium up to the
target premium amount and 1.5% on received premiums in excess of the
target premium amount in Policy Years 2-5. We will pay renewal
commissions at the rates set forth above on all received premiums in
Policy Years 6-10. We will pay trail compensation on all received
premiums at the rates set forth above in Policy Years 6 and later.
2. On the Amount of Replacement Policy Premiums in excess of the Amount of
Replaced Policy Premium
We will pay renewal commissions at the rates set forth above on all
received premiums in Policy Years 2-10. We will pay Trail Compensation
at the rates set forth above on all received premiums in Policy Years 6
and later.
C. Commissions will not be paid when partial surrender amounts are used to
fund premium increases or new business.
D. For special situations, defined by Insurance Company, involving
replacement of life policies issued by Insurance Company, Insurance
Company reserves the right to further modify commissions payable on
replacements outlined above.
E. Commission Charge-back. A three-year commission charge-back as stated
in the table below is applicable if the Policy lapses, is surrendered
or terminates (other than death) in the first three Policy Years.
======================= ===================================================
Policy Year Percent of First Year Commission Paid
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
1 100
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
2 68
----------------------- ---------------------------------------------------
----------------------- ---------------------------------------------------
3 38
======================= ===================================================
EXHIBIT E Compensation Schedule
For Benefit VUL
Principal Life Insurance Company ("Insurance Company") and/or Princor Financial
Services Corporation ("Distributor") (collectively "we" or "us") will pay
compensation on premiums we receive on sales of Benefit VUL ("Policy") made
pursuant to the Agreement according to the schedule below. We will pay
compensation only if the Policy is in effect and this Agreement is in effect and
active.
We may, by written notice to Broker-Dealer (1) change this Compensation
Schedule; (2) discontinue the issuance of any form of Policy; and/or (3) fix or
change the amount of compensation on Policies issued in exchange for previously
issued policies.
The date of receipt of premium payments will determine the Policy Year for
purposes of determining the applicable commission rate.
First Year Commissions
1. We will pay first year commissions of 50% on received premiums up to
the target premium amount. If Benefit VUL is sold with the Accounting
Benefit Rider ("ABR"), we will reduce the first year commissions to
20% on received premiums up to the target premium amount.
2. We will pay first year commissions of 3% on received premiums in
excess of the target premium amount.
The target premium is determined according to a rate per $1,000 of face amount
and may vary depending on such factors as age, gender and underwriting
classification. The target premium will be set forth in the illustration.
Renewal Commissions
1. We will pay a renewal commission of 2% on all received premiums in
Policy Years 2 and later.
2. If Benefit VUL is sold with the ABR, we will pay a renewal commission
of 12% on received premiums up to the target premium amount, and 2% on
received premiums in excess of the target premium amount in Policy
Years 2-4. We will pay a renewal commission of 2% on all received
premiums in Policy Years 5 and later.
Service Fees
We will pay service fees of 0.5% on all received premiums in Policy Years 2 and
later to the Servicing Agent.
Servicing agent means the agent appointed by us and accepted by the policy owner
as its servicing agent. If the policy owner requests a change in the Servicing
Agent or if we decide that a change would be in the best interests of the policy
owner, the service fees will be paid to the new Servicing Agent.
Compensation on Increases
Most underwritten increases in face will result in first year commissions for
premium attributable to the face increase. We allow up to 12 months from the
effective date of an underwritten face increase to pay first year commissions.
Non-underwritten increases in face due to preferred MEC underwriting rules will
not receive first year commissions (i.e. no new target premium is generated). We
will compare the increased face amount of the Policy against the highest face
amount over the lifetime to determine if there is a face amount increase during
the current year. If so, a new target premium is based on the face amount
increase above the highest lifetime face amount, which may or may not equal the
requested face increase. If the new resulting face amount is less than the
highest face amount over the lifetime, no new target premium is calculated. To
determine first year commissions versus renewals, premiums paid are split in
proportion to the target premium of each face increase.
Compensation Where Benefit VUL Replaces Other Life Policies Issued by Insurance
Company
A. First Year Commissions. We will pay first year commissions on a
new Benefit VUL Policy (the "Replacement Policy") that replaces an
existing life policy issued by Insurance Company (the "Replaced
Policy") as follows:
1. On the Amount of Replaced Policy Premiums Received:
We will pay first year commissions of 3% on the amount of Replaced
Policy Premiums received (excluding the cash value transfer).
2. On the Amount of Replacement Policy Premiums Received in excess of the
Amount of Replaced Policy Premium
We will pay first year commissions at the rates set forth above on the
amount of Replacement Policy Premiums received (excluding the cash
value transfer) that exceeds the amount of Replaced Policy premiums.
"Target premium" shall refer to the target premium of the Replacement
Policy.
In situations where a policy loan is carried over to the Replacement
Policy, no commission will be paid on the unscheduled premium deposit
created for the purpose of carrying over the loan.
Renewal Commissions and Service Fees
We will pay renewal commissions and service fees at the rates set forth
above on all received premiums in Policy Years 2 and later.
If the Replacement Policy is issued with ABR, we will pay renewal
commissions of 2% on Replaced Policy Premiums received in Policy Years 2-4.
We will pay renewal commissions at the rates set forth above on the amount
of Replacement Policy Premiums (excluding the cash value transfer) that
exceed the amount of Replaced Policy Premiums received in Policy Years 2-4.
We will pay renewal commissions at the rates set forth above on all
received premiums in Policy Years 5 and later. We will pay service fees at
the rates set forth above on all received premiums in Policy Years 2 and
later.
"Target premium" shall refer to the target premiums of the Replacement
Policy
B. Commissions will not be paid when partial surrender amounts are
used to fund premium increases or new business.
C. For special situations defined by Insurance Company involving
replacement of life policies issued by Insurance Company,
Insurance Company reserves the right to further modify commissions
payable on replacements outlined above.
D. Commission Charge-back (only applicable if the ABR is present). A
three-year commission charge-back as stated in the table below is
applicable if the Policy lapses, is surrendered or terminates
(other than death) in the first three Policy Years.
========================= =============================================================
Policy Year Percent of First Year Commission Paid
------------------------- -------------------------------------------------------------
------------------------- -------------------------------------------------------------
1 100
------------------------- -------------------------------------------------------------
------------------------- -------------------------------------------------------------
2 68
------------------------- -------------------------------------------------------------
------------------------- -------------------------------------------------------------
3 38
========================= =============================================================
EXHIBIT F
Compensation Schedule For VUL Income and VUL Income Plus
Insurance Company or Distributor ("we") will pay compensation on premiums we
receive on sales of VUL Income and VUL Income with Surrender Charge Adjustment
Rider ("VUL Income Plus") (individually "Policy" and together "Policies") made
pursuant to the Agreement according to the schedule below. (The Surrender Charge
Adjustment Rider cannot be added to an existing VUL Income Policy.) We will pay
compensation only if the Policy is in effect and this Agreement is in effect and
active.
We may, by written notice to Broker-Dealer (1) change this Compensation
Schedule; (2) discontinue the issuance of any form of Policy; and/or (3) fix or
change the amount of compensation on Policies issued in exchange for previously
issued policies.
The date of receipt of premium payments will determine the Policy Year for
purposes of determining the applicable commission rate.
The target premium is determined according to a rate per $1,000 of face amount
and may vary depending on such factors as age, gender, and underwriting
classification. The target premium will be set forth in the illustration.
First Year Commissions - VUL Income
1. We will pay first year commissions of 50% on received premiums up to
the target premium amount.
2. We will pay first year commissions of 2.5% on received premiums in
excess of the target premium amount.
First Year Commissions - VUL Income Plus
1. We will pay first year commissions of 20% on received premiums up to
the target premium amount.
2. We will pay first year commissions of 2.5% on received premiums in
excess of the target premium amount.
Renewal Commissions - VUL Income
We will pay renewal commissions of 2.5% on all received premiums in Policy
Years 2-5.
Renewal Commissions - VUL Income Plus
We will pay renewal commissions of 12.5% on premiums up to the target premium
amount and 2.5% on premiums in excess of the target premium amount received in
Policy Years 2-4. We will pay renewal commissions of 2.5% on all premiums
received in Policy Year 5.
Trail Compensation (Asset Based Compensation) - VUL Income & VUL Income Plus
We will pay Trail Compensation commencing at the end of the first quarter of
Policy Year 6 and every quarter thereafter. The percentage of Trail Compensation
will be based on the Policy's net policy value ("NPV") as shown in the following
table:
================= =================================== ============================================================================
YEAR TOTAL % NPV TRAIL COMPENSATION BREAKDOWN OF NPV TRAIL COMPENSATION
----------------- ----------------------------------- ----------------------------------------------------------------------------
----------------- ----------------------------------- ----------------------------------------------------------------------------
6-10 0.25% o 0.15%* vested to original selling agent
o 0.10%* non-vested to servicing agent
----------------- ----------------------------------- ----------------------------------------------------------------------------
----------------- ----------------------------------- ----------------------------------------------------------------------------
11+ 0.15% o 0.10%* vested to original selling agent
o 0.05%* non-vested to servicing agent
----------------- ----------------------------------- ----------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------------------
*One fourth of the annual Trail Compensation rate is multiplied by the total NPV
on the last day of the contract quarter starting at the end of the first quarter
in Policy Year 6.
===============================================================================
Servicing agent means the agent appointed by us and accepted by the policyowner
as its servicing agent. If the policyowner requests a change in the Servicing
Agent or if we decide that a change would be in the best interests of the
policyowner, the service fees will be paid to the new Servicing Agent.
Compensation on Increases - VUL Income & VUL Income Plus
Increase is defined as a face amount increase. We will compare the increased
face amount of a Policy against the highest face amount of the Policy over the
latest three-year period to determine if there is a Policy face amount increase
in the current year.
We will pay first year commissions at the rates set forth above on those
premiums received in the first 12 months following the date of a face amount
increase that are greater than the premiums on which first year commissions were
previously paid. The maximum premium on which the target first year commission
rate will be paid is the total target premium of the Policy after a face amount
increase has occurred.
Cost of living increases are not paid to a producer if the producer's contract
terminates. Cost of living increases will be paid to the Servicing Agent.
Compensation Where VUL Income or VUL Income Plus Replaces Other Life Policies
Issued by Insurance Company
A. First year commission: We will pay first year commissions ("FYC") on a new
VUL Income or VUL Income Plus Policy (the "Replacement Policy") that replaces an
existing life policy issued by Insurance Company (the "Replaced Policy") in an
amount that is the sum of 1, 2 and 3 below:
1. On the Amount of Replaced Policy Premiums Received:
We will pay first year commissions on the amount of Replaced
Policy Premiums as follows:
-------------------------------------------------- ---------------------------------------------------------------------------
Type of Replacement Compensation Rate
-------------------------------------------------- ---------------------------------------------------------------------------
-------------------------------------------------- ---------------------------------------------------------------------------
Permanent to Permanent in Policy Years 2.5% on all Replaced Policy Premium amounts
1-4
-------------------------------------------------- ---------------------------------------------------------------------------
-------------------------------------------------- ---------------------------------------------------------------------------
Permanent to Permanent in Policy Years 5 and 20% of the FYC rates set forth
above up to target premium of the later Replacement Policy; 2.5% on premiums
in excess of target premium of the
Replacement Policy
-------------------------------------------------- ---------------------------------------------------------------------------
-------------------------------------------------- ---------------------------------------------------------------------------
Term to Permanent 100% of the FYC rates set forth above for premium received up to and in
excess of target premium of the Replacement Policy
-------------------------------------------------- ---------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------
Permanent - includes all other life products available for sale that are not
Term products.
Term - includes Term-Other (10 year term or 20 year term), Term-ART (Annually
Renewable Term) or any other product classified as Term.
2. On the Amount of Replacement Policy Premiums in excess of the Amount of
Replaced Policy Premium
We will pay first year commissions at the rates set forth above
on the amount of Replacement Policy Premiums (excluding the cash
value transfer) that exceed the amount of Replaced Policy
premiums. "Target premium" shall refer to the target premium of
the Replacement Policy.
3. On the Amount of cash values conserved and transferred into the Replacement
Policy:
o 3% of cash values transferred from a non-updated policy
o 1% of cash values transferred from an updated policy
In situations where a policy loan is carried over to the
Replacement Policy, no commission will be paid on the unscheduled
premium deposit created for the purpose of carrying over the loan.
B. Renewal Commissions and Trail Compensation
We will pay the following renewal commissions and trail compensation:
1. VUL Income. We will pay renewal commissions at the rates set
forth above on all premiums received in Policy Years 2-5. We will
pay trail compensation at the rates set forth above in Policy
Years 6 and later.
2. VUL Income Plus. We will pay renewal commissions of 2.5% on the
amount of Replaced Policy Premiums received in Policy Year 2-4.
We will pay renewal commissions at the rates set forth above on
the amount of Replacement Policy Premiums (excluding the cash
value transfer) that exceed the amount of Replaced Policy
Premiums received in Policy Years 2-4. We will pay renewal
commissions at the rates set forth above on all premiums received
in Policy Year 5. We will pay trail compensation at the rates set
forth above in Policy Years 6 and later. "Target premium" shall
refer to the target premium of the Replacement Policy.
C. Commissions will not be paid when partial surrender amounts are used to fund
premium increases or new business.
D. For special situations, as defined by the Insurance Company, involving
replacement of life policies issued by Insurance Company, Insurance Company
reserves the right to modify commissions payable on replacements outlined above.
First Year Commission Charge Back
Commission charge back for Policies with face amounts of $500,000 or greater and
with a face amount reduction of 35% or more is based on a decreasing scale over
a period of five years. The first year commissions are reduced if the following
occurs:
o The illustration shows face amount decrease(s) greater than 35% of the
total face value or;
o The cumulative face amount decreases(s) are greater than 35% of the
total face amount and;
o The total face amount is greater than or equal to $500,000.
First year commissions will be reduced by taking the difference between the
commission paid and the commission that would have been paid had the face amount
been issued at the decreased amount, multiplied by the appropriate percentage of
commission reduction listed in the table below:
===================== ================= ================== ================== ================== ================== ===============
Issue/Increase Year 1 Year 2 Year 3 Year 4 Year 5 Year(s) 6+
Duration
--------------------- ----------------- ------------------ ------------------ ------------------ ------------------ ---------------
--------------------- ----------------- ------------------ ------------------ ------------------ ------------------ ---------------
Percentage of FYC N/A* 80% 60% 40% 20% No Charge
Reduction
===================== ================= ================== ================== ================== ================== ===============
*Face Amount decreases are not allowed in Policy Year 1.
The face amount at issue and each increase in face amount has its own five-year
commission chargeback schedule. A face amount decrease, processed the same year
as a face amount increase, large enough to cancel out the increase,
automatically reverses the first year commission paid on the increase.
Face amount increases or decreases that are a result of partial surrenders or
death benefit option charges are not applicable when assessing commission charge
backs.
