PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
I
THIS AGREEMENT. made and entered into tllis~V'day of May 1998. by and among
MTS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the "Trust"),
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY. an Indiana corporation (the
"Company") on its own behalf p ~ and oil behalf of each of the segregated
asset accounts of the Company set forth in Schedule A hereto, as mav be
amended from time to time (the "Accounts"), and MASSACHUSETTS FINANCIAL
SERVICES COMPANY. a Delaware corporation ("MFS").
WHEREAS. the Trust is registered as an open-end management investment
company under the Investment Cornpan-N, Act of 1940, as amended (the "1940
Act"). and its shares are registered or will be re-istered under the Securities
Act of 19", as amended (the " 1933 Act"),
WHEREAS. shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, tile series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth oil Schedule A attached hereto (each, a
"Portfolio," and. collectively, the "Portfolios"):
WHEREAS. MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940. as amended and is the Trust's investment
adviser;
WHEREAS. the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, wi11 be realstered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to tile Accounts
(the Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS. the Company has registered or will register the Accounts as
unit investment trusts under the 1940 Act (unless exempt there from);
WHEREAS. MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (,hereinafter the "1934 Act"), and
is a member in good standing of the National Association of Securities Dealers,
Inc. (tile "NASD"),
WHEREAS. tile Company, the underwriter for the Policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD, and zl are as follows:
WHEREAS. to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies. and the Trust intends to sell such Shares to
the Accounts at net asset value:
NOW, THEREFORE, in consideration of their mutual promises, tile Trust, MFS,
and the Company
ARTICLE 1. SALE AND REDEMPTION OF TRUST SHARES
Tile Trust agrees to sell to the Company those Shares which the Accounts
order (based on orders placed by Policy holders on that Business Day, as
defined below) and which are available for purchase by such Accounts.
executina such orders on a daily basis at the net asset value next computed
after receipt by the Trust or its designee of the order for the Shares. For
purposes of this Section 1. 1. the Company shall be the designee of the Trust
for receipt of such orders from Policy owners and receipt by such designee
shall constitute receipt by the Trust, PROVIDED that the Trust receives
notice of such orders by 9:30 a.m. New York time on the next following
Business Day. "Business Dav" shall rnean any day on which the New York Stock
Exchange, Inc. (the "NYSE") is open for trading and oil which the Trust
calculates its net asset value pursuant to the rules of the SEC.
1.2. The Trust a-xxxx to make the Shares available indefinitely for
purchase at the applicable net asset value per share by the Company and the
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC and the Trust shall calculate such net asset value
on each day which the NYSE is open for trading. Notwithstanding the foregoing,
the Board of Trustees of tile Trust (tile "Board") may refuse to sell any Shares
to the Company and the Accounts, or suspend or terminate the offering of the
Shares if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
necessary in the best interest of tile Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to insurance
companies which have entered into participation agreements with the Trust and
MFS (the "Participating Insurance Companies") and their separate accounts,
qualified pension and retirement plans and MFS or its affiliates. The Trust and
MFS will not sell Trust shares to any insurance company or separate account
unless an agreement containing provisions substantially the same as Articles III
and VII of this Agreement is in effect to govern such sales. The Company will
not resell the Shares except to the Trust or its agents.
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The Trust agrees to redeem for cash, on the Company's request, any full or
fractional Shares held by the Accounts (based on orders placed by Policy owners
on that Business Day), executing such requests on a daily basis at tile net
asset value next computed after receipt by the Trust or its designee OF the
request for redemption. For purposes of this Section 1.4. the Company shall be
the designee of tile Trust for receipt of requests for redemption from Policy
owners and receipt b\ such designee shall constitute receipt by the Trust,
provided that the Trust receives notice of such request for redemption by 9:30
a.m. New York time on the next following Business XxX.
Each purchase. redemption and exchange order placed by the Company shall be
placed separatek for each Portfolio and shall not be netted with respect to any
Portfolio. However, with respect to payment of the purchase price by the Company
and of redemption proceeds by the Trust, the Company and the Trust shall net
purchase and redemption orders with respect to each Portfolio and shall transmit
one net payment for all of the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares by
2:00 p.m. New York time on the next Business Da~ after an order to purchase the
Shares is made in accordance with the provisions OF Section 1. 1. hereof. In the
event of net redemptions, the Trust shall pay the redemption proceeds by 2:00
p.m. New York tirne on the next Business Day after an order to redeern the
shares is made in accordance with the provisions of Section 1.4. hereof. All
such payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer OF the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be recorded in an appropriate title for the Accounts
or the appropriate subaccounts of the Accounts.
The Trust shall furnish same day notice (by wire or telephone followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares. The Company hereby elects to receive all
such dividends and distributions as are payable on a Portfolio's Shares in
additional Shares OF that Portfolio, but may revoke that election at any time by
iIFN M2 the Trust written, I ompany of the number of Shares so lot
The Trust shall notily the C issued as payment OF such dividends and
distributions.
1.9. The Trust or its custodian shall make the net asset value per share
for each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available by 6:30
p.m. New York time. In the event that the Trust is unable to meet the 6:30 p.m.
tirne stated herein, it shall provide additional time for the Company to place
orders for the purchase and redemption of Shares. Such additional time shall be
equal to the additional time which the Trust takes to make the net asset value
available to the Company. If the Trust provides materially incorrect share net
asset value information, the Trust shall make an adjustment to the number of
shares purchased or redeemed for the Accounts to reflect the correct net asset
value per share. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gains information shall be reported
promptly upon discovery to the Company.
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ARTICLE 11. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2 1 Tile Compan\ represents and warrants that the Policies are or will be
registered under the 19' )3 Act or are exerript from or not subject to
registration thereunder, and that the Policies will be issued. sold. and
distributed in compliance in all material respects with all applicable state and
federal laws. including without limitation the 1933 Act, the Securities Exchange
Act of 1934, as amended (the " 1934 Act"). and the 1940 Act. The Company further
represents and warrants that it is an insurance company duly organized and
validly existing under applicable law and that it has legal1N and validly
established the Account as a segregated asset account under applicable law and
has registered or. prior to any issuance or sale of the Policies, will register
the Accounts as unit investment trusts in accordance with the provisions of the
1940 Act (unless exempt therefrom) to serve as segregated investment accounts
for the Policies, and that it will maintain such registration for so lonQ as
all\ Policies are outstanding. The Company shall amend the registration
statements under the 1933 Act for the Policies and the registration statements
under the 1940 Act for the Accounts from tirne to time as required in order to
effect the continuous offering of the Policies or as ma\ other~,vise be required
by applicable law. The Company shall register and qualif~, the Policies for
sales in accordance with the securities laws of the various states only if and
to the extent deemed necessary by the Company.
2.2 The Company represents and warrants that the Policies are currently and
at the time of issuance will be treated as life insurance policies, endowment or
annuity contracts under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), that it will maintain such treatment and that it
WILL notlfV the Trust or MFS immediately upon having a reasonable basis for
believing that the Policies have ceased to be so treated or that they might not
be so treated in the future.
2.3. The Company represents and warrants that it, as the underwriter for
the Policies, is a member in good standing of the NASD and is a registered
broker-dealer with the SEC. The Company represents and warrants that, to the
extent it sells the Policies directly, it will sell and distribute such policies
in accordance in all material respects with all applicable state and federal
securities laws, including without limitation the 1933 Act, the 1934 Act, and
the 1940 Act.
The Trust and MFS represent and warrant that the Shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the la\,\;s of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that the
Trust is and shall remain registered under the 1940 Act. The Trust shall amend
the recristration statement for its Shares under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of its
Shares. The Trust shall register and qualify the Shares for sale in accordance
with the laws of the various states only if and to the extent deemed necessary
by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
DISTRIBUTE THE SHARES IN ACCORDANCE IN ALL MATERIAL RESPECTS with all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
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2.6. The Trust represents that it is lawfull\ organized and validly
existing under the laws of The Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act and all\ applicable
regulations thereunder.
2.7 MFS represents and warrants that and shall remain duly registered under
all applicable federal securities laws and that it shall perform its obligations
for the Trust in compliance in all material respect~ \\ith all\ applicable
federal securities laws and with the securities laws of The Cornmormcalth ol
Massachusetts. MFS represents and warrants that it is not subject to state
securities iak\ s other than tile securities laws of The Commonwealth of
Massachusetts and that it is exempt from registration as all investment adviser
under the securities laws of The Commonwealth of Massachusetts.
18. Tile Cornpan\ shall submit to the Board such reports. material or data as
the Board may reasonably request from time to time so that it mav carrv out
ful1v the oblioations imposed upon it bN tile conditions contained in the
exemptive application pursuant to which the SEC has granted exemptive relief to
permit mixed and shared funding (the "Mixed and Shared Funding Exemptive
Order").
ARTICLE 111. PROSPECTUS AND PROXY STATEMENTS; VOTING
At least annual]. . . the Trust or its designee shall provide the Company,
free of charge, with as many copies of the current prospectus (describing only
the Portfolios listed in Schedule A hereto) for the Shares as tile Company may
reasonably request for distribution to existing Policy owners whose Policies are
funded by such Shares. The Trust or its designee shall provide the CornpanN. at
the Company's expense. with as many copies of the current prospectus for the
Shares as the Company may reasonably request for distribution to prospective
purchasers of Policies. If requested b\ tile Company\ in lieu thereof. the Trust
or its designee shall provide such documentation, including, a "camera ready"
copy of the new prospectus as set in type or, at the request of the Cornpan\. as
a diskette in the form sent to tile financial printer) and other assistance as
is reasonabiv necessary in order for tile parties hereto once each year (or more
frequently if the prospectus for the Shares is supplernented or amended) to have
tile prospectus for tile Policies and the prospectus for the Shares printed
together in one document; the expenses of such printing to be apportioned
between (a) the Company and (b) the Trust or its designee in proportion to the
number of pages of the Pollcv and Shares' prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers, columns,
graphs and charts; the Trust or its designee to bear the cost of printing the
Shares' prospectus portion of such document for distribution to owners of
existing Policies funded'by the Shares and the Company to bear the expenses of
printing the portion of such document relating to the Accounts; provided,
however,, that the Company shall bear all printing expenses of such combined
documents where used for distribution to prospective purchasers or to owners of
existing Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust's prospectus in a
"camera ready" or diskette format, the Trust shall be responsible for providing
the prospectus in the format in which it or MFS is accustomed to formatting
prospectuses and shall bear the expense of providing the prospectus in such
format (eg., typesetting EXPENSES), AND THE COMPANY SHALL BEAR the expense of
adjusting or changing the format to conform with any of its prospectuses.
3.2. The prospectus for tile Shares shall state that the statement of
ADDITIONAL INFORMATION FOR the Shares is available frorn the Trust or its
designee. The Trust or its designee, at its expense,
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shall print and provide such statement OF additional information to the Company
(or a master OF such statement. suitable for duplication by the- Compamy for
distribution to any owner of a policy funded by the Shares. Tile Trust or its
designee, at the Company's expense, shall print and provide such statement to
tile Company (or a master of such statement suitable for duplication by the
Company) for distribution to a prospective purchaser who requests such statement
or to an owner OF a POLICY not funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge
copies, if and to the extent applicable to tile Shares, of the Trust's proxy
materials, reports to Shareholders and other cornm un ]cations to Shareholders
in such quantity as the Company shall reasonably require for distribution to
PolicN owners.
3.4. Notwithstanding the provisions of Sections 3. 1, 31.2, and 33.3 above,
or of Article V below, the CornpanN shall pay tile expense OF printing or
providing documents to tile extent such cost is considered a distribution
expense. Distribution expenses would include by way of illustration, but are not
limited to, the printing OF the Shares' prospectus or prospectuses for
distribution to prospective purchasers or to owners OF existing Policies not
funded by such Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to
include in the prospectus pursuant to which a Policy is offered disclosure
regarding the potential risks of mixed and shared funding
3.6. If and to the extent required by law. the Company shall:
(a) solicit voting instructions from Policy owners-,
(b) vote the Shares in accordance with instructions received from Policy
owners; and
(c) vote tile Shares in each separate Account for which no instructions
have been
received in the same proportion as the Shares of such Portfolio in such Account
for which instructions have been received from Policy owners;
so loncy as and to the extent that the SEC continues to interpret the 1940 Act
to require pass through voting privileges for variable contract owners. The
Company will in no way recommend action in connection with or oppose or
interfere with the solicitation of proxies for the Shares held for such Policy
owners. Tile Company reserves the right to vote shares held in any segregated
asset account in its own right, to the extent permitted by law. Participating
Insurance Companies shall be responsible for assuring that each of their
separate accounts holding Shares calculates voting privileges in the manner
required by the Mixed and Shared Funding Exemptive Order. The Trust and MFS will
notify the Company of any changes of interpretations or amendments to the Mixed
and Shared Funding Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust, MFS, any other investment adviser to the Trust, or
any affiliate of MFS are named, at least ten (10) Business Days
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20
prior to its use. No such material shall be used if the Trust, MFS, or their
respective designees reasonably objects to such use within five (5) Business
Days after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statement on behalf of tile Trust. MFS, any other investment adviser to the
Trust, or any affiliate of MFS or concern i mu, the 'trust or xxX other such
entity in connection with the sale of the Policies other than the information or
representations contained in the registration statement, prospectus or statement
of additional information for the Shares, as such registration statement,
prospectus and statement of additional information may be amended or
supplemented from time to time, or in reports or proxv statements for tile
Trust, or in sales literature or other promotional material approved by the
Trust. MFS or their respective designees, except with the permission of the
Trust, MFS or their respective designees. The Trust. MFS or their respective
designees each agrees to respond to any request for approval oil a prompt and
timely basis. The Company shall adopt and implement procedures reasonably
designed to ensure that information concerning the Trust, MFS or any of their
affiliates which is intended for use only by brokers or agents selling the
Policies (I.E., information that is not intended for distribution to Policy
owners or prospective Policy owners) is so used, and neither the Trust, MFS nor
ariv of their affiliates shall be liable for any losses, damages or expenses
relating to tile improper use of such broker only materials.
4.3. The Trust or its designee shall furnish, or shall cause to be
furnished, to the Company or its designee. each piece of sales literature or
other promotional material in which the Company and/or the Accounts is named. at
least ten H 0) Business Days prior to its use. No such material shall be used if
the Company or its designee reasonably objects to such use within five (5)
Business Days after receipt of such material.
The Trust and MFS shall not give. and agree that the Underwriter shall not
give, any informatioii or make aiiv representations oil behalf of the Company or
concerning the Company, the Accounts. or tile Policies in connection with the
sale of the Policies other than the information or representations contained in
a re-istration statement, prospectus, or statement of additional information for
the Policies, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional material
approved by the Company or its designee, except with the permission of the
Company. The Company or its designee agrees to respond to any request for
approval on a prompt and timely basis. The parties hereto agree that this
Section 4.4. is neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or
the Trust, as appropriate) will each provide to the other at least one complete
copy of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate (in the case of THE TRUST) TO THE
POLICIES, OR (IN THE case of the Company) to the Trust or its Shares, within
twenty (20) days after the filing of such docurnent with the SEC or other
regulatory authorities. The Company and the Trust shall also each promptly
inform the other of the results of any examination by the SEC (or other
regulatory authorities) that relates to the Policies, the Trust or its Shares,
and the party that was the subject of the examination shall provide the other
party with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
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4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxN solicitation for any Portfolio, and of any
material change in the Trust's recristration statement. particularly an), change
requiring change to the registration statement or prospectus or statement of
additional information for any Account. The Trust and MFS will cooperate with
the Company so as to enable the Company to solicit proxies from Policy owners or
to make chanues to its prospectus. statement of additional information or
registration statement, in an orderl\ manner The Trust and MFS will make
reasonable efforts to attempt to have changes affectim-, Pollc\ prospectuses
become effective simultaneously with the annual updates for such PI-OSPeCtLISCS
4.7. For purpose of this Article IV and Article VIII. 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 displa\. signs or billboards. motion pictures, or other public media),
and sales literature (such as brochures, circulars, reprints or excerpts or any
other advertisement, sales literature, or published articles), distributed or
made generall\ available to customers or the public, educational or trainina
materials or communications distributed or made aenerallv available to some or
all AUENTS or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pa\ no fee or other compensation to the Company under
this Agreement, and the Company shall pay no fee or other compensation to the
Trust, except that if the Trust or any Portfolio adopts and implements a plan
pursuant to Rule 12b- I under the 1940 Act to finance distribution and
Shareholder servicing expenses. then, subject to obtaining any required
exemptive orders or regulatory approvals. the Trust may make payments to the
Company or to the underwriter for the Policies if and in amounts AUREED to by
the Trust in writing. Each party, however, shall, in accordance xvith the
allocation of expenses specified in Articles III and V hereof, reimburse other
parties for expenses initial],,, paid by one party but allocated to another
party. In addition, nothing herein shall prevent the parties hereto frorn
otherwise agreeing to perform, and arranging for appropriate compensation for.
other services relating to the Trust and/or to the Accounts.
The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal and
state laws, including preparation and filino of the Trust's realstration
statement, and payment of film- fees and registration fees; preparation and
filincy of the Trust's proxy materials and reports to Shareholders, setting in
type and printing its prospectus and statement of additional information (to the
extent provided by and as determined in accordance with Article III above);
setting in type and printing the proxy materials and reports to Shareholders (to
the extent provided by and as determined in accordance with Article III above),
the preparation of all statements and notices required of the Trust by any
federal or state law with respect to its Shares-, all taxes on the issuance or
transfer of the Shares; and the costs of distributing the Trust's prospectuses
and proxy materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any, under
Rule 12b- I under the 0000 Xxx. The Trust shall not bear any expenses of
MARKETING THE POLICIES.
5.3. The Company shall bear the expenses of distributing the Shares'
prospectus or prospectuses in connection with new sales of the Policies and of
DISTRIBUTING THE TRUST'S
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Shareholder reports to Policy owners. The Company shall bear all expenses
associated with the registration, qualification, and filing of the Policies
under applicable federal securities and state Hisurance laws. the cost of
preparing. printing and distributing the Policy prospectus and statement
of additional information to other than existing Policy owners; and the cost of
preparing, printing L, and distributina annual individual account statements for
Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the
Trust will meet the diversification requirements of Section 817 (h) (I) of the
Code and Treas. Reg. 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts, as the,. rna-, be
amended from time to tirne (and any revenue rulings, revenue procedures,
notices, and other published announcements of the Internal Revenue Service
interpreting these sections), as if those requirements applied directly to each
such Portfolio. The Trust and MFS represent that each Portfolio will elect to
be qualified as a Regulated Investment Company under Subchapter M of the Code
and that they will maintain such qualification (under Subchapter M or any
successor or similar provision), and will notify the Company if it appears that
any Portfolio will not so qualify.
ARTICLE V11. POTENTIAL MATERIAL CONFLICTS
The Trust AAREES that the Board. constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of anv material irreconcilable conflict between the interests of the
variable annuity contract owners and the variable life insurance policy oxvners
of the Company and/or affiliated companies ("contract owners") investing in the
Trust. The Board shall have the sole authority to determine if a material
irreconcilable conflict exists, and such determination shall be binding on the
Company only if approved in the form of a resolution by a majority of the Board.
or a majority of the disinterested trustees of the Board. The Board will give
prompt notice of any such determination to the Company.
The Company agrees that it will be responsible for assisting the Board in
carrying out its responsibilities under the conditions set forth in the Trust's
exemptive application pursuant to which the SEC has granted the Mixed and Shared
Funding Exemptive Order by providing the Board, as it may reasonably request,
with all information necessary for the Board to consider any issues raised and
agrees that it will be responsible for promptly reporting any potential or
existing conflicts of which it is aware to the Board including, but not limited
to, an obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that if it is
determined by a majority of the Trustees, or a majority of the disinterested
Trustees, that a material irreconcilable conflict exists, the Company shall, at
its own expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Trustees) take whatever steps are necessary to
remedy or eliminate the material irreconcilable conflict. which steps include:
(a) withdrawing the assets allocable to some or all of the Accounts froin the
Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, or
submitting to a vote of all affected contract owners whether to withdraw assets
from the Trust or any Portfolio and reinvesting such
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assets in a different investment medium and. as appropriate, segregating the
assets attributable to any appropriate group of contract owners that votes in
favor of such segregation, or offering to any of the affected contract owners
the option of segregating the assets attributable to their contracts or
policies. and (b) establishing a new registered management investment company
and segregating the assets underIvinu the Policies, unless a majority of Policy
owners materially adversely affected b\ the conflict have voted to decline the
offer to establish a new registered management investment compan\.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by tile Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable conflict,
the Company will withdraw frorn investment in the Trust each of the Accounts
designated by the disinterested trustees and terminate this Agreement within six
(6) months after the Board informs the Company in writing of the foregoing
determination; PROVIDED, HOWEVER. that such withdrawal and termination shall be
limited to the extent required to remedy an\ such material irreconcilable
conflict as determined by a majority of the disinterested trustees of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the 1940
Act or the rules promulgated thereunder with respect to mixed or shared funding
(as defined in the Mixed and Shared Funding Exerriptive Order) on terms and
conditions materially different from those contained in the Mixed and Shared
Funding Exemptive Order, then (a) the Trust and/or the Participating Insurance
Companies, as appropriate. shall take such steps as may be necessary to comply
with Rule 6e-2 and 6e-3(T). as amended, and Rule 6e-3, as adopted, to the extent
such rules are applicable; and (b) Sections 3.5. 3.6. 7.1, 7.2. 7.3 and 7.4 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust. MFS. any
affiliates of MFS, and each of their respective directors/trustees, officers and
each person, if any, who controls the Trust or MFS within the meaning of Section
15 of the 1933 Act, and any agents or employees of the foregoing (each an
"Indemnified Party," or collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or expenses (including reasonable counsel fees) to which any Indemnified Party
may become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Shares or the Policies and:
(a)arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Policies or contained
in the Policies or sales literature or other promotional material for the
Policies (or any amendment or
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#20320
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
provided that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission was
made in reasonable reliance upon and in conformity with information furnished to
the Cornpaw, or its designee by or on behalf of the Trust or MFS for use in the
reEnstration statement. prospectus or statement of additional information for
the Policies or in the Policies or sales literature or other promotional
material (or any amendinent or supplement to any of the foregoing) or otherwise
for use in connection with the sale of the Policies or Shares; or
(b)arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus, statement of additional information or sales literature or other
promotional material of the Trust not supplied by the Company or its designee,
or persons under its control and on which the Company has reasonably relied) or
wrongful conduct of the Company or persons under its control, with respect to
the sale or distribution of the Policies or Shares: or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the reizistration staternent, prospectus, statement
of additional information. or sales literature or other promotional literature
of the Trust, 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 statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished to the
Trust by or on behalf of the Company, or
(d)arise out of or result from any material breach of any representation
and/or warranty inade by the Company in this Agreement or arise out of or result
from anx; other material breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the services
and furnish the materials under the terms of this Agreement; as limited by and
in accordance with the provisions of this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust a-xxxx to indemnifv and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust) or expenses (including reasonable counsel fees) to WHICH
ANY INDEMNIFIED PARTY MAY become subject under any statute, at common law or
otherwise, insofar as such losses, claims,
-11-
#20320
20
darnaues. liabilities or expenses (or actions in respect thereof) or settlements
are related to the sale or acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of an\ material fact contained in the registration statement,
prospectus. statement of additional information or sales literature or other
promotional material of the Trust (or an\ 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 statement therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Partv if such
staternent or omission or such alleged statement or ornission was made in
reasonable reliance upon and in conformity with Information furnished to the
Trust. MFS, the Underwriter or their respective desianees B\ or on behalf of the
Company for use in the registration statement, prospectus or statement of
additional information for the Trust or in sales literature or other promotional
material for the Trust (or any amendment or supplement to an\ of the foreooing)
or otherwise for use in connection with the sale of the
Policies or Shares-. or (b)
(C) arise out of or as a result of statements or representations (other
than statements or representations contained in the registration statement,
prospectus, statement of additional information or sales literature or other
promotional material for the Policies not supplied by the Trust. MFS, the
Underwriter or any of their respective designees or persons under their
respective control and on which any such entity Z~ -
has reasonably relied) or wrongful conduct of the Trust or persons under its
control. Nvith respect to the sale or distribution of the Policies or Shares, or
arise out of an\- untrue statement or alleged untrue statement of a material
fact contained in the rea'strat'I ion statement, prospectus. statement of
additional information, or sales literature or other promotional literature of
the Accounts or relating to the Policies. or any amendment thereof or supplement
thereto, or the omission or alleaed omission to state therein a material fact
required to be stated therein or necessary to make the statement or statements
therein not misleading, if such staternent or omission was made in reliance upon
information furnished to the Company by or on behalf of the Trust, MFS or the
Underwriter-, or
(d) at-Ise out of or result from any inaterial breach of any
representation and/or warranty made by the Trust in this Agreement (including a
failure, whether Unintentional or in good faith or otherwise, to comply with the
diversification requirements specified in Article VI of this Agreement) or arise
out of or result from anv other material breach of this Agreement by the Trust;
or
(e) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share or dividend or
capital gain distribution rate; or arise as a result of any failure by the Trust
to provide the SERVICES AND FURNISH THE materials under the terms of the
Agreement;
;C0320
-12-
as limited by and in accordance with the provisions of tills Article VIII.
In no event sliall the Trust be liable under the indemnification provisions
contained in this Aureenient to xxX individual or entity. includinc, without
limitation, the Company. or any Participatinu, Insurance Company or any Policy
holder, with respect to any losses, claims, datnaL,es. liabilities or expenses
that arise out of or result froin (1) a breach of any representation,
k,,,xxxxxx\. and/or coxenani made b\ the Company hereunder or by any
Participating Insurance Conipan\ under an affeement containing substantially
similar representations. warranties and covenants: (11) the failure by the
Company or any Participating Insurance Company to maintain its seareuated asset
account (which invests in any Portfolio) as a legally and valldly established
segregated asset account under applicable state law and as a duly registered
unit i I I investment trust under the provisions of the 1940 Act (unless exempt
therefrom): or (Ili) the failure by the Company or xxX Participating Insurance
Company to maintain its variable annuity and/or variable life insurance
contracts (with respect to which any Portfolio serves as an underlying funding
vehicle) as life insurance, endowment or annuit\ contracts under applicable
provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the
indemnification provisions contained in this Aareernent \vIth respect to any
losses, claims. damages. liabilities or expenses to Z~ which all Indemnified
Part\ would otherwise be subject by reason of such Indemnified Party's \'llful
misfeasance. willful misconduct, or gross neglig, A, I I - igence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of oblioations and duties under this Aareenient.
Prornptl\ after receipt by all Indemnified Part\ under this Section 8.5. of
notice of commencement of anv action. such Indemnified Party will, if a claim in
respect thereof is to be made aaaInst the indernnifvino party under this
section, notify the indemnifying party of the 1101-11niencernent thereof. but
the ornission so to notify the indemnifying party will not relieve it from all,,
habilitN which it ma\ have to any Indemnified Party otherwise than under this
section. In case all\ such action is broualit auainst any Indemnified Party, and
it notified the indemnifying part\ of the commencement thereof, the Indemnifying
party will be entitled to participate therein and, to the extent that it may
wish, assume the defense thereof, with counsel satisfactory to such Indemnified
Party. After notice from tile indemnifying party of its intention to assume the
defense of all action, the Indemnified Party shall bear the expenses of any
additional counsel obtained by it, and the indemnifying party shall not be
liable to such Indemnified Party under this section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of the
commencement of any litiuation or proceedino acrainst it or any of its
respective officers, directors, trustees, employees or 1933 Act control persons
in connection with tile Agreement, the issuance or sale of the Policies, the
operation of the Accounts, or the sale or acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
420320
-13-
9 1 This Agreement shall be construed and tile provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
9.2 ~ This Aureernent shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and reuulations as tile SEC may grant
and the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust. MFS. and the Company agree that each such party shall promptly
notify the other parties to this Agreeinent~ in of the institution of all),
formal proceedings brought against such party or its designees b~ tile NASD.
tile SEC. or any insurance department or any other regulatory body regarding
such party's duties under this Agreement or related to the sale of the Policies,
the operation of the Accounts, or tile purchase of the Shares.
ARTICLE XI. TERMINATION
Portfolios:
420320
This Agreement shall terminate with respect to the Accounts, or one, sorne, or
all
(a) at the option of any party upon six (6) months' advance written notice
to the other parties: or
(b) at the option of the Company to the extent that the Shares of
Portfolios are not reasonablv available to meet the requirements of the Policies
or are not "appropriate funding vehicles" for the Policies, as reasonably
determined by the Company. Without limiting the generality of the foregoing, the
Shares of a Portfolio would not be "appropriate funding vehicles" if, for
example, such Shares did not meet the diversification or other requirements
referred to in Article VI hereof: or if the Company would be permitted to
disregard Policy owner voting instructions pursuant to Rule 6e-2 or 6e-3(T)
under the 1940 Act. Prompt notice of tile election to terminate for such cause
and an explanation of such cause shall be furnished to the Trust by the Company;
or
(c) at tile option of the Trust or MFS upon institution of formal
proceedings against the Company by the NASD, the SEC, or any insurance
department or any other regulatory body regarding the Company's duties under
this Agreement or related to the sale of the Policies, the operation of the
Accounts, or the purchase of the Shares, or
(d) at the option of the Company upon institution of formal proceedings
against the Trust or MFS by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body regarding the Trust's or MFS'
duties under this Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of any
necessary regulatory approvals and/or the vote of the Policy owners having an
interest in the
-14-
14
Accounts (or any subaccounts) to substitute the shares of another investment
company for the corresponding Portfolio Shares in accordance with the terms of
the Policies for which those Portfolio Shares had been selected to serve as the
underlying investment media. The Company will give thirty (30) days' prior
written notice to the Trust of the Date of any proposed vote or other action
taken to replace the Shares-. or
W) termination by either the Trust or MFS by written notice to the
Company, if either one or both of the Trust or MFS respectively, shall
determine, in their sole judgment exercised in good faith, that the Company has
suffered a material adverse change in its business, operations, financial
condition, or prospects since the date of this Agreement; or C~
(g) termination by the Company by written notice to the Trust and MFS, if
the Company shall determine. In its sole Judgment exercised in good faith, that
the Trust or MFS has suffered a material adverse change in this business,
operations, financial condition or prospects since the date of this Agreement.
or
(1.1) at the option of any partN to this Agreement, upon another party's
material breach of any provision of this Agreement-, or upon asslanment of this
A-reement, unless made with the written consent of the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and,
if applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section I ].I (a) may be exercised for
cause or for no cause. Termination by any party pursuant to any of Section 11. 1
(b) through Section 11. 1 (1) shall not take effect until the terminating party
shall have provided written notice to the other party.
11.4. Except as necessary to implement Policy owner initiated transactions,
or as required by state insurance laws or regulations, the Company shall not
redeem the Shares attributable to the Policies (as opposed to the Shares
attributable to the Company's assets held in the Accounts), and the Company
shall not prevent Policy owners from allocating payments to a Portfolio that was
otherwise available under the Policies. until thirty (30) days after the Company
shall have notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this Agreement,
for all Policies in effect on the effective date of termination of this
Agreement (the "Existing Policies"), except as otherwise provided under Article
VII of this Agreement. Specifically. WITHOUT LIMITATION, THE OWNERS OF THE
EXISTING POLICIES SHALL be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the Trust
upon the making of additional purchase payments under the Existing Policies.
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#20320
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may frorn time to
time specify in writing to the other party, If to the Trust:
MFS VARIABLE INSURANCE TRUST 000 Xxxxxxxx Xxxxxx Xxxxxx. Xxxxxxxxxxxxx 00000
Facsimile No.: (000) 000-0000 Attn: Xxxxxxx X. Xxxxx, Secretary If to the
Cornpan-N:
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY 0000 Xxxxx Xxxxxxx Xxxxxx Xxxx
Xxxxx. Xxxxxxx 00000-0000 FacsirnileNo.: (219)455-177') Xxxxx: XxxxX X.Xxxxxxxxx
If to MFS: MASSACHUSETTS FINANCIAL SERVICES COMPANY 000 XxxXxxxx Xxxxxx Xxxxxx,
Xxxxxxxxxxxxx 00000 Facsimile No.: (000) 000-0000 Attn: Xxxxxxx X. Xxxxx,
General Counsel
ARTICLE XIII. MISCELLANEOUS
Subject to the requirement of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the owners
of the Policies and all information reasonably identified as confidential in
writing by any other party hereto and, except as permitted by this Agreement or
as otherwise required by applicable law or regulation, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more
counterparts, each of which taken together shall constitute one and the same
instrument.
13.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
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420320
13.5. The Schedule attached hereto, as modified from tirne to time, is
incorporated herein by reference and is part of this Agreement.
13. 6. Each party hereto shall cooperate with each other party in
connection with inquiries by appropriate governmental authorities (including
without limitation the SEC, the NASD, and state insurance regulators) relating
to this Agreement or the transactions contemplated hereby. L- L
13.7. The rights. remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts. The Company
acknowledges that the obligations of or arising out of this instrument are not
binding upon any of the Trust's trustees, officers, employees, agents or
shareholders individually, but are binding solely upon the assets and property
of the Trust in accordance with its proportionate interest hereunder. The
Company further acknowledges that the assets and liabilities of each Portfolio
are separate and distinct and that the obligations of or arising out of this
instrument are binding solely upon the assets or property of the Portfolio on
whose behalf the Trust has executed this instrument. The Company also agrees
that the obligations of each Portfolio hereunder shall be several and not joint,
in accordance with its proportionate interest hereunder, and the Company agrees
not to proceed against any Portfolio for the obligations of another Portfolio.
420320
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By its authorized officer,
By:
Title
MFS VARIABLE INSURANCE TRUST, ON BEHALF OF THE
PORTFOLIOS
By its authorized officer and not individually,
lames X. Xxxxxxxxx, Xx.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY By its authorized officer.
man and Chief Executive Officer
-18-
As of May _, 1998
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
NAME OF SEPARATE
W
Account and Date PO1I*S'F**DE,D,""'
ESTABLISHED BY BOARD OF DIRECTORS bySeparat4~A'c'tbiint""I",~,~-"""-"",
t"O",
Lincoln Life Flexible Flexible Premium Variable Life MFS Emerging Growth
Series
Premium Variable Life MFS Total Return
Series
Separate Account M MFS Utilities
Series
Lincoln Life Flexible Premium Variable Life
Separate Account
-19-
#20320
