Exhibit 8(o)
FORM OF
FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT is made and entered into as of
September , 1996 by and between LINCOLN NATIONAL LIFE INSURANCE COMPANY (the
"Company") and TWENTIETH CENTURY SECURITIES, INC. (the "Distributor").
WHEREAS, the Company offers to the public certain group variable annuity
contracts and group variable life insurance contracts (the "Contracts"); and
WHEREAS, the Company wishes to offer as investment options under the
Contracts, TCI Balanced and TCI Growth (the "Funds"), both of which are a series
of mutual fund shares registered under the Investment Company Act of 1940, as
amended, and issued by TCI Portfolios, Inc. (the "Issuer"); and
WHEREAS, on the terms and conditions hereinafter set forth, Distributor and
the Issuer desire to make shares of the Funds available as investment options
under the Contracts and to retain the Company to perform certain administrative
services on behalf of the Funds;
WHEREAS, the Funds are open-end management investment companies that were
established for the purpose of serving as the investment vehicles for separate
accounts established for variable life insurance policies and variable annuity
contracts (collectively referred to as "Variable Insurance Products", the owners
of such products being referred to as "Product Owners") to be offered by
insurance companies which have entered into participation agreements with the
Fund ("Participating Insurance Companies"); and
WHEREAS, the Issuer filed with the Securities and Exchange Commission (the
"SEC") and the SEC has declared effective a registration statement (referred to
herein as the "Fund Registration Statement" and the prospectus contained
therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as
the "Fund Prospectus") on Form N-1A to register itself as an open-end management
investment company (File No. 40-811-5188) under the Investment Company Act of
1940, as amended (the "1940 Act"), and the Fund shares (File No. 33-14567) under
the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC to
register under the 1933 Act certain variable annuity contracts described in
Schedule A to this Agreement as in effect at the time this Agreement is executed
and such other variable annuity contracts and variable life insurance policies
which may be added to Schedule A from time to time (such policies and contracts
shall be referred to herein collectively as the "Contracts," each such
registration statement for a class or classes of contracts listed on Schedule A
being referred to as the "Contracts Registration Statement" and the prospectus
for each such class or classes being referred to herein as the "Contracts
Prospectus; and
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WHEREAS, each Account (defined in SECTION 7(a) below), a validly existing
separate account, duly authorized by resolution of the Board of Directors of the
Company, set forth on Schedule B sets aside and invests assets attributable to
the Contracts; and
WHEREAS, the Company has registered or will have registered each Account with
the SEC as a unit investment trust under the 1940 Act before any Contracts are
issued by that Account; and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC under
the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, the Distributor and the Issuer have entered into an agreement (the
"Distribution Agreement") pursuant to which the Distributor will distribute Fund
shares; and
WHEREAS, Investors Research Corporation (the "Investment Advisor") is
registered as an investment adviser under the 1940 Act and any applicable state
securities laws and serves as an investment manager to the Issuer and the Funds
pursuant to an agreement; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Fund shares on behalf of each
Account to fund its Contracts and the Distributor is authorized to sell such
Fund shares to purchasers such as the Accounts at net asset value;
NOW, THEREFORE, the Company and Distributor agree as follows:
1. TRANSACTIONS IN THE FUNDS. Subject to the terms and conditions of this
Agreement, the Distributor will cause the Issuer to make shares of the Funds
available to be purchased, exchanged, or redeemed, by the Company on behalf of
the Accounts through a single account per Fund at the net asset value applicable
to each order. The Funds' shares shall be purchased and redeemed on a net basis
in such quantity and at such time as determined by the Company to satisfy the
requirements of the Contracts for which the Funds serve as underlying investment
media. Dividends and capital gains distributions will be automatically
reinvested in full and fractional shares of the Funds.
2. ADMINISTRATIVE SERVICES. The Company shall be solely responsible for
providing all administrative services for the Contract owners. The Company
agrees that it will maintain and preserve all records as required by law to be
maintained and preserved, and will otherwise comply with all laws, rules and
regulations applicable to the marketing of the Contracts and the provision of
administrative services to the Contract owners.
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3. TIMING OF TRANSACTIONS.
Distributor hereby appoints the Company as its agent and/or agent for the
Funds for the limited purpose of accepting purchase and redemption orders for
Fund shares from the Accounts and/or Contract Owners, as applicable. On each day
the New York Stock Exchange (the "Exchange") is open for trading (each, a
"Business Day"), the Company may receive instructions from the Accounts and/or
Contract Owners for the purchase or redemption of shares of the Funds
("Orders"). Orders received and accepted by the Company prior to the close of
regular trading on the Exchange (the "Close of Trading") on any given Business
Day (currently, 4:00 p.m. Eastern time) and transmitted to the Issuers by 10:00
a.m. Eastern time on the next following Business Day will be executed at the net
asset value determined as of the Close of Trading on the previous Business Day.
Any Orders received by the Company after the Close of Trading, and all Orders
that are transmitted to the Issuers after 10:00 a.m. Eastern time on the next
following Business Day, will be executed by the Issuers at the net asset value
next determined following receipt of such Order. The day as of which an Order is
executed by the Issuers pursuant to the provisions set forth above is referred
to herein as the "Trade Date".
4. PROCESSING OF TRANSACTIONS.
(a) By 7:00 p.m. Eastern time on each Business Day, Distributor will provide
to the Company, via facsimile or other electronic transmission acceptable to the
Company, the Funds' net asset value, dividend and capital gain information and,
in the case of income funds, the daily accrual for interest rate factor (mil
rate), determined at the Close of Trading.
(b) By 10:00 a.m. Eastern time on each Business Day, the Company will provide
to Distributor via facsimile or other electronic transmission acceptable to
Distributor a report stating whether the Orders received by the Company from
Contract Owners by the Close of Trading on the preceding Business Day resulted
in the Accounts being a net purchaser or net seller of shares of the Funds. As
used in this Agreement, the phrase "other electronic transmission acceptable to
Distributor" includes the use of remote computer terminals located at the
premises of the Company, its agents or affiliates, which terminals may be linked
electronically to the computer system of Distributor, its agents or affiliates
(hereinafter, "Remote Computer Terminals").
(c) Upon the timely receipt from the Company of the report described in (b)
above, the Funds' transfer agent will execute the purchase or redemption
transactions (as the case may be) at the net asset value computed as of the
Close of Trading on the Trade Date. Payment for net purchase transactions shall
be made by wire transfer to the applicable Fund custodial account designated by
the Distributor on the Business Day next following the Trade Date. Such wire
transfers shall be initiated by the Company's bank prior to 4:00 p.m. Eastern
time and received by the Funds prior to 6:00 p.m. Eastern time on the Business
Day next following the Trade Date ("T + 1"). If payments for a purchase Order is
not timely received, such Order will be executed at the net asset value next
computed
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following receipt of payment. Payments for net redemption transactions shall be
made by wire transfer by the Issuers to the account designated by the Company on
T + 1;
PROVIDED, HOWEVER, the Issuer reserves the right to settle redemptions
transactions within the time period set forth in the applicable Fund's
then-current prospectus. On any Business Day when the Federal Reserve Wire
Transfer System is closed, all communication and processing rules will be
suspended for the settlement of Orders. Orders will be settled on the next
Business Day on which the Federal Reserve Wire Transfer System is open and the
original Trade Date will apply.
5. PROSPECTUS, PROXY MATERIALS AND OTHER INFORMATION
(a) Distributor shall provide the Company with copies of the Issuer's proxy
materials, periodic fund reports to shareholders and other materials that are
required by law to be sent to the Issuer's shareholders. In addition,
Distributor shall provide the Company with a sufficient quantity of prospectuses
and Statements of Additional Information of the Funds to be used in conjunction
with the transactions contemplated by this Agreement, together with such
additional copies of the Issuer's prospectuses and Statements of Additional
Information as may be reasonably requested by Company. If the Company provides
for pass-through voting by the Contract owners, Distributor will provide the
Company with a sufficient quantity of proxy materials for each Contract owner.
(b) The cost of preparing, printing and shipping of the prospectuses,
proxy materials, periodic fund reports and other materials of the Issuer to
the Company shall be paid by Distributor or its agents or affiliates;
PROVIDED, HOWEVER, that if at any time Distributor or its agent reasonably
deems the usage by the Company of such items to be excessive, it may, prior
to the delivery of any quantity of materials in excess of what is deemed
reasonable, request that the Company demonstrate the reasonableness of such
usage. If the Distributor believes the reasonableness of such usage has not
been adequately demonstrated, it may request that the Company pay the cost of
printing (including press time) and delivery of any excess copies of such
materials. Unless the Company agrees to make such payments, Distributor may
refuse to supply such additional materials and Distributor shall be deemed in
compliance with this SECTION 5 if it delivers to the Company at least the
number of prospectuses and other materials as may be required by the Issuers
under applicable law.
(c) The cost of distribution, if any, of any prospectuses, proxy materials,
periodic fund reports and other materials of the Issuer to the Contract owners
shall be paid by the Company and shall not be the responsibility of Distributor
or the Issuer.
(d) The Fund shall not give any information or make any representations on
behalf of the Company or concerning the Company, the Account or the Contracts
other than the information or representations contained in the Contracts
Registration Statement or Contracts Prospectus, as such Registration Statement
and Prospectus may be amended or
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supplemented from time to time, or in published reports of the Account which are
in the public domain or approved in writing by the Company for distribution to
Contract owners, or in sales literature or other promotional material, except
with the prior written permission of the Company. The Company agrees to respond
to any request for permission on a prompt and timely basis. If the Company fails
respond within 10 days of a request by the Fund or the Distributor, then the
Fund is relieved of the obligation to obtain the prior written permission of the
Company.
(e) For purposes of this SECTION 5, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such
as material published, or designed for use, in a newspaper, magazine or other
periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other
public media), sales literature (I.E., any written communication distributed
or made generally available to customers or the public, in print or
electronically, including brochures, circular, research reports, market
letters, form letters, seminar texts, or reprints or excerpts of any other
advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, Statements of Additional Information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
6. COMPENSATION AND EXPENSES.
(a) The Accounts shall be the sole shareholder of Fund shares purchased for
the Contract owners pursuant to this Agreement (the "Record Owners"). The
Company and the Record Owners shall properly complete any applications or other
forms required by Distributor or the Issuer from time to time.
(b) Distributor acknowledges that it will derive a substantial savings in
administrative expenses, such as a reduction in expenses related to postage,
shareholder communications and recordkeeping, by virtue of having a single
shareholder account per Fund for the Accounts rather than having each Contract
owner as a shareholder. In consideration of the Administrative Services and
performance of all other obligations under this Agreement by the Company,
Distributor will pay the Company a fee (the "Administrative Services fee") equal
to 20 basis points (0.20%) per annum of the average aggregate amount invested by
the Company under this Agreement. Distributor's obligation shall be suspended
with respect to any month during which the Company's average aggregate
investment in the Funds drops below $10 million. Notwithstanding the above, if
the Company's average investment in a single Fund during a month exceeds $5
million, Distributor will pay the Company the Administrative Services Fee with
respect to all amounts invested in such Fund. If the Company's investment in
such Fund drops below $5 million, the Distributor's obligation to pay the
Administrative Services Fee shall be suspended until the Company's average
investment in the Fund exceeds $5 million or
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average aggregate investment in the Funds exceeds $10 million. For purposes of
Section 6(b), First UNUM/UNUM assets in the Fund will be included in determining
the threshold.
(c) The payments received by the Company under this Agreement are for
administrative and shareholder services only and do not constitute payment in
any manner for investment advisory services or for costs of distribution.
(d) For the purposes of computing the payment to the Company contemplated by
this SECTION 6, the average aggregate amount invested by the Accounts in the
Funds over a one month period shall be computed by totaling the Company's
aggregate investment (share net asset value multiplied by total number of shares
of the Funds held by the Company) on each Business Day during the month and
dividing by the total number of Business Days during such month.
(e) Distributor will calculate the amount of the payment to be made pursuant
to this SECTION 6 at the end of each calendar quarter and will make such payment
to the Company within 30 days thereafter. The check for such payment will be
accompanied by a statement showing the calculation of the amounts being paid by
Distributor for the relevant months and such other supporting data as may be
requested by the Company and shall be mailed to:
Lincoln National Life Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
(f) In the event Distributor reduces its management fee with respect to any
Fund after the date hereof, Distributor may amend the Administrative Services
fee payable with regard to such Fund by providing the Company 30 days' advance
written notice of any such adjustment. The revised Administrative Services fee
shall become effective as of the latter of 30 days from the date of delivery of
the notice or the date prescribed in the notice.
7. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants that: (i) this Agreement has been
duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms; (ii) it has established the
Separate Accounts listed on Schedule B (the "Accounts"), each of which is a
separate account under the Indiana Insurance law, and has registered each
Account as a unit investment trust under the Investment Company Act of 1940 (the
"1940 Act") to serve as an investment vehicle for the Contracts; (iii) each
Contract provides for the allocation of net amounts received by the
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Company to an Account for investment in the shares of one of more specified
investment companies selected among those companies available through the
Account to act as underlying investment media; (iv) selection of a particular
investment company is made by the Contract owner under a particular Contract,
who may change such selection from time to time in accordance with the terms
of the applicable Contract; and (v) the activities of the Company
contemplated by this Agreement comply with all provisions of federal and
state insurance, securities, and tax laws applicable to such activities.
(b) Distributor represents and warrants that: (i) this Agreement has been
duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of
Distributor, enforceable in accordance with its terms; and (ii) the investments
of the Funds will at all times be adequately diversified within the meaning of
Section 817(h) of the Internal Revenue Service Code of 1986, as amended (the
"Code"), and the regulations thereunder, and that at all times while this
Agreement is in effect, all beneficial interests in each of the Funds will be
owned by one or more insurance companies or by any other party permitted under
Section 1.817-5(f)(3) of the Regulations promulgated under the Code; and (iii)
each Fund currently qualifies as a Regulated Investment Company under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). The Distributor
further represents and warrants that it will cause the Funds to continue to
qualify and to maintain such qualification (under Subchapter M or any successor
or similar provision), and that it will notify the Company immediately upon
having a reasonable basis for believing that it has ceased to so qualify or that
it might not so qualify in the future and (iv) that Distributor is registered as
a Broker/Dealer under the Securities and Exchange Act of 1934.
(c) The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for so long as the Fund shares are sold. The Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
(d) The Fund represents and warrants that the Fund's investment policies,
fees and expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement.
(e) The Fund represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will immediately
notify the Company in the event the fidelity bond coverage should lapse at any
time.
8. ADDITIONAL COVENANTS AND AGREEMENTS
(a) Each party shall comply with all provisions of federal and state laws
applicable to its respective activities under this Agreement. All obligations of
each party under this Agreement are subject to compliance with applicable
federal and state laws.
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(b) Each party shall promptly notify the other parties in the event that it
is, for any reason, unable to perform any of its obligations under this
Agreement.
(c) The Company covenants and agrees that all Orders accepted and transmitted
by it hereunder with respect to each Account on any Business Day will be based
upon instructions that it received from the Contract owners in proper form prior
to the Close of Trading of the Exchange on that Business Day. The Company shall
time stamp all Orders or otherwise maintain records that will enable the Company
to demonstrate compliance with SECTION 8(c) hereof.
(d) The Company covenants and agrees that all Orders transmitted to the
Issuers, whether by telephone, telecopy, or other electronic transmission
acceptable to Distributor, shall be sent by or under the authority and
direction of a person designated by the Company as being duly authorized to
act on behalf of the owner of the Accounts. Absent actual knowledge to the
contrary, Distributor shall be entitled to rely on the existence of such
authority and to assume that any person transmitting Orders for the purchase,
redemption or transfer of Fund shares on behalf of the Company is "an
appropriate person" as used in Sections 8-308 and 8-404 of the Uniform
Commercial Code with respect to the transmission of instructions regarding
Fund shares on behalf of the owner of such Fund shares. The Company shall
maintain the confidentiality of all passwords and security procedures issued,
installed or otherwise put in place with respect to the use of Remote
Computer Terminals and assumes full responsibility for the security therefor.
The Company further agrees to be responsible for the accuracy, propriety and
consequences of all data transmitted to Distributor by the Company by
telephone, telecopy or other electronic transmission acceptable to
Distributor.
(e) The Company agrees to make every reasonable effort to market its
Contracts. It will use its best efforts to give equal emphasis and promotion to
shares of the Funds as is given to other underlying investments of the Accounts.
(f) The Company shall not, without the written consent of Distributor, make
representations concerning the Issuer or the shares of the Funds except those
contained in the then-current prospectus and in current printed sales literature
approved by Distributor or the Issuer.
(g) Advertising and sales literature with respect to the Issuer or the Funds
prepared by the Company or its agents, if any, for use in marketing shares of
the Funds as underlying investment media to Contract owners shall be submitted
to Distributor for review and approval before such material is used. Failure by
Distributor to respond within 10 Business Days of the request by the Company
shall relieve the Company of the obligation to obtain prior approval of
Distributor.
(h) The Company will provide to Distributor at least one complete copy of all
registration statements, prospectuses, statements of additional information,
annual and
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semi-annual reports, proxy statements, and all amendments or supplements to any
of the above that include a description of or information regarding the Funds
promptly after the filing of such document with the SEC or other regulatory
authority.
(i) Each party will comply with reasonable requests for information and
documents regarding the Funds or the other party's compliance with its
obligations under this Agreement made by the other party, by the Fund's Board of
Directors or by any appropriate governmental entity or self regulatory
organization.
9. USE OF NAMES. Except as otherwise expressly provided for in this
Agreement, neither Distributor nor the Funds shall use any trademark, trade
name, service xxxx or logo of the Company, or any variation of any such
trademark, trade name, service xxxx or logo, without the Company's prior
written consent, the granting of which shall be at the Company's sole option.
Except as otherwise expressly provided for in this Agreement, the Company
shall not use any trademark, trade name, service xxxx or logo of the Issuer
or Distributor, or any variation of any such trademarks, trade names, service
marks, or logos, without the prior written consent of either the Issuer or
Distributor, as appropriate, the granting of which shall be at the sole
option of Distributor and/or the Issuer.
10. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges to all Contract
owners so long as the SEC continues to interpret the 1940 Act as requiring such
privileges. It shall be the responsibility of the Company to assure that it and
the separate accounts of the other Participating Companies (as defined in
SECTION 12(a) below) participating in any Fund calculate voting privileges in a
consistent manner.
(b) The Company will distribute to Contract owners all proxy material
furnished by Distributor and will vote shares in accordance with instructions
received from such Contract owners. The Company shall vote Fund shares for which
no instructions have been received in the same proportion as shares for which
such instructions have been received. The Company shall not oppose or interfere
with the solicitation of proxies for Fund shares held for such Contract owners.
11. INDEMNITY.
11.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Fund, the Distributor and each person who controls or
is associated with the Fund (other than another Participating Insurance Company)
or the Distributor within the meaning of such terms under the federal securities
laws and any officer, trustee, director, employee or agent of the foregoing,
against any and all losses, claims, expenses, damages or liabilities, joint or
several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid
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in settlement of, any action, suit or proceeding or any claim asserted), to
which they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, expenses, damages or
liabilities:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Contracts Registration
Statement, Contracts Prospectus, sales literature or other promotional
material for the Contracts or the Contracts themselves (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission or such
alleged statement or alleged omission was made in reliance upon and in
conformity with information furnished in writing to the Company by the
Distributor (or a person authorized in writing to do so on behalf of the Fund
or the Distributor) for use in the Contracts Registration Statement,
Contracts Prospectus or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact by or on behalf of the Company (other than
statements or representations contained in the Fund Registration Statement, Fund
Prospectus or sales literature or other promotional material of the Fund not
supplied by the Company or persons under its control) or wrongful conduct of the
Company or persons under its control with respect to the sale or distribution of
the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Fund Registration Statement, Fund Prospectus or
sales literature or other promotional material of the Fund or any amendment
thereof or supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which they
were made, if such statement or omission was made in reliance upon and in
conformity with information furnished to the Fund by or on behalf of the
Company; or
(d) arise as a result of any failure by the Company to provide the services
and furnish the materials or to make any payments under the terms of this
Agreement; or
(e) arise out of any material breach by the Company of this Agreement,
including but not limited to any failure to transmit a request for redemption or
purchase of Fund shares on a timely basis in accordance with the procedures set
forth in SECTION 3; or
(f) arise as a result of the Company's providing the Fund with inaccurate
information, which causes the Fund to calculate its Net Asset Values
incorrectly.
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This indemnification will be in addition to any liability which the Company
may otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
11.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to
indemnify and hold harmless the Company and each person who controls or is
associated with the Company within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, expenses, damages or liabilities, joint or
several (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amounts paid in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, expenses, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Fund Registration Statement,
Fund Prospectus (or any amendment or supplement thereto) or sales literature or
other promotional material of the Fund, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or omission or alleged
statement or alleged omission was made in reliance upon and in conformity with
information furnished in writing by the Company to the Distributor or its
affiliates for use in the Fund Registration Statement, Fund Prospectus (or any
amendment or supplement thereto) or sales literature for the Fund or otherwise
for use in connection with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact made by the Distributor (other than statements or
representations contained in the Fund Registration Statement, Fund Prospectus or
sales literature or other promotional material of the Fund not supplied by the
Fund or persons under their control) or gross negligence, willful misfeasance
or bad faith of the Distributor or persons under its control with respect to the
sale or distribution of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Contract's Registration Statement, Contract's
Prospectus or sales literature or other promotional material for the Contracts
(or any amendment or supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances in which
they were made, if such statement or omission was made in reliance upon
information furnished in writing by the Distributor to the Company (or a person
authorized in writing to do so on behalf of the Fund or the Distributor); or
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(d) arise as a result of any failure by the Distributor to provide the
services and furnish the materials under the terms of this Agreement (including,
but not by way of limitation, a failure, whether unintentional or in good faith
or otherwise; (i) to comply with the diversification requirements specified in
SECTION 7(b) of this Agreement; and (ii) to provide the Company with accurate
information sufficient for it to calculate its accumulation and/or annuity unit
values in timely fashion as required by law and by the this Agreement); or
(e) arise out of any material breach by the Distributor of this Agreement.
This indemnification will be in addition to any liability which the Fund
may otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
11.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this SECTION 11 of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this SECTION 11 ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this SECTION 11, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to the
benefits of the indemnification contained in this SECTION 11. The
indemnification provisions contained in this SECTION 11 shall survive any
termination of this Agreement.
12
12. POTENTIAL CONFLICTS.
(a) The Company has received a copy of an application for exemptive relief,
as amended, filed by Investors Research on December 12, 1987, with the SEC and
the order issued by the SEC in response thereto (the "Shared Funding Exemptive
Order"). The Company has reviewed the conditions to the requested relief set
forth in such application for exemptive relief. As set forth in such
application, the Board of Directors of the Issuer (the "Board") will monitor the
Issuer for the existence of any material irreconcilable conflict between the
interests of the contract owners of all separate accounts ("Participating
Companies") investing in funds of the Issuer. An irreconcilable material
conflict may arise for a variety of reasons, including: (i) an action by any
state insurance regulatory authority; (ii) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
actions by insurance, tax or securities regulatory authorities; (iii) an
administrative or judicial decision in any relevant proceeding; (iv) the manner
in which the investments of any portfolio are being managed; (v) a difference in
voting instructions given by variable annuity contract owners and variable life
insurance contract owners; or (vi) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof.
(b) The Company will report any potential or existing conflicts of which it
is aware to the Board. The Company will assist the Board in carrying out its
responsibilities under the Shared Funding Exemptive Order by providing the Board
with all information reasonably necessary for the Board to consider any issues
raised. This includes, but is not limited to, an obligation by the Company to
inform the Board whenever contract owner voting instructions are disregarded.
(c) If a majority of the Board, or a majority of its disinterested Board
members, determines that a material irreconcilable conflict exists with regard
to contract owner investments in a Fund, the Board shall give prompt notice to
all Participating Companies. If the Board determines that the Company is
responsible for causing or creating said conflict, the Company shall at its sole
cost and expense, and to the extent reasonably practicable (as determined by a
majority of the disinterested Board members), take such action as is necessary
to remedy or eliminate the irreconcilable material conflict. Such necessary
action may include but shall not be limited to (i) withdrawing the assets
allocable to the Accounts from the fund and reinvesting such assets in a
different investment medium or submitting the question of whether such
segregation should be implemented to a vote of all affected contract owners and
as appropriate, segregating the assets of any appropriate group (i.e., annuity
contract owners, life insurance contract owners, or variable contract owners of
one or more Participating Companies) that votes in favor of such segregation, or
offering to the affected contract owners the option of making such a change [and
(ii) establishing a new registered management investment company or managed
separate account.]
13
Nothing in this paragraph (c) shall be construed to waive any cause of action
which may be available to Company against any other Participating Insurance
Company or Companies, or against any other person or entity, in the event
Company determines in good faith that it (Company) is not responsible (or is not
solely responsible) for the material irreconcilable conflict.
(d) If a material irreconcilable conflict arises as a result of a decision by
the Company to disregard its contract owner voting instructions and said
decision represents a minority position or would preclude a majority vote by all
of its contract owners having an interest in the Issuer, the Company at its sole
cost, may be required, at the Board's election, to withdraw an Account's
investment in the Issuer and terminate this Agreement; provided, however, that
such withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
(e) For the purpose of this SECTION 12, a majority of the disinterested Board
members shall determine whether or not any proposed action adequately remedies
any irreconcilable material conflict, but in no event will the Issuer be
required to establish a new funding medium for any Contract. The Company shall
not be required by this SECTION 12 to establish a new funding medium for any
Contract if an offer to do so has been declined by vote of a majority of the
Contract owners materially adversely affected by the irreconcilable material
conflict.
13. APPLICABLE LAW. This Agreement shall be subject to the provisions of
all applicable securities law, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and regulations
as the SEC may grant, and the terms hereof shall be limited, interpreted and
construed in accordance therewith.
14. TERMINATION. This agreement shall terminate as to the sale and issuance
of new Contracts:
(a) at the option of either the Company, Distributor or the Issuer upon six
months' advance written notice to the other;
(b) at the option of the Company if the Fund's shares are not available for
any reason to meet the requirement of Contracts as determined by the Company.
Reasonable advance notice of election to terminate shall be furnished by
Company;
(c) at the option of either party upon institution of formal proceedings
against the other party or the Investment Advisor or and Sub-Investment Advisor
by the National Association of Securities Dealers, Inc. (the "NASD"), the SEC or
any other regulatory body which the terminating party reasonably believes will
result in a material harm to the terminating party or the Funds, the Accounts or
the Contract owners;
14
(d) upon termination of the Management Agreement between the Issuer and
Investment Advisor or the Distribution Agreement between the Issuer and the
Distributor. Notice of such termination shall be promptly furnished to the
Company. This subsection (e) shall not be deemed to apply if contemporaneously
with such termination a new contract of substantially similar terms is entered
into between the Issuer and the Investment Advisor or between the Issuer and
Distributor;
(e) upon the requisite vote of Contract owners having an interest in the
Issuer to substitute for the Issuer's shares the shares of another investment
company in accordance with the terms of Contracts for which the Issuer's shares
had been selected to serve as the underlying investment medium. The Company will
give 60 days' written notice to the Issuer and Distributor of any proposed vote
to replace the Funds' shares;
(f) upon assignment of this Agreement unless made with the written consent of
all other parties hereto;
(g) if the Issuer's shares are not registered, issued or sold in conformance
with Federal law or such law precludes the use of Fund shares as an underlying
investment medium of Contracts issued or to be issued by the Company. Prompt
notice shall be given by either party should such situation occur;
(h) at the option of the Issuer, if the Issuer reasonably determines in good
faith that the Company is not offering shares of the Fund in conformity with the
terms of this Agreement or applicable law;
(i) at the option of any party hereto upon a determination that continuing to
perform under this Agreement would, in the reasonable opinion of the terminating
party's counsel, violate any applicable federal or state law, rule, regulation
or judicial order;
(j) at the option of the Company or the Fund upon a determination by a
majority of the Fund Board, or a majority of disinterested Fund Board members,
that an irreconcilable material conflict exists among the interests of (i) any
Product owners or (ii) the interests of the Participating Insurance Companies
investing in the Fund;
(k) at the option of the Company if the Fund ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code, or under any successor or
similar provision, or if the Company reasonably believes, based on an opinion of
its counsel, that the Fund may fail to so qualify;
(l) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Section 817(h) of the Code and any
regulations thereunder;
(m) at the option of either the Fund or the Distributor if the Fund or the
Distributor, respectively, shall determine, in their sole judgment exercised in
good faith, that either
15
(1) the Company shall have suffered a material adverse change in its business or
financial condition; or (2) the Company shall have been the subject of material
adverse publicity which is likely to have a material adverse impact upon the
business and operations of either the Fund or the Distributor; or
(n) at the option of the Company, if the Company shall determine, in its sole
judgment exercised in good faith, that either; (1) the Investment Advisor or
Distributor shall have suffered a material adverse change in their respective
businesses or financial condition; or (2) the Investment Advisor or Distributor
shall have been the subject of material adverse publicity which is likely to
have a material adverse impact upon the business and operations of the Company.
15. CONTINUATION OF AGREEMENT.
(a) Termination as the result of any cause listed in SECTION 14 shall not
affect the Issuer's obligation to furnish its shares to Contracts then in force
for which its shares serve or may serve as the underlying medium (unless such
further sale of Fund shares is proscribed by law or the SEC or other regulatory
body). Following termination, Distributor shall not have any Administrative
Services payment obligation to the Company (except for payment obligations
accrued but not yet paid as of the termination date).
(b) Notwithstanding any termination of this Agreement pursuant to SECTION 14
of this Agreement, the Fund will, at the option of the Company, continued to
make available additional Fund shares for so long after the termination of this
Agreement as the Company desires, pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, if the Company so
elects to make additional Fund shares available, the owners of the Existing
Contracts or the Company, whichever shall have legal authority to do so, shall
be permitted to redeem investments in the Fund and/or invest in the Fund.
(c) If Fund shares continue to be made available after such termination, the
provisions of this Agreement shall remain in effect except as set forth in
SECTION 14(a) and thereafter either the Fund or the Company may terminate the
Agreement, as so continued pursuant to this SECTION 15, upon prior written
notice to the other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Fund, need not be for more than six
months.
(d) The parties agree that this SECTION 15 shall not apply to any termination
made pursuant to SECTION 12 or any conditions or undertakings incorporated by
reference in SECTION 12, and the effect of such SECTION 12 termination shall be
governed by the provisions set forth or incorporated by reference therein.
16
16. NON-EXCLUSIVITY. Each of the parties acknowledges and agrees that this
Agreement and the arrangement described herein are intended to be non-exclusive
and that each of the parties is free to enter into similar agreements and
arrangements with other entities.
17. SURVIVAL. The provisions of SECTION 9 (use of names) and SECTION 11
(indemnity) of this Agreement shall survive termination of this Agreement.
18. AMENDMENT. Neither this Agreement, nor any provision hereof, may be
amended, waived, discharged or terminated orally, but only by an instrument in
writing signed by all of the parties hereto.
19. NOTICES. All notices and other communications hereunder shall be given
or made in writing, and shall be delivered personally, or sent by telex,
telecopier, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
To the Company:
Lincoln National Life Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
(000) 000-0000 (office number)
(000) 000-0000 (telecopy number)
To the Issuer or Distributor:
Twentieth Century Mutual Funds
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq.
(000) 000-0000 (office number)
(000) 000-0000 (telecopy number)
Any notice, demand or other communication given in a manner prescribed in
this SECTION 19 shall be deemed to have been delivered on receipt.
20. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without the
written consent of all parties to the Agreement at the time of such assignment.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective permitted successors and assigns.
17
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
22. SEVERABILITY. In case any one or more of the provisions contained in
this Agreement should be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
23. ENTIRE AGREEMENT. This Agreement, including the Attachments hereto,
constitutes the entire agreement between the parties with respect to the matters
dealt with herein, and supersedes all previous agreements, written or oral, with
respect to such matter.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the
date set forth above.
TWENTIETH CENTURY SECURITIES, INC. LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: By:
-------------------------------- -------------------------------
Xxxxxxx X. Xxxxx Xxxxx X. Xxxxxxxxx
Executive Vice President Vice President
SCHEDULE A
SEPARATE ACCOUNTS OF LINCOLN NATIONAL LIFE INSURANCE COMPANY
INVESTING IN THE FUND
Lincoln National Variable Annuity Account L
SCHEDULE B
VARIABLE ANNUITY CONTRACTS
AND VARIABLE LIFE INSURANCE POLICIES
SUPPORTED BY SEPARATE ACCOUNTS
LISTED ON SCHEDULE A
Group Variable Annuity I Contracts
Group Variable Annuity II Contracts
Group Variable Annuity III Contracts
