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EXHIBIT 10.26
LINCOLN NATIONAL INTERCOMPANY AGREEMENT
This agreement is being executed to formalize the procedures involved
with the intercompany flow of dollars which result from Lincoln National
Corporation and its affiliated companies sharing common facilities and
services. The accompanying Exhibits considered to be a part of this
agreement are as follows:
Exhibit I - Procedures for Allocated Expenses/Usage Fees
Exhibit II - Procedures for Intercompany Receivables/Payables
Exhibit III - Specific Allocated Expenses/Usage Fees for Calendar Year 1997
Exhibit IV - Lincoln Investment Management - Service Fees for Calendar
Year 1997
As duly authorized officers of Lincoln National Corporation or one of its
affiliated companies, we have reviewed the attached exhibits and find the
procedures and specific charges to be acceptable. Any changes to the
procedures or specific charges covered by this agreement will be formalized by
Lincoln National Life's Financial & Risk Management - Performance Management
Unit and will be duly authorized by obtaining signed amendments to this initial
agreement.
This agreement may be signed in one or more counterparts, each of which
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
Dated: January 1, 1997
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Lincoln National Corporation Lincoln Life Improved Housing, Inc.
by: Xxx X. Xxxxxxx, Chairman, CEO Xxx X. Xxxxxxx, CEO
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The Lincoln National Life Insurance Company Lincoln National (China) Inc.
Lincoln Financial Group, Inc. Xxxxxxx X. Xxxxxxx, President
by: Xxx X. Xxxxxx, President, CEO
/s/ Xxxxxxx X. Xxxxxx
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American States Insurance Company Lincoln National Investment Companies, Inc.
by: Xxxxxxx X. Xxxxxx, President Xxxxxxx X. Xxxx, President, CEO
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LNC Equity Sales Corporation First Penn-Pacific Life Insurance Company
by: J. Michael Hemp, President by: Xxxxxx X. Xxxxx, President, Director
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The Xxxxxxx Xxxxx Corporation Vantage Global Advisors, Inc.
by: Xxxxxx X. Xxxxx, President, CEO by: T. Xxxxx Xxxxxxx, President, Treasurer
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Lincoln Investment Management, Inc.
H. Xxxxxx XxXxxxxx, President
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by: Xxxxxxxx X. Xxxxxxx for the following companies:
Lincoln National Reassurance Company, President
Lincoln National Health & Casualty
Insurance Company, President
LNC Administrative Services Corporation, CEO
Lincoln National Intermediaries, Inc., CEO
Lincoln National Management Services, Inc., CEO
Lincoln National Risk Management, Inc., CEO
Lincoln National Structured Settlement, Inc., CEO
Special Pooled Risk Administrators, Inc., CEO
Underwriters & Management Services, Inc., CEO
Lincoln National Reinsurance Co. Limited, CEO
Lincoln National Reinsurance Co
(Barbados) Ltd., CEO
Old Fort Insurance Company, Ltd, CEO
Lincoln National Underwriting Service, Ltd., CEO
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Xxxxx & Xxxxx, Inc.
by: Xxxxxx X. Xxxxxx, President, Co-CEO
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Delaware Management Holdings, Inc.
by: Xxxxx X. Xxxxx, CEO
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Lincoln National (UK) PLC
by: Xxxxxxx X. Xxxxxxx
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Lincoln National Realty Corporation
by: Xxxxxx X. Xxxxx, President, Director
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EXHIBIT I
ALLOCATED EXPENSE/USAGE FEE CURRENT PROCEDURES
The Lincoln affiliated companies utilize allocated expenses/usage fees as a
means of allocating costs among themselves. The procedures for developing,
reviewing, and recording the allocated expenses/usage fees are outlined below:
1. As a part of the budget preparation process each year, departments
wishing to utilize the allocated expense/usage fee method of allocating
costs develop how they will charge as well as the amount they will charge.
The "how" may be employee counts, item counts, hourly rates, etc. The
amount to be charged each area are determined based on the method of
charging, and the total to be recovered by the charging department
represents a percentage of their total budget. The percentage of recovery
varies by department and is determined by that department. In addition to
the above, a portion of the LNC parent company expenses are allocated to
the business units based on their equity employed as of June 30 each year
and is made through expense account 3943.
2. The LNL Financial & Risk Management - Performance Management unit
collects the allocated expense/usage fee data for the various
departments and compiles a report which details all departments
assessing allocated expenses/usage fees as well as the departments
being assessed the charges. Charged departments then have an
opportunity to review the charges for reasonableness. If the charges
are deemed unreasonable, they may be negotiated with the department
assessing the charges. Once the charges have been agreed upon, LNL
Financial & Risk Management - Performance Management unit prepares a
second version of the allocated expense/usage fee detailed report
which is presented to senior management for review. If changes are
again deemed necessary, the changes are incorporated into the final
version of the report.
3. Based on the final version of the allocated expense/usage fee
detailed report, monthly accounting entries are generated. Allocated
expense amounts are allocated equally each month throughout the year
whereas usage fee amounts are based on usage of services. The LNL
Financial & Risk Management - Performance Management unit is responsible
for initiating the accounting entries for the monthly allocated expenses.
The accounting entries for the monthly usage fees are initiated by the
department providing the services.
4. The LNL Financial & Risk Management - Performance Management Unit,
as well as the individual departments, are responsible for monitoring the
monthly expense reports to ensure that the actual charges being generated
compare favorably to the budgeted charges. Major differences are
researched to determine the reason for the variance and corrective action
is taken as necessary.
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EXHIBIT II
Page 1
INTERCOMPANY ACCOUNTS RECEIVABLES/PAYABLES USER PROCEDURES
The primary purpose for using the Intercompany Accounts Receivables/Payables
Account is to provide a clearing account to facilitate the simultaneous
recording of revenue/expense entries on the general ledgers of two or more Fort
Xxxxx based companies. Use of this account negates the need to transfer cash
among the Fort Xxxxx based companies every time an intercompany transaction is
initiated. Since the entries for all Fort Xxxxx based companies affected by
the transaction can be made simultaneously, the integrity of the consolidated
financial statements is enhanced because there is reasonable assurance that all
the accounting entries impacting the income statements and balance sheets have
been made. For an explanation of the procedures followed to record and settle
intercompany accounts receivables/payables with non-Fort Xxxxx based companies,
see Item 6.
The procedures for using this account are as follows:
1. The department initiating the accounting entries prepares journal entries
for all companies affected by the transaction. The proper revenue/expense
accounts make up half the accounting entry for each company, and the
intercompany accounts receivable/payable account is used as the offset
account in each company. These accounting entries are made throughout the
month.
2. After the end of each accounting month, reports are generated which list
all intercompany accounts receivable/payable entries grouped by matched
and unmatched entries between companies. LNC Controllers personnel are
responsible for the intercompany accounts receivable/payable cash
settlement process which includes reviewing the matched entries for
accuracy as well as reconciling the unmatched entries.
Once all unmatched entries have been reconciled, the amounts of cash to be
transferred among the Fort Xxxxx based companies can be determined. The
cash transfers are completed by no later than the 15th calendar day of
the month as settlement of the previous month's transactions. All
intercompany accounts receivables/payables balances are settled every
month.
3. Transfer of the cash for settlement of the intercompany accounts
receivables/ payables among the Fort Xxxxx based companies is accomplished
using Treasurers' CAPS (ACH) Wire Transfer System. The wire transfer
amounts are input into the CAPS (ACH) Wire Transfer System by LNC
Controllers personnel. Treasurers - Cash Management/Funds Transfer
personnel will then transfer the cash in accordance with the instructions
in the CAPS (ACH) Wire Transfer System.
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EXHIBIT II
Page 2
4. Unmatched entries will be researched by LNC Controllers personnel to
determine what corrective action is necessary. At the direction of LNC
Controllers personnel, correcting entries will be initiated by the
departments who made the original entries. All unmatched entries are
expected to be cleared within the month following the date of the original
entry.
5. If errors were made in assessing allocated expense/usage fee charges, LNL
Financial & Risk Management - Performance Management unit will serve as
the liaison to resolve the discrepancies identified by individual
departments during their review of the monthly expense management reports.
6. If a charge is to be assessed a non-Fort Xxxxx based company, a journal
entry will be made on the ledger of the Fort Xxxxx based company assessing
the charge to the non-Fort Xxxxx based company's intercompany accounts
receivable/payable account/analysis. After the end of each accounting
month, a report is generated which details the amounts to be collected
from the non-Fort Xxxxx based companies. Documentation supporting each
amount charged is gathered and an invoice for the total amount due from
each non-Fort Xxxxx based company is prepared. The invoices and
supporting documentation are then sent to each non-Fort Xxxxx based
company having incurred charges. Payment of the invoices are due upon
receipt. If any of the non-Fort Xxxxx based companies dispute a charge,
LNC Controllers serves as the liaison to resolve the question.
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EXHIBIT III
Page 1
1997 PROPOSED BUDGET REPORT
AMERICAN STATES INSURANCE COMPANY
(Non-Fort Xxxxx Based Affiliate)
1997
ACCOUNT ACCOUNT TITLE PROPOSED BUDGET
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3169 Alloc Exp-LNL 401(K) Part/Plan Admin 130,104
3170 Alloc Exp-LNL 401(K) Asset Charge 274,812
3259 Usage Xxx-XXX Xxxxx/Xxxxxxxxxxxx Xxxxxx 00
0000 Xxxxx Exp-LNC General Corporate 6,411,900
3951 Alloc Exp-LNL Human Resources 176,628
3964 Alloc Exp-LNL College Relations Program 17,976
3995 Usage Fee-LNC/LNL Law 4,236
3998 Usage Fee-LNL Data Center 4,349
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Total Allocated Expenses/Usage Fees 7,020,056
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