Exhibit 3a
PRINCIPAL UNDERWRITING AGREEMENT
--------------------------------
THIS AGREEMENT is effective on the __th day of __________ among LINCOLN
LIFE & ANNUITY COMPANY OF NEW YORK ("LNY"), a life insurance company organized
under the laws of the State of New York on behalf of itself and LINCOLN LIFE &
ANNUITY VARIABLE ANNUITY ACCOUNT H OF LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
("Separate Account"), a separate account established by LNY pursuant to the
New York Insurance Law and AMERICAN FUNDS DISTRIBUTORS, INC. ("AFD"), a
corporation organized under the laws of the State of California. WITNESSETH:
WHEREAS, LNY proposes to issue to the public certain variable annuity
contracts ("Contracts") and has, by resolution of its Board of Directors on July
24, 1996, and by directive of its President on July 24, 1996, authorized the
creation of a segregated investment account in connection therewith; and
WHEREAS, LNY has established the Separate Account for the purpose of
issuing the Contracts and has registered the Separate Account with the
Securities and Exchange Commission ("Commission") as a unit investment trust
under the Investment Company Act of 1940; and
WHEREAS, the Contracts to be issued by LNY are registered with the
Commission for offer and sale to the public, and otherwise are in compliance
with all applicable laws; and
WHEREAS, AFD is a broker-dealer registered under the Securities Exchange
Act of 1934 and a member of the National Association of Securities Dealers,
Inc., and proposes to form a selling group for the distribution of said
Contracts; and
WHEREAS, LNY desires to obtain the services of AFD as principal
underwriter of the Contracts issued by LNY through the Separate Account;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and conditions set forth herein, and for other good and valuable
consideration, LNY, the Separate Account and AFD hereby agree as follows:
Duties of AFD
1. AFD will form a selling group consisting of broker-dealers appointed
by LNY to distribute the Contracts which are issued by LNY through the Separate
Account and are registered with the Commission for offer and sale to the
public.
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2. AFD will enter into and maintain a dealer agreement with each broker-
dealer joining such selling group ("member"); an executed copy of each will be
provided to LNY. Any such dealer agreement expressly will be made subject to
this Agreement. Any such dealer agreement will provide: (i) that each member
will distribute the Contracts only in those jurisdictions in which the Contracts
are registered or qualified for sale and only through duly licensed registered
representatives of members who are fully licensed with LNY to sell the
Contracts in the applicable jurisdiction(s); (ii) that all applications and
initial and subsequent payments under the Contracts collected by the member will
be remitted promptly by the member to LNY at such address as it may from time
to time designate; and (iii) that each member will comply with all applicable
federal and state laws, rules and regulations.
3. AFD will use reasonable efforts to provide information and marketing
assistance to the members, including preparing and providing members with
advertising materials and sales literature, and providing members with current
Prospectuses of the Contracts and of American Variable Insurance Series (the
"Series"). AFD will use reasonable efforts to ensure that members deliver only
the currently effective Prospectuses of the Contracts and the Series. AFD and
LNY will cooperate in the development of advertising and sales literature, as
requested. AFD will deliver to members, and use reasonable efforts to ensure
that members use, only sales literature and advertising material which conforms
to the requirements of federal and state laws and regulations and which has been
authorized by LNY and AFD. AFD will be responsible for filing sales literature
and advertising material, where necessary, with appropriate securities
regulatory authorities, including the National Association of Securities
Dealers, Inc. AFD will not distribute any Prospectus, sales literature,
advertising material or any other printed matter or material relating to the
contracts or the Series if, to its knowledge, any of the foregoing misstates the
duties, obligations or liabilities of LNY or AFD.
4. AFD shall not be responsible for (i) taking or transmitting
applications for the Contracts; (ii) examining or inspecting risks or approving,
issuing or delivering Contracts; (iii) receiving, collecting or transmitting
premium payments; (iv) assisting in the completion of applications for
contracts; (v) paying sales commissions to licensed broker-dealers and insurance
agents; and (vi) otherwise offering and selling Contracts directly to the
public.
5. AFD will bear all its expenses of providing services under this
Agreement, including the cost of preparing, printing and mailing advertising and
sales literature, and the cost of printing and mailing Series and Contract
Prospectuses which are used for sales purposes, except that AFD shall not bear
the expenses of registering and qualifying shares for Contracts for sale under
federal and state laws and expenses of preparing, printing and mailing
Prospectuses, proxies and shareholder reports to the extent authorized by law.
It is understood that LNY will not be required to bear the cost of preparing,
printing and mailing Series Prospectuses.
6. AFD will furnish to LNY such information with respect to the Series
in such form and signed by such of its officers as LNY may reasonably request,
and will warrant that the statements therein contained when so signed will be
true and correct. AFD will advise LNY immediately of (a) any request by the
Commission (i) for amendment of the registration statement relating to the
Contracts or the Series or (ii) for additional information; (b) the issuance
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by the commission of any stop order suspending the effectiveness of the
registration statement of the Contracts or the Series or the initiation of any
proceedings for that purpose; (c) the institution of any proceeding,
investigation or hearing involving the offer or sale of the Contracts or the
Series of which it becomes aware; or (d) the happening of any material event, if
known, which makes untrue any statement made in the registration statement of
the Contracts or the Series or which requires the making of a change therein in
order to make any statement made therein not misleading.
7. AFD will use reasonable efforts to have the Series register for sale
under the Securities Act of 1933 and, as required, under state securities laws,
from time to time as necessary, such additional shares of the Series as may
reasonably be necessary for use as the funding vehicle for the Contracts.
Duties of LNY
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8. LNY or its agent will receive and process applications and premium
payments in accordance with the terms of the Contracts and the current
Prospectuses. All applications for Contracts are subject to acceptance or
rejection by LNY in its sole discretion. LNY will inform AFD of any such
rejection and the reason therefor.
9. LNY will be responsible for filing the Contracts, applications,
forms, sales literature and advertising material, where necessary, with
appropriate insurance regulatory authorities.
10. LNY will furnish to AFD such information with respect to the
Separate Account and the Contracts in such form and signed by such of its
officers as AFD may reasonably request, and will warrant that the statements
therein contained when so signed will be true and correct. LNY will advise AFD
immediately of: (a) any request by the Commission (i) for amendment of the
registration statement relating to the Contracts or the Series or (ii) for
additional information; (b) the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement of the Contracts or
the Series or the initiation of any proceedings for that purpose; (c) the
institution of any proceeding, investigation, hearing or other action involving
the offer or sale of the Contracts or the Series of which it becomes aware; (d)
the happening of any material event, if known, which makes untrue any statement
made in the registration statement of the Contracts or the Series or which
requires the making of a change therein in order to make any statement made
therein not misleading.
11. LNY will use reasonable efforts to register for sale, from time to
time as necessary, additional dollar amounts of the Contracts under the
Securities Act of 1933, and, should it ever be required, under state securities
laws and to file for approval under state insurance laws when necessary and will
maintain the Investment Company Act of 1940 registration of the Separate
Account.
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12. LNY will pay to members of the selling group such commissions as are
from time to time approved by LNY set forth in dealer agreements. Such dealer
agreements shall provide for the return of sales commissions by the members to
LNY if the Contracts are tendered for redemption to LNY in accordance with the
"free look" provision in the Contract.
13. LNY will bear its expenses of providing services under this Agreement,
including the cost of preparing (including typesetting costs), printing and
mailing Prospectuses of the Contracts to Contract owners, expenses and fees of
registering or qualifying the Contracts and the Separate Account under federal
or state laws, and any direct expenses incurred by its employees in assisting
AFD in performing its duties hereunder. LNY will pay to AFD such remuneration
for its services and for the services of its salaried employees, and such
reimbursement for its charges and expenses, as may be contained in such schedule
of remuneration as may be adopted and appended to this Agreement from time to
time. (See Schedule A - Commissions to Members and Remuneration to AFD.) Said
Schedule A may be amended from time to time by the mutual written consent of the
undersigned parties; except that AFD may alter the ratio of commissions paid to
dealers and remuneration paid to AFD as set forth in paragraph 26 of this
Agreement. LNY will be responsible for paying all state appointing fees and
associated renewal fees incurred to enable members to sell the Contracts, except
with respect to paying appointment fees for "non-producers." In the event LNY
determines to stop paying the appointment fees for a non-producer, AFD shall be
given the opportunity to pay such fees.
14. Compensation shall be paid in accordance with Schedule A which is
attached to, and hereby incorporated into, this Agreement; provided, however,
that LNY shall not be obligated to pay servicing fees or trail commissions to
members in the event that LNY has not received, or is no longer eligible to
receive, payments under the plan of distribution adopted by the Class 2 Shares
of the Funds of the American Variable Insurance Series pursuant to rule 12b-1
under the Investment Company Act of 1940.
Warranties
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15. LNY represents and warrants to AFD that: (i) a registration statement
under the Securities Act of 1933 (File No. 333-38007) and under the Investment
Company Act of 1940 (File No. 811-08441) on Form N-4 with respect to the
Contracts and Separate Accounts has been filed with the Commission in the form
previously delivered to AFD, and copies of any and all amendments thereto will
be forwarded to AFD at the time that they are filed with the Commission; (ii)
the registration statement and any further amendments or supplements thereto
will, when they become effective, conform in all material respects to the
requirements of the Securities Act of 1933 and the Investment Company Act of
1940, and the rules and regulations of the Commission thereunder, and will not
contain any untrue statement of a material fact or omit to state a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statement or omission made in
reliance upon and in conformity with information furnished in writing to LNY by
AFD expressly for use therein; (iii) LNY is validly existing as a stock life
insurance company under the laws of the State of New York, with power (corporate
or other) to own its properties and conduct its business as described in the
Prospectus, and has been duly qualified for the transaction
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of business under the laws of each other jurisdiction in which it owns or leases
properties, or conducts any business, so as to require such qualification; (iv)
the Contracts to be issued through the Separate Account have been duly and
validly authorized and, when issued and delivered against payment therefor as
provided in the Prospectuses and in the Contracts, will be duly and validly
issued and will conform to the description of such Contracts contained in the
Prospectuses relating thereto; (v) LNY will not pay commissions to persons who,
to the best of LNY's knowledge, are not appropriately licensed in a manner as to
comply with the state insurance laws; (vi) the performance of this Agreement and
the consummation of the transactions herein contemplated will not result in a
breach or violation of any of the terms or provisions of, or constitute a
default under, any statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which LNY is a party or by which
LNY is bound, LNY's Charter as a stock life insurance company or By-Laws, or any
order, rule or regulation of any court or governmental agency or body having
jurisdiction over LNY or any of its properties; and no consent, approval,
authorization or order of any court or governmental agency or body which has not
been obtained by the effective date of this Agreement is required for the
consummation by LNY of the transactions contemplated by this Agreement; (vii)
there are no material legal or governmental proceedings pending to which LNY or
the Separate Account is a party or of which any property of LNY or the Separate
Account is the subject, other than as set forth in the Prospectus relating to
the Contracts, and other than litigation incident to the kind of business
conducted by LNY which, if determined adversely to LNY, would not individually
or in the aggregate have a material adverse effect on the financial position,
surplus or operations of LNY; and (viii) any information furnished in writing by
LNY to AFD for use in the registration statement of the Series will not result
in the registration statement's failing to conform in all respects to the
requirements of the Securities Act of 1933 and the rules and regulations
thereunder or containing any untrue statement of a material fact or omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading.
16. AFD represents and warrants to LNY that: (i) a registration
statement under the Securities Act of 1933 (File No. 2-86838), and under the
Investment Company Act of 1940 (File No. 811-3857) with respect to American
Variable Insurance Series has been filed with the Commission in the form
previously delivered to LNY, and copies of any and all amendments thereto will
be forwarded to LNY at the time that they are filed with the Commission; (ii)
the Series' registration statement and any further amendments or supplements
thereto will, when they become effective, conform in all material respects to
the requirements of the Securities Act of 1933 and the Investment Company Act of
1940, and the rules and regulations of the Commission thereunder, and will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty shall not
apply to any statements or omissions made in reliance upon and in conformity
with information furnished in writing to AFD by LNY expressly for use therein;
(iii) the performance of its duties under this Agreement by AFD will not result
in a breach or violation of any of the terms or provisions or constitute a
default under any statute, any indenture, mortgage, deed of trust, note
agreement or other agreement or instrument to which AFD is a party or by which
AFD is bound, the Certificate of Incorporation or By-Laws of AFD, or any order,
rule or regulation of any court or governmental
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agency or body having jurisdiction over AFD or its property; and (iv) any
information furnished in writing by AFD to LNY for use in the registration
statement for the Contracts will not result in the registration statement's
failing to conform in all respects to the requirements of the Securities Act of
1933 and the rules and regulations thereunder or containing any untrue statement
of a material fact or omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; (v) it is a
broker-dealer duty registered with the Commission pursuant to the Securities
Exchange Act of 1934 and a member in good standing of the National Association
of Securities Dealers, Inc. and is in compliance with the securities laws in
those states in which it conducts business as a broker-dealer; (vi) it will use
reasonable efforts to ensure that no offering, sale or other disposition of the
Contracts will be made until it has been notified by LNY that the subject
registration statements have been declared effective and the Contracts have been
released for sale by LNY, and that such offering, sale or other disposition
shall be limited to those jurisdictions that have approved or otherwise permit
the offer and sale of the Contracts by LNY; and (vii) it will comply with the
requirements of state broker-dealer regulations and the Securities Exchange Act
of 1934 as each applies to AFD and shall conduct its affairs in accordance with
the Conduct Rules of the National Association of Securities Dealers, Inc.
Miscellaneous
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17. AFD makes no representation or warranty regarding the number of
Contracts to be sold by licensed broker-dealers and insurance agents or the
amount to be paid thereunder. AFD does, however, represent that it will actively
engage in its duties under this Agreement on a continuous basis while the
Agreement is in effect and there is an effective registration of the Contracts
and of the Series, or its successor, with the Commission.
18. AFD may act as principal underwriter, sponsor, distributor or dealer
for issuers other than LNY or its affiliates in connection with mutual funds
or insurance products.
LNY may issue through any broker-dealer any insurance contract; however,
LNY will not enter into any agreement with any other organization for the
purpose of distributing the Contracts.
It is understood that shares of American Variable Insurance Series may be
sold to fund insurance contracts of issuers other than LNY or its affiliates
or to other shareholders in accordance with Internal Revenue Code Section 817(h)
and the regulations thereunder.
19. Nothing in this Agreement shall obligate LNY to appoint any member
or registered representative of a member its agent for purposes of the
distribution of the Contracts. Nothing in this Agreement shall be construed as
requiring AFD to effect sales of the Contracts directly to the public or to act
as an insurance agent or insurance broker on behalf of LNY for purposes of
state insurance laws.
20. AFD agrees to indemnify LNY (or any control person, shareholder,
director, officer or employee of LNY) for any liability incurred (including
costs relating to defense of
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any action) arising out of any AFD act or omission relating to (i) rendering
services under this Agreement or (ii) the purchase, retention or surrender of
a Contract by any person or entity; provided, however that indemnification will
not be provided hereunder for any such liability that results from the willful
misfeasance, bad faith or gross negligence of LNY or from the reckless
disregard by LNY of the duties and obligations arising under this Agreement.
21. LNY agrees to indemnify AFD (or any control person, shareholder,
director, officer or employee of AFD) for any liability incurred (including
costs relating to defense of any action) arising out of any LNY act or
omission relating to (i) rendering services under this Agreement or (ii) the
purchase, retention or surrender of a Contract by any person or entity;
provided, however, that indemnification will not be provided hereunder for any
such liability that results from the willful misfeasance, bad faith or gross
negligence of AFD or from the reckless disregard by AFD of the duties and
obligations arising under this Agreement.
22. This Agreement will terminate automatically upon its assignment, as
that term is defined in the Investment Company Act of 1940. The parties
understand that there is no intention to create a joint venture in the subject
matter of this Agreement. Accordingly, the right to terminate this Agreement and
to engage in any activity not inconsistent with this Agreement is absolute. This
Agreement will terminate, without the payment of any penalty by either party:
(a) at the option of LNY upon six months' advance written notice to AFD; or
(b) at the option of AFD upon six months' advance written notice to LNY; or
(c) at the option of LNY upon institution of formal proceedings against AFD by
the National Association of Securities Dealers, Inc. or by the Commission; or
(d) at the option of AFD upon the institution of formal proceedings against
LNY by the Department of Insurance of a State; or (e) as otherwise provided in
the Investment Company Act of 1940.
23. Each notice required by this Agreement shall be given in writing and
delivered by certified mail-return receipt requested to the following
addresses:
LNY:
Xxxx X. Xxxxxxx
Second Vice President
Lincoln Life & Annuity Company of New York
000 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxx Xxxx 00000
AFD:
Xxxx X. Post, Jr.
Vice President
American Funds Distributors, Inc.
000 Xxxxx Xxxx Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxxxxx, XX 00000
24. This Agreement shall be subject to the laws of the State of New York
and construed so as to interpret the Contracts as insurance products written
within the business operation of LNY.
25. This Agreement covers and includes all agreements, oral and written
(expressed or implied) between LNY and AFD with regard to the marketing and
distribution of the Contracts, and supersedes any and all Agreements between the
parties with respect to the subject matter of this Agreement; except that this
Agreement shall not affect the operation of any previous agreements entered into
between LNY and AFD unrelated to the subject matter of this Agreement.
26. This Agreement, along with any Schedules attached hereto and
incorporated herein by reference, may be amended from time to time by the mutual
agreement and consent of the undersigned parties, provided such amendment be in
writing and duly executed; except that with respect to any Schedule A, AFD in
its sole discretion, may alter upon written notice to LNY the ratio of member
commissions paid to remuneration paid to AFD. AFD agrees to reimburse
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LNY any remuneration previously received to the extent necessary to pay
additional commissions to members due to a retroactive change of this ratio.
27. LNY shall make available to AFD for distribution through an AFD-
formed selling group, at AFD's option, any variable contract type or variable
contract feature issued by LNY through broker-dealers on the same terms and
conditions. LNY shall make available to AFD any proposed variable contract
type to be issued through broker-dealers prior to introduction. AFD shall use
its best efforts to provide wholesaler support for the Contract and any
successor contracts as long as this Agreement, as amended, or similar agreement
is in effect that is at least comparable to the level of support provided by AFD
for non-Lincoln contracts.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to
be duly executed and attested as follows:
Lincoln Life & Annuity Company of New York
on behalf of itself and Lincoln Life &
Annuity Variable Annuity Account H of
Lincoln Life & Annuity Company of New York
Attest:
--------------------------------- -------------------------------------
American Funds Distributors, Inc.
Attest:
--------------------------------- -------------------------------------
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SCHEDULE A
COMMISSIONS TO MEMBERS AND REMUNERATION TO AFD
1. All Sales of the Contracts
A. Commissions with Service Fees to Members other than LFA
The standard commission schedule pays to dealers 4.75% of each purchase payment
and a 0.25% annual service fee (on all contract purchase payments beginning in
the second contract year which increases to 0.40% after 84 months). The
additional following choices are also available:
Schedule (1) 6.00% of each purchase payment, 0.25% annual service fee
after 84 months
Schedule (2) 5.10% of each purchase payment, 0.25% annual service fee
Schedule (3) 0.75% of each purchase payment, 0.75% annual continuing
commission, 0.25% annual service fee
AFD will give up a portion of its remuneration in order to provide an extra
sales volume allowance of 0.25% of Purchase Payments to be paid to dealers
maintaining a sales volume of at least $7,500,000 in each calendar year. LNY,
upon notification from AFD, will deduct enough from AFD's remuneration to pay
this additional allowance to that dealer on all sales for that calendar year.
Payment will be made to qualifying dealers every quarter after notification from
AFD is received by LNY. The above options do not affect the 0.25% sales volume
allowance paid to dealers maintaining a sales volume of at least $7,500,000 in
the American Legacy III variable annuity in each calendar year.
Commission options can be chosen on a contract by contract basis by the
individual registered representative. Once a commission option is chosen for a
contract, it may not be changed. The commission option chosen must be indicated
on the application. If no selection is made, the default will be our standard
commission schedule.
Service fees for schedule (1) will be paid to dealers on the value of all
contract purchase payments beginning in the eighth contract year. The service
fee will be paid at the end of each calendar quarter on the quarter ending
account value less purchase payments made in the previous 84 months. Service
fees for schedules (2) and (3) and the schedule (3) continuing commissions will
be paid to dealers on the value of all contract purchase payments beginning in
the second contract year. These service fees and continuing commissions will be
paid at the end of each calendar quarter on the quarter ending account value
less purchase payments made in the previous 15 months. Service fees and
continuing commissions will continue to be paid on a particular contract until
the contract is surrendered or annuity benefits begin to be paid under an
annuity option.
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Service fee payments are subject to the continuation of the plan of distribution
adopted by American Variable Insurance Series, which serves as the investment
vehicle for American Legacy III, and such service fee payments may be varied or
discontinued at any time.
Additional Deposits Made At or After Age 81 and Before Age 86 to Contracts
Issued Before Age 81.
If the contract is issued to an owner under age 81, any deposit received
at or after the owner attains age 81 and before the owner attains age 86 will
receive the same annual service fee and same annual continuing commission
according to the commission schedule selected, but a different commission on
additional purchase payments. This commission will depend on the original
schedule chosen.
If the standard schedule was chosen, then a commission of 2.25% of each
purchase payment will be paid on purchase payments made at or after age 81 and
before age 86.
If schedule (1) had been chosen, the commission is 3.00% of each
purchase payment made at or after age 81 and before age 86.
If schedule (2) had been chosen, the commission is 2.25% of each
purchase payment made at or after age 81 and before age 86.
If schedule (3) had been chosen, the commission is 0.65% of each
purchase payment made at or after age 81 and before age 86.
The service fee and continuing commission will be paid at the end of
each calendar quarter on the quarter ending account value less purchase payments
made in the previous 84 months for schedule (1) and 15 months for schedules (2)
and (3).
Newly-Established Contracts with Owner Issue Age At or After Age 81 and Before
Age 86.
All purchase payments made to contracts with owner issue age at or after
age 81 and before age 86 will receive one of the following commission schedules.
In addition to the standard commission schedule (which pays 2.25% of each
purchase payment made at or after age 81 and before age 86 plus a continuing
0.25% annual service fee), the following choices are available:
(1) 3.00% of each purchase payment, 0.25% annual service fee after 84
months
(2) 2.25% of each purchase payment, 0.25% annual service fee
(3) 0.65% of each purchase payment, 0.65% annual continuing
commission, 0.25% annual service fee.
The service fee and continuing commission will be paid at the end of
each calendar quarter on the quarter ending account value less purchase payments
made in the previous 84 months for schedule (1) and 15 months for schedules (2)
and (3).
Additional Deposits Made At or After Age 86 to Contracts Issued Before Age 86
If the contract is issued to an owner under age 86, any deposit received
at or after the owner attains age 86 will receive the same annual service fee
and the same annual continuing commission according to the commission schedule
selected, but a different commission on additional purchase payments. This
commission will depend on the original schedule chosen.
If the standard schedule was chosen, then a commission of 1.60% of
each purchase payment will be paid on purchase payments made at or after age 86.
If schedule (1) had been chosen, the commission is 2.00% of each
purchase payment made at or after age 86.
If schedule (2) had been chosen, the commission is 1.60% of each
purchase payment made at or after age 86.
If schedule (3) had been chosen, no initial commission is paid on
additional purchase payments made at or after age 86. The schedule (3)
continuing commission and service fee will apply to these purchase payments.
The service fee and continuing commission will be paid at the end of
each calendar quarter on the quarter ending account value less purchase payments
made in the previous 84 months for schedule (1) and 15 months for schedules (2)
and (3).
Additional Commissions
For dealers reaching certain sales levels set by AFD and LNY from time to
time, and additional 0.10% continuing commission will be paid to dealers on the
value of all Contract purchase payments beginning in the second Contract year.
This compensation will be paid at the end of each calendar quarter and will be
calculated as follows: At the end of each calendar quarter, LNY will calculate
and pay, for all eligible Contracts which have been in force for 15 months or
more as of the last day of the quarter, an amount equal to 0.025% of an amount
equal to the quarter ending account value less any deposits made in the
previous 15 months.
B. Commissions and Service Fees to LFA
Cash flow expressed as a percent of purchase payment received and includes a
sales volume allowance of 0.25% which represents a reduction in AFD's
remuneration; trails 2-7 are expressed as a percent of account value less
purchase payments made in the previous 15 months; trails 8+ are expressed as a
percent of account value less purchase payments made in the previous 84 months.
These continuing commissions are not paid on Contracts that have been
annuitized.
Commission options can be chosen on a contract by contract basis by the
individual registered representative. Once a commission option is chosen for a
contract, it may not be changed. The commission option chosen must be indicated
on the application. If no selection is made, the default will be Option 1.
1. Purchase Payments made before age 81 to contracts issued before age 81.
Option 1 Option 2 Option 3
-------- -------- --------
Cash flow 6.50% 4.60% 1.00%
Trails 2-7 0.0% 0.35% 1.00%
Trails 8+ 0.0% 0.55% 1.00%
2. Purchase Payments made between ages 81-85 to contracts issued before age 81.
Option 1 Option 2 Option 3
-------- -------- --------
Cash flow 3.25% 2.60% 0.90%
Trails 2-7 0.0% 0.35% 1.00%
Trails 8+ 0.0% 0.55% 1.00%
3. Purchase Payments made after age 85 to contracts issued before age 81.
Option 1 Option 2 Option 3
-------- -------- --------
Cash flow 2.25% 1.60% 0.30%
Trails 2-7 0.0% 0.35% 1.00%
Trails 8+ 0.0% 0.55% 1.00%
4. Purchase Payments made between ages 81-85 to contracts issued between ages
81-85.
Option 1 Option 2 Option 3
-------- -------- --------
Cash flow 3.25% 2.60% 0.90%
Trails 2-7 0.0% 0.35% 0.90%
Trails 8+ 0.0% 0.40% 0.90%
5. Purchase Payments over age 85 to contracts issued between ages 81-85.
Option 1 Option 2 Option 3
-------- -------- --------
Cash flow 2.25% 1.60% 0.30%
Trails 2-7 0.0% 0.35% 0.90%
Trails 8+ 0.0% 0.40% 0.90%
C. Remuneration to AFD for sales of the contracts
AFD shall receive 0.90% of each purchase payment made. AFD will give up a
portion of its remuneration in order to provide a sales volume allowance of
0.25% of purchase payments to be paid to dealers (including LFA) maintaining a
sales volume of $7.5 million in each calendar year. LNY, upon notification from
AFD, will deduct enough from AFD's remuneration to pay this additional allowance
to that dealers on all sales for that calendar year. Payments will be made to
qualifying dealers every quarter after notification from AFD is received by LNY.
2. Annuitization
Upon annuitization of a Contract to which no surrender charges apply: (1) a
continuing commission of 0.80% annually will be paid to dealers on statutory
reserves for that portion of the Contract which has been annuitized on a
variable basis and which remains annuitized on a variable basis (i.e. excluding
any statutory reserves associated with post-annuitization transfers from a
variable payout status to fixed payout status). This amount will be based on the
calendar quarter end reserve amount and paid to dealers each calender quarter;
and/or (2) a one time commission of 3.00% will be paid to dealers on Contract
value which has been annuitized on a fixed basis.
Upon annuitization of a Contract to which no surrender charges apply,
AFD will receive remuneration of 0.90% on Contract value which has been
annuitized on a fixed and/or variable basis.
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