Broker-Dealer Variable Contract
Supervisory and Service Agreement
--------------------------------------------------------------------------------
Princor Financial Services Corporation ("Princor"), and Principal Life Insurance
Company (the "Insurer"), distributor and issuer for and of the Policies
hereunder described and the undersigned broker-dealer (the "Broker-Dealer"),
enter into this Agreement as of the date indicated, for the purpose of
appointing the Broker-Dealer to perform the services hereunder described,
subject to the following provisions:
1. Except as 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.
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.
The 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 (1933 Act) and the Investment
Company Act of 1940 and the rules and regulations thereunder, including the
terms of any order of the Securities and Exchange Commission (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 the Broker-Dealer pursuant to the
accompanying Exhibits. The Broker-Dealer agrees to return promptly 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 due it from
sales of the Policy to such Compensation Representative; it remains fully
responsible for recordkeeping and supervision of the solicitation and/or
sale of the Policy; all monies 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
Polices.
5. The 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 Securities Act of 1933 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. The 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
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.
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.
7. 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.
8. The activities of all producers referred to in Paragraph 6 will be under
the direct supervision and control of the Broker-Dealer. The right of such
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.
9. 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.
10. Broker-Dealer shall ensure that the prospectus delivery requirements under
the Securities Act of 1933 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.
11. The 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.)
12. This Agreement may not be assigned by the Broker-Dealer without the prior
written consent of Princor. Any party hereto may cancel this Agreement at
any time upon written notice. This Agreement shall automatically terminate
if the Broker-Dealer voluntarily or involuntarily ceases to be or is
suspended from being, a member in good standing of the NASD. Provided
further, Princor and the Insurer reserve the right to terminate this
Agreement in the event that any employee or agent of Broker-Dealer is
suspended, disciplined or found to be in violation of governing insurance
or securities laws, rules or regulations. Furthermore, Princor and the
Insurer reserve the right to revise the payments for services described in
this Agreement as set forth in the accompanying Exhibits at any time upon
the mailing of written notice to the Broker-Dealer. 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.
13. 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. This Agreement
shall be governed by and construed in accordance with the laws of the State
of Iowa.
AGREED TO BY:
ABC BROKER DEALER, INC
By: ________________________________
Title: _____________________________
Date: ______________________________
PRINCOR FINANCIAL SERVICES CORPORATION
By: ________________________________
Title: _____________________________
Date: ______________________________
PRINCIPAL LIFE INSURANCE COMPANY
By: ________________________________
Title: _____________________________
Date: ______________________________
EXHIBIT A - Compensation Schedule
PrinFlex LIFE Broker-Dealer
Supervisory and Service Agreement
Principal Mutual Life Insurance Company will pay commissions on sales of
policies made pursuant to the Broker-Dealer Variable Contract Supervisory and
Service Agreement according to the schedule below on premiums we receive.
We may, by written notice to you, change this compensation schedule. We may
discontinue the issuance of any form of policy and fix the amount of
compensation on policies issued in exchange for previously issued policies.
First Year Commissions
a) 50%# of premium received up to the planned periodic premium, not to
exceed target premium*.
b) 3% of premium received above the lesser of planned periodic or target
premium.
*The target premium is determined according to a rate per $1,000 of face
amount. This rate varies by age and sex of the insured.
# See Special Underwriting
Target Premiums (Annual per $1,000 face amount)
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Age Male Female Unisex Age Male Female Unisex
--- ---- ------ ------ --- ---- ------ ------
0 3.50 2.83 3.41 45 14.31 11.93 14.00
1 3.50 2.83 3.41 46 15.08 12.53 14.75
2 3.50 2.83 3.41 47 15.90 13.16 15.54
3 3.50 2.83 3.41 48 16.77 13.83 16.39
4 3.50 2.83 3.41 49 17.70 14.54 17.29
5 3.50 2.83 3.41 50 18.68 15.30 18.24
6 3.50 2.83 3.41 51 19.74 16.10 19.27
7 3.50 2.83 3.41 52 20.86 16.94 20.35
8 3.50 2.83 3.41 53 22.05 17.85 21.50
9 3.50 2.83 3.41 54 23.32 18.80 22.73
10 3.50 2.83 3.41 55 24.67 19.82 24.04
11 3.65 2.91 3.55 56 26.11 20.90 25.43
12 3.80 3.00 3.70 57 27.65 22.05 26.92
13 3.95 3.08 3.84 58 29.30 23.29 28.52
14 4.10 3.17 3.98 59 31.05 24.62 30.21
15 4.25 3.25 4.12 60 32.93 26.06 32.04
16 4.62 3.63 4.49 61 34.94 27.60 33.99
17 4.99 4.00 4.86 62 37.10 29.26 36.08
18 5.36 4.38 5.23 63 39.40 31.06 38.32
19 5.73 4.75 5.60 64 41.86 32.97 40.70
20 6.10 5.13 5.97 65 44.48 35.02 43.25
21 6.11 5.16 5.99 66 47.29 37.21 45.98
22 6.12 5.20 6.00 67 50.30 39.58 48.91
23 6.13 5.23 6.01 68 53.52 42.14 52.04
24 6.14 5.27 6.03 69 56.98 44.93 55.41
25 6.15 5.30 6.04 70 60.71 47.98 59.06
26 6.29 5.42 6.18 71 64.73 51.30 62.98
27 6.43 5.54 6.31 72 69.02 54.93 67.19
28 6.57 5.65 6.45 73 73.62 58.86 71.70
29 6.71 5.77 6.59 74 78.48 63.12 76.48
30 6.85 5.89 6.73 75 83.65 67.71 81.58
31 7.17 6.16 7.04 76 87.77 71.45 85.65
32 7.51 6.44 7.37 77 91.89 75.20 89.72
33 7.87 6.74 7.72 78 96.00 78.94 93.78
34 8.26 7.06 8.10 79 100.12 82.69 97.85
35 8.66 7.40 8.50 80 104.24 86.43 101.92
36 9.10 7.76 8.93 81 113.32 95.74 111.03
37 9.55 8.13 9.37 82 122.40 105.05 120.14
38 10.03 8.53 9.84 83 131.48 114.36 129.25
39 10.54 8.94 10.33 84 140.56 123.67 138.36
40 11.09 9.38 10.87 85 149.64 132.98 147.47
41 11.66 9.83 11.42
42 12.26 10.32 12.01
43 12.91 10.82 12.64
44 13.59 11.36 13.30
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Service Fees
A service fee of 3% on all premium received beyond the first policy year is
paid as long as the policy remains in effect and the Broker-Dealer Variable
Contract Supervisory and Service Agreement remains active.
Compensation on Increases
An increase is defined as a face amount increase. We will compare the
increased face amount of the policy against the highest policy face amount
over the latest three year period to determine if there is a policy face
amount increase during the current year.
A 50%# commission will be paid on premium received during the first 12
months following the date of an face amount increase that is greater than
the premium level on which a high [50%] first year commission rate was
previously paid. The maximum premium on which a high [50%] first year
commission rate is paid will be limited to the lesser of total planned
periodic premium or total target premium amount of the policy after a face
amount increase has occurred.
# See Special Underwriting
Compensation for Replacement of Life Policies Issued by Principal Mutual Life
Insurance Company
A. First year commission is the sum of 1,2, 3 and 4 which follow.
1. A full first year commission rate as set out in First Year Commissions
of the exhibit will be applied to all new policy premium in excess of
the replaced premium but less than the planned periodic, not to exceed
target premium.
2. A percentage of the first year commission rate of the new policy
determined from the table below according to the number of years since
the replaced policy was issued or updated will be applied to the
replaced policy planned periodic premium, not to exceed target premium.
The resulting commission rate in the table shall in no event exceed the
applicable first year commissions rates as set out in the First Year
Commissions section of this exhibit.
---------------------------------------------------------------------------------------------------------------------------
Percentage of New
Policy's
First Year
Years Since Percentage of New Policy's Years Since Date of Commission Rate
Date of Issue First Year Commission Rate Issue Payable on Replaced
or Update Payable on Replaced Premium* or Update Premium*
--------- ---------------------------- --------- --------
0 - 3 0 12 36
4 20 13 38
5 22 14 40
6 24 15 42
7 26 16 44
8 28 17 46
9 30 18 48
10 32 19 and later 50
11 34
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* Replaced premium amounts will be defined as the level of premium on which a
first year commission was previously paid.
** A commission equal to the renewal rate of the new policy will be paid on
replaced premium.
3. Commissions on cash values conserved and transferred into the new
policy will be paid as follows:
o 3% of cash value transferred from a non-Updated policy.
o 1% on cash value transferred from an Updated policy or current
yield policy.
These commissions will be paid on cash values deposited as unscheduled
premiums. However, in situations where a policy loan is carried over to
the new policy, we will not pay a commission on the unscheduled premium
deposit created for the purpose of carrying over the loan.
4. An additional 5% commission will be paid on the amount of policy
premium being replaced if the total premium in the new policy is at
least 25% greater than the premium of the replaced policy.
B. Service fees are determined according to the applicable rates for such as
set out in the exhibit.
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 the Insurer involving replacement of life
policies, the insurer reserves the right to further modify commissions
payable on replacements outlined above.
E. Special Underwriting. Commission rate is reduced to 45% if Batch
underwriting or Expanded Non-Medical underwriting is used. Commission rate
is reduced to 30% of Guaranteed Issue underwriting is used. Other
arrangements may be made with different compensation amounts.
EXHIBIT B - Compensation Schedule
SVUL Broker-Dealer
Supervisory and Service Agreement
Principal Mutual Life Insurance Company will pay commissions on sales of
policies made pursuant to the Broker-Dealer Variable Contract Supervisory and
Service Agreement according to the schedule below on premiums we receive.
We may, by written notice to you, change this compensation schedule. We may
discontinue the issuance of any form of policy and fix the amount of
compensation on policies issued in exchange for previously issued policies.
First Year Commissions
c) 50%# of premium received up to the planned periodic premium, not to
exceed target premium*.
d) 3% of premium received above the lesser of planned periodic or target
premium.
*The target premium is determined according to a rate per $1,000 of face
amount. This rate varies by age and sex of the insured.
Target Premiums (Annual per $1,000 face amount)
APPENDIX B
TARGET PREMIUMS
The target premiums for the Policy are based on the joint equivalent age (JEA)
of the insureds. The JEA takes into account the gender*, age, smoking status and
risk classification of each insured. The calculation is as follows:
1. Start with the unadjusted individual ages of insured #1 and insured #2.
Call this (X1) and (X2) respectively.
2. Take each individual age and adjust for gender.
-if Male the gender adjustment is 0
-if Female the gender adjustment is minus 5
-if Unisex rating is used, the gender adjustment is minus 2
3. Take resulting individual ages from step 2 and adjust for smokers if
applicable.
-if Male Smoker the smoker adjustment is plus 3
-if Female Smoker the smoker adjustment is plus 2
-if Unisex Smoker the smoker adjustment is plus 3
4. Take resulting individual ages from step 3 and adjust for substandard
table ratings, if any.
-if table A rating then add 2
-if table B rating then add 4
-if table C rating then add 6
-if table D rating then add 8
-if table E rating then add 10
-if table F rating then add 12
-if table G rating then add 14
-if table H rating then add 15
-if rating is higher than table H then add 16.
5. The result of step 4 is the adjusted individual ages of insured #1 and
insured #1. Call this (X1A) and (X2A) respectively.
6. If (X1A) is greater than 100 then set (X1A) equal to 100.
7. If (X1B) is greater than 100 then set (X1B) equal to 100.
8. Take the difference between (X1A) and (X1B). Call this (XDIFF).
9. Look up (XDIFF) on the table below to find out what to add on to
youngest adjusted age.
XDIFF ADD ON
0 0
1 to 2 1
3 to 4 2
5 to 6 3
7 to 9 4
10 to 12 5
13 to 15 6
16 to 18 7
19 to 23 8
24 to 28 9
29 to 34 10
35 to 39 11
40 to 44 12
45 to 47 13
48 to 50 14
51 to 53 15
54 to 56 16
57 to 60 17
61 to 64 18
65 to 69 19
70 to 75 20
76 to 85 21
10. The JEA (Joint Equivalent Age) is equal to the Minimum of (X1A) and
(X1B) plus ADD ON from the table above.
Example:
Male Nonsmoker age 45 table rating A, Female Smoker age 57.
1. (X1) = 45 and (X2) = 57
2. (X1) = 45 + 0 = 45; and (X2) = 57 - 5 = 52
3. (X1) = 45 + 0 = 45; and (X2) = 52 + 2 = 54
4. (X1) = 45 + 2 = 47; and (X2) = 54 + 0 = 54
5. (XIA) = 47; (X2A) = 54
6. (XIA) is not greater than 100
7. (XIB) is not greater than 100
8. (XDIFF) = (X2A) - (X1A) = 54 - 47 = 7
9. ADD ON = 4
10. JEA = minimum of (XIA) and (X2A) + ADD ON = 47 + 4 = 51
SVUL Target Premium Rates per $1000 of Face
JEA Target JEA Target
less than 20 2.78 61 21.67
20 2.78 62 22.98
21 2.87 63 24.23
22 2.95 64 25.41
23 3.03 65 26.52
24 3.13 66 27.56
25 3.22 67 28.56
26 3.32 68 29.53
27 3.41 69 30.45
28 3.52 70 31.36
29 3.62 71 32.27
30 3.73 72 33.17
31 3.84 73 34.08
32 3.96 74 35.02
33 4.07 75 35.97
34 4.24 76 36.95
35 4.42 77 37.95
36 4.60 78 38.94
37 4.79 79 39.96
38 4.99 80 40.99
39 5.20 81 42.00
40 5.41 82 42.00
41 5.64 83 42.00
42 5.87 84 42.00
43 6.11 85 42.00
44 6.51 86 42.00
45 6.93 87 42.00
46 7.38 88 42.00
47 7.86 89 42.00
48 8.38 90 42.00
49 8.93 greater than 90 42.00
50 9.50
51 10.12
52 10.78
53 11.49
54 12.54
55 13.68
56 14.92
57 16.22
58 17.58
59 18.94
60 20.32
* The cost of insurance rate for Policies issued in states which require
unisex pricing or in connection with employment related insurance and
benefit plans is not based on the gender of the insured.
Service Fees
A service fee on all premium received beyond the first year is paid as long
as the policy remains in effect and the variable contract supervisory and
service agreement remains active.
o 3% for policy years 2 through 10
o 1% for policy years 11 and later
A service fee will be paid only
Compensation on Increases
An increase is defined as a face amount increase. We will compare the
increased face amount of the policy against the highest policy face amount
over the latest three year period to determine if there is a policy face
amount increase during the current year.
A 50%# commission will be paid on premium received during the first 12
months following the date of an face amount increase that is greater than
the premium level on which a high [50%] first year commission rate was
previously paid. The maximum premium on which a high [50%] first year
commission rate is paid will be limited to the lesser of total planned
periodic premium or total target premium amount of the policy after a face
amount increase has occurred.
# See Special Underwriting
Compensation for Renewals
A renewal fee of 2% on all premiums received during policy years two (2)
through ten (10) is paid as long as the policy remains in effect and the
Broker-Dealer Variable Contract Supervisory and Service Agreement remains
active.
Compensation for Replacement of Life Policies Issued by Principal Mutual Life
Insurance Company
First year commission is the sum of 1,2, 3 and 4 which follow.
1. A full first year commission rate as set out in First Year Commissions
of the exhibit will be applied to all new policy premium in excess of
the replaced premium but less than the planned periodic, not to exceed
target premium.
2. A percentage of the first year commission rate of the new policy
determined from the table below according to the number of years since
the replaced policy was issued or updated will be applied to the
replaced policy planned periodic premium, not to exceed target premium.
The resulting commission rate in the table shall in no event exceed the
applicable first year commissions rates as set out in the First Year
Commissions section of this exhibit.
---------------------------------------------------------------------------------------------------------------------------
Percentage of New
Policy's
First Year
Years Since Percentage of New Policy's Years Since Date of Commission Rate
Date of Issue First Year Commission Rate Issue Payable on Replaced
or Update Payable on Replaced Premium* or Update Premium*
--------- ---------------------------- --------- --------
0 - 3 0 12 36
4 20 13 38
5 22 14 40
6 24 15 42
7 26 16 44
8 28 17 46
9 30 18 48
10 32 19 and later 50
11 34
---------------------------------------------------------------------------------------------------------------------------
* Replaced premium amounts will be defined as the level of premium on which a
first year commission was previously paid.
** A commission equal to the renewal rate of the new policy will be paid on
replaced premium.
3. Commissions on cash values conserved and transferred into the new
policy will be paid as follows:
o 3% of cash value transferred from a non-Updated policy.
o 1 on cash value transferred from an Updated policy or current
yield policy.
These commissions will be paid on cash values deposited as unscheduled
premiums. However, in situations where a policy loan is carried over to
the new policy, we will not pay a commission on the unscheduled premium
deposit created for the purpose of carrying over the loan.
4. An additional 5% commission will be paid on the amount of policy
premium being replaced if the total premium in the new policy is at
least 25% greater than the premium of the replaced policy.
B. Service fees are determined according to the applicable rates for such as
set out in the exhibit.
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 the Insurer involving replacement of life
policies, the insurer reserves the right to further modify commissions
payable on replacements outlined above.
EXHIBIT C - Expense Reimbursement Schedule
Broker-Dealer Variable Contract
Supervisory and Service Agreement
Principal Mutual Life Insurance Company will reimburse the broker-dealer for
expenses incurred by them on sales of policies made pursuant to the
Broker-Dealer Variable Contract Supervisory and Service Agreement according to
the schedule below. We may, by written notice to you, change this compensation
schedule. We may discontinue the issuance of any form of policy and fix the
amount of compensation on policies issued in exchange for previously issued
policies.
New York Insurance Department Limitations
The Broker-Dealer and the Insurer agree that the maximum payment under this
agreement shall be subject to the terms of a plan submitted and approved by the
New York State Insurance Department. The determination of whether payments do
not exceed the maximum amount permissible shall be the sole responsibility of
the Insurer. Any amounts paid by the Insurer to the Broker-Dealer that are
deemed to exceed the maximum amount permissible shall become a debt from the
Broker-Dealer to the Insurer. The Insurer reserves the right to off set any
indebtedness against any amount payable under this Schedule or any other
contract with the Insurer or an affiliate of the Insurer.
Expense Reimbursement Amounts
The insurer agrees to pay the Broker-Dealer an expense reimbursement allowance
on premiums during the first policy year as follows:
o 25%# of premium received up to the planned periodic premium, not to exceed
target premium. See Exhibit A for schedule of Target Premiums.
# Allowance is reduced to 22.5% if Batch underwriting or Expanded
Non-Medical underwriting is used. Allowance is reduced to 15% if
Guaranteed Issue underwriting is used. Other arrangements may be made
with different compensation amounts.
