FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is entered into as of this 15th day of October, 1999 among
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ("Lincoln National"), a life
insurance company organized under the laws of the State of Indiana, AMERICAN
VARIABLE INSURANCE SERIES ("Series"), an open-end management investment company
organized under the laws of the Commonwealth of Massachusetts, AMERICAN FUNDS
DISTRIBUTORS, INC. ("AFD"), a corporation organized under the laws of the State
of California, and having a business address of 000 Xxxxx Xxxx Xxxxxx, Xxx
Xxxxxxx, Xxxxxxxxxx 9007 1, and CAPITAL RESEARCH AND MANAGEMENT COMPANY
("CRMC"), a corporation organized under the laws of the State of Delaware, and
having a business address of 000 Xxxxx Xxxx Xxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx
00000.
WITNESSETH:
WHEREAS, Lincoln National proposes to issue to the public, now and in
the future, certain multi-manager variable annuity contracts and variable life
insurance policies ("Contracts") as set forth in Appendix A;
WHEREAS, Lincoln National has established one or more separate
accounts ("Accounts"), as set forth in Appendix B, for the purposes of issuing
the Contracts and has or will register the Account with the United States
Securities and Exchange Commission ("the SEC") as an unit investment trust under
the Investment Company Act of 1940 ("xxx 0000 Xxx") unless exempt therefrom;
WHEREAS, the Series has received a "Mixed and Shared Funding Order"
from the SEC granting relief from the certain provisions of the 1940 Act and the
rules thereunder to the extent necessary to permit shares of the Series to be
sold to variable annuity and life insurance separate accounts of unaffiliated
insurance companies;
WHEREAS, the Series is divided into various funds ("Funds"), some of
which are set forth in Appendix C, each Fund being subject to certain
fundamental investment policies some of which may not be changed without a
majority vote of the shareholders of such Fund;
WHEREAS, certain Funds will serve as the underlying investments for
the Contracts as set forth in Appendix C;
WHEREAS, AFD. a registered broker-dealer. will provide certain
services to Lincoln National with regard to the Contracts; and
WHEREAS, CRMC is the investment adviser for the Series.
NOW THEREFORE, in consideration of the foregoing and of mutual
covenants and conditions set forth herein and for other good and valuable
consideration, Lincoln National, the Accounts, the Series, AFD and CRMC hereby
agree as follows:
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1. The Series and CRMC each represents and warrants to Lincoln
National that: (i) a registration statement under the Securities Act of 1933
("1933 Act") and under the 1940 Act with respect to the Series has been filed
with the SEC in the form previously delivered to Lincoln National, and copies of
any and all amendments thereto will be forwarded to Lincoln National at the time
that they are filed with the SEC; (ii) the Series is, and shall be at all times
while this Agreement is in force, lawfully organized, validly existing, and
properly qualified as an open-end management investment company; and (iii) 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 1933 Act and the 1940 Act, and the rules and regulations of
the SEC 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 statement 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 the
Series by Lincoln National expressly for use therein.
2. The Series will furnish to Lincoln National such information with
respect to the Series in such form and signed by such of its officers as Lincoln
National may reasonably request, and will warrant that the statements therein
contained when so signed will be true and correct. The Series will advise
Lincoln National immediately of: (a) any request by the SEC (i) for amendment of
the registration statement relating to the Series or (ii) for additional
information; (b) the issuance by the SEC of any stop order suspending the
effectiveness of the registration statement of the Series or the initiation of
any proceeding 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 Series or which requires the making of a change therein in order to make any
statement made therein not misleading.
3. The Series will use best efforts to register for sale under the
1933 Act and, if required, under state securities laws, such additional shares
of the Series as may reasonably be necessary for use as the funding vehicle for
the Contracts.
4. The Series agrees to make Class I and Class 2 shares of all of its
Funds available to the Contracts. To the extent Lincoln National uses Class 2
shares, it will be entitled to a fee from the Series of .25% per annum of Class
2 assets attributable to the Contracts to offset Contract marketing expenses for
as long as the Series' Rule 12b I plan remains in effect. Fund shares to be made
available to Accounts for the Contracts shall be sold by the Series and
purchased by Lincoln National for a given Account at the net asset value
(without the imposition of a sales load) next computed after receipt of each
order by the Series or its designee, as established in accordance with the
provisions of the then current prospectus of the Series. For purposes of this
Paragraph 4, Lincoln National shall be a designee of the Series for receipt of
such orders from each Account, and receipt by such designee by 4:00 p.m. Eastern
time shall constitute receipt by the Series only if the net purchase or
redemption orders are transmitted to the Series by Lincoln National by 10:00
a.m. Eastern time on the day following Lincoln National's receipt of that
information. "Business Day" shall mean any day on which the New
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York Stock Exchange ("NYSE") is open for trading and on which the Series
calculates its net asset value pursuant to the rules of the SEC. The Series will
make its shares available indefinitely for purchase at the applicable net asset
value per share on those days on which the Series calculates its net asset value
pursuant to the rules of the SEC, and the Series shall use its best efforts to
calculate such net asset value on each day on which the NYSE is open for
trading. The Series shall make the net asset value per share for each of the
Funds available to Lincoln National (using a mutually agreed upon format) on a
daily basis as soon as reasonably practical after the Series calculates its net
asset value per share, and the Series shall use its best efforts to make such
net asset value per share available by 6:00 p.m. Eastern time. The Series, and
its investment adviser, CRMC, are responsible for maintaining net asset values
for the Funds in accordance with the requirements of the 1940 Act and its
current prospectus. Shares of particular Funds shall be ordered in such
quantities and at such times as determined by Lincoln National to be necessary
to meet the requirements of the Contracts. Payment for shares purchased shall be
made in federal funds transmitted by wire by 2:00 p.m. Eastern time as long as
the banking system is open for business. If the banking, system is closed,
payment will be transmitted the next day that the banking system is open for
business. If payment is received by the Series after 2:00 p.m., Eastern time on
such Business Day, Lincoln National shall, upon the Series' request, promptly
reimburse the Series for any charges, costs, fees, interest or other expenses
incurred in connection with any advances, borrowing, or overdrafts. The Series
will confirm receipt of each trade (using a mutually agreed upon format) by 1:00
p.m. Eastern time on the Business Day the trade is placed with the Series.
The Series reserves the right to temporarily suspend sales if the
Board of Trustees of the Series deems it appropriate and in the best interests
of the Series or in response to the order of an appropriate regulatory
authority.
5. The Contracts funded through the Accounts will provide for the
allocation of net amounts among certain subaccounts for investment in such
shares of the Funds as may be offered from time to time in the Contracts. The
selection of the particular subaccount is to be made by the Contract owner and
such selection may be changed in accordance with the terms of the Contracts.
6. Transfer of the Series' shares will be by book entry only. No stock
certificates will be issued to the Account. Shares ordered from a particular
Fund will be recorded by the Series as instructed by Lincoln National in an
appropriate title for the corresponding Account or subaccount.
7. The Series shall furnish notice promptly to Lincoln National (using
a mutually agreed upon format) of any dividend or distribution payable on any
shares underlying subaccounts. Lincoln National hereby elects to receive all
such dividends and distributions as are payable on shares of a Fund recorded in
the title for the corresponding subaccount in additional shares of that Fund.
The Series shall notify Lincoln National of the number of shares so issued.
Lincoln National reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash.
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8. The Series shall redeem its shares in accordance with the terms of
its then current prospectus. For purposes of this Paragraph 8, Lincoln National
shall be a designee of the Series for receipt of requests for redemption from
each Account, and receipt by such designee by 4:00 p.m. Eastern time shall
constitute receipt by the Series; provided that the Series receives notice of
such request for redemption by 10:00 a.m. Eastern time on the following Business
Day. Lincoln National shall purchase and redeem the shares of Funds offered by
the then current prospectus of the Series in accordance with the provisions of
such prospectus. The Series agrees to redeem, upon Lincoln National's request,
any full or fractional shares of the designated portfolio held by Lincoln
National. Payment shall be made in federal funds transmitted by wire by 2:00
p.m. Eastern time as long as the banking system is open for business. If the
banking system is closed, payment will be transmitted the next day that the
banking system is open for business. If payment is received by Lincoln Life
after 2:00 p.m., Eastern time on such Business Day, the Series shall, upon
Lincoln National's request, promptly reimburse Lincoln National for any charges,
costs, fees, interest or other expenses incurred in connection with any
advances, borrowing, or overdrafts. The Series will confirm receipt of each
trade (using a mutually agreed upon format) by 1:00 p.m. Eastern time on the
Business Day the trade is placed with the Series.
9. The Series shall pay all expenses incidental to its performance
under this Agreement. The Series shall see to it that all of its shares are
registered and authorized for issue in accordance with applicable federal and
state laws prior to their purchase for the Accounts. The Series shall bear the
expenses for the cost of registration of its shares, preparation of prospectuses
to be sent to existing Contract owners, proxy materials and reports, the
printing and distribution of such items to each Contract owner who has allocated
net amounts to any Subaccount, the preparation of all statements and notices
required from it by any federal or state law, and taxes on the issue or transfer
of the Series' shares subject to this Agreement. The Series will provide Lincoln
National, at least once a year, with enough copies of its Statement of
Additional Information to be able to distribute one to each Contract owner or
prospective Contract owner who requests such Statement of Additional
Information.
10. Lincoln National shall bear the expenses for the cost of printing
and distribution of Series prospectuses to be sent to prospective Contract
owners. The Series shall provide, at its expense, such documentation (in camera
ready or other mutually agreeable form) and other assistance as is reasonably
necessary in order for Lincoln National once each year (or more frequently if
the prospectus for the Series is amended) to have the prospectus or prospectuses
for the Contracts and the Series prospectus printed together in one or more
documents. With respect to any Series prospectus that is printed in combination
with any one or more Contract prospectus (the "Prospectus Booklet"), the Series
shall bear the costs of printing and mailing the Prospectus Booklet to existing
Contract owners based on the ratio of the number of pages of the Series
prospectuses included in the Prospectus Booklet to the number of pages in the
Prospectus Booklet as a whole. With respect to any Series report that is printed
in combination with any one or more reports of investment options for the
Contracts (the "Report Booklet"), the Series shall bear the costs of printing
and mailing the Report Booklet to existing Contract owners based on the ratio of
the number of pages of the Series report included in the Report Booklet to the
number of pages in the Report Booklet as a whole.
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11. Lincoln National represents and warrants to the Series that any
information furnished in writing by Lincoln National to the Series for use in
the registration statement of the Series will not result in the registration
statement's failing to conform in all material respects to the requirements of
the 1933 Act and the 1940 Act 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.
12. Lincoln National and its affiliates shall make no representations
concerning the Series' shares except those contained in the then current
prospectus of the Series, in such printed information subsequently issued on
behalf of the Series or other funds managed by CRMC as supplemental to the
appropriate fund prospectus, or in materials approved by AFD.
13. Shares of the Series may be offered to separate accounts of
various insurance companies in addition to Lincoln National. The Series shall
comply with the provisions of Section 817 of the Internal Revenue Code of 1986
as amended and the regulations thereunder ("Section 817").
14. The parties to this Agreement recognize that due to differences in
tax treatment or other considerations, the interests of various Contract owners
participating in one or more Funds might, at some time, be in conflict. Each
party shall report to the other party any potential or existing conflict of
which it becomes aware. The Board of Trustees of the Series shall promptly
notify Lincoln National of the existence of irreconcilable material conflict and
its implications. If such a conflict exists for which Lincoln National is
responsible as determined by the Board of Trustees, Lincoln National will, at
its own expense, take whatever action it deems necessary to remedy such
conflict; in any case, Contract owners will not be required to bear such
expenses.
15. Lincoln National agrees to indemnify and hold the Series harmless
against, any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and reasonable other expenses) to which the Series
may be subject under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements arise as a result of Lincoln National: (a) making untrue
statements of material facts or omitting material fact in the registration
statement, prospectus or sales literature of the Contracts and/or Accounts; (b)
making untrue statements of material facts that the Series includes in its
materials, provided the Series relies on information supplied by Lincoln
National, (c) engaging in unlawful conduct with respect to the sale of the
Contracts or Fund shares; and (d) materially breaching this Agreement or a
representation or warranty.
16. The Series and CRMC each agrees to indemnify and hold Lincoln
National harmless against, any and all losses, claims, damages, liabilities or
litigation (Including reasonable legal and reasonable other expenses) to which
Lincoln National may be subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements arise as a result of the Series', AFD's or
CRMC's (a) making untrue statements of material facts or omitting material facts
in the registration statement, prospectus or sales literature of the Series; (b)
making untrue statements of material facts that the Series includes in its
materials, provided Lincoln National relies on information supplied by or on
behalf of the Series; (c) engaging in unlawful conduct
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with respect to the sale of the Contracts or Fund shares; (d) materially
breaching this Agreement or a representation or warranty; and (e) failing to
comply with the requirements of Section 817 and regulations thereunder.
17. Lincoln National shall be responsible for assuring that the
Accounts provide passthrough voting privileges to Contract owners so long as and
to the extent that the Securities and Exchange Commission continues to interpret
the 1940 Act to require pass through voting privileges for the Contracts.
18. AFD will be responsible for conducting training activities for
Lincoln National's wholesalers regarding CRMC's approach to investment
management in connection with Lincoln National's wholesaler support of the
Series. Training will include initial sessions as to CRMC's investment approach
and strategies, background in CRMC's investment results, information on CRMC's
portfolio counselors managing the Series and general information on CRMC. AFD
will provide such periodic additional training and refresher training as may be
requested by Lincoln National. AFD will provide speakers and panelists at
national sales meetings conducted by Lincoln National regarding the Series.
In consideration of the activities performed by AFD for Lincoln
National, Lincoln National will pay AFD .25 % on each new Contract purchase
payment.
19. 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:
(i) By any party at any time upon six months' written notice to
the other parties; or
(ii) at the option of Lincoln National or the Series, upon ten
calendar days' prior written notice to the other parties, if
a final non-appealable administrative or judicial decision
is entered against any other party which has a material
impact on the Contracts;
(iii) at the option of Lincoln National, upon ten calendar days'
prior written notice to the other parties, if shares of the
Series are not reasonably available;
(iv) at the option of Lincoln National, immediately upon written
notice to the other parties, if the Series or CRMC falls to
meet the requirements for either diversification under
Section 817 or registered investment company status or if
the Board of the Series terminates the Class 2 Plan of
Distribution pursuant to Rule 12b-I under the 1940 Act; or
(v) immediately in the event the Series' shares are not
registered, issued or sold in accordance with applicable
state and/or federal law or such law
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precludes the use of such shares as an underlying investment
for the Contracts issued or to be issued by Lincoln
National; in such event prompt notice shall be given by
Lincoln National or the Series to the other parties.
The effective date for termination pursuant to any notice required
under this Paragraph shall be calculated beginning with the date of receipt of
such notice to all other parties.
20. All notices, consents, waivers, and other communications under
this Agreement must be in writing, and will be deemed to have been duly received
(a) when delivered by hand (with written confirmation of receipt), (b) when sent
by facsimile (with written confirmation of receipt), provided that a copy is
mailed by registered mail, return receipt requested, or (c) the day after it is
sent by a nationally recognized overnight delivery service, in each case to the
appropriate addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to the other
parties):
IF TO LINCOLN NATIONAL:
The Lincoln National Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Second Vice President
Facsimile No.: 000-000-0000
IF TO SERIES:
American Variable Insurance Series
000 X. Xxxx Xxxxxx, 55 th Floor
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Senior Vice President
Facsimile No.: 000-000-0000
IF TO CRMC:
Capital Research and Management Company
000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxx, Senior Vice President and Legal Counsel
Facsimile No.: 000-000-0000
IF TO AFD:
American Funds Distributors, Inc.
000 X. Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Secretary and Legal Counsel
Facsimile No.: 000-000-0000
21. If this Agreement terminates, any provision of this Agreement
necessary to the orderly windup of business under it will remain in effect as to
that business, after termination.
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22. If this Agreement terminates, the Series, at Lincoln National's
option, will continue to make additional shares of the Series available for all
Contracts existing as of the effective date of termination (under the same terms
and conditions as were in effect prior to termination of this Agreement with
respect to existing Contract owners), unless the Series liquidates or applicable
laws prohibit further sales. Lincoln National agrees not to redeem shares unless
legitimately required to do so according to a Contract owner's request or under
an order from the SEC.
23. The obligations of the Series under this Agreement are not binding
upon any of the Trustees, officers, employees, or shareholders (except CRMC if
it is a shareholder) of the Series individually, but bind only the Series'
assets. When seeking satisfaction for any liability of the Series in respect of
this Agreement, Lincoln National and the Account agree not to seek recourse
against said Trustees, officers, employees, or shareholders, or any of them, or
any of their personal assets for such satisfaction. Notwithstanding the
foregoing, if Lincoln National seeks satisfaction for the Series for any losses,
claims, damages, liabilities or litigation in respect of this Agreement, Lincoln
National and the Accounts shall also have recourse against AFD and CRMC< which
shall be jointly and severally liable for all amounts due Lincoln National and
not recovered from the Series.
24. This Agreement shall be construed in accordance with the laws of
the State of California.
25. This Agreement and the parties' rights, duties, and obligations
under this Agreement are not transferable or assignable by any of them without
the express, prior written consent of the other party hereto. Any attempt by a
party to transfer or assign this Agreement or any of its rights, duties or
obligations under this Agreement without such consent is void.
26. The following Paragraphs shall survive any termination of this
Agreement: 4, 7, 8, 15, 16, 19, 20-25.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and attested as of the date first above written.
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY (ON BEHALF OF THE
ACCOUNTS AND ITSELF)
Attest: By:
Its:
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AMERICAN VARIABLE INSURANCE
SERIES
Attest:
By:
Its: Senior Vice President
AMERICAN FUNDS DISTRIBUTORS, INC.
Attest:
By:
Its: President
CAPITAL RESEARCH AND MANAGEMENT
COMPANY
Attest:
By:
Its: Executive Vice President
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Appendix A
Lincoln VUL
Lincoln VULdb
Lincoln CVUL D
L ChoicePlus variable annuity
MultiFund individual variable annuity
MultiFund group variable annuity Lincoln SVUL
Appendix B
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Flexible Premium Variable Life Account S
Lincoln Life Variable Annuity Account N
Lincoln National Variable Annuity Account C
Lincoln Life Variable Annuity Account Q
Lincoln Life Flexible Premium Variable Life Account R
Appendix C
American Variable Insurance Series
Global Growth Fund Class 2
Global Small Capitalization Fund Class 2
International Fund Class 2
Growth Fund Class 2
Growth Income Fund Class 2
High Yield Bond Fund Class 2
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