FUND PARTICIPATION AGREEMENT
THIS AGREEMENT, effective this 1st day of August, 2002, among THE LINCOLN
NATIONAL LIFE INSURANCE COMPANY ("Lincoln National"), a life insurance company
organized under the laws of the State of Indiana, LINCOLN LIFE & ANNUITY COMPANY
OF NEW YORK ("LNY"), a life insurance company organized under the laws of the
State of New York, AMERICAN FUNDS INSURANCE SERIES (the "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 00000, 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. The term "Company" used in this AGREEMENT
refers to the respective undersigned life insurance company whose products are
being solicited and sold. Unless otherwise stated in this AGREEMENT, any rights,
obligations and liabilities of the undersigned companies are separate and
distinct.
WITNESSETH:
WHEREAS, the Company proposes to issue to the public, now and in the
future, certain variable life insurance policies ("Policies") as set forth in
Appendix A;
WHEREAS, the Company has established one or more separate accounts
("Accounts"), as set forth in Appendix B, for the purposes of issuing the
Policies and has or will register the Account with the United States Securities
and Exchange Commission (the "SEC") as a unit investment trust under the
Investment Company Act of 1940 (the "1940 Act") 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
Policies as set forth in Appendix C;
WHEREAS, AFD, a registered broker-dealer, will provide certain services to
the Company with regard to the Policies; and
WHEREAS, CRMC is the investment adviser for the Series.
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NOW THEREFORE, in consideration of the foregoing and of mutual covenants
and conditions set forth herein and for other good and valuable consideration,
the Company, the Account, the Series, AFD and CRMC hereby agree as follows:
1. The Series and CRMC each represents and warrants to the Company 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 the Company, and copies of any and all amendments
thereto will be forwarded to the Company 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 any 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 the Company
expressly for use therein.
2. The Series will furnish to the Company such information with respect
to the Series in such form and signed by such of its officers as the Company may
reasonably request, and will warrant that the statements therein contained when
so signed will be true and correct. The Series will advise the Company
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 Policies 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
Policies.
4. The Series agrees to make Class 2 shares of the Funds listed in
Appendix C available to the Policies. Lincoln National will be entitled to
receive a fee from the Series of 0.25% per annum of Class 2 assets attributable
to Lincoln National Policies and Lincoln Financial Advisors will be entitled to
receive a fee from the Series of 0.25% per annum of Class 2 assets attributable
to LNY Policies to offset Policy marketing expenses for as long as the Series'
Rule 12b-1 plan remains in effect. Fund shares to be made available to Accounts
for the Policies shall be sold by the Series and purchased by the Company for a
given Account at the net asset value (without the imposition of a sales load)
next computed after receipt of each order by
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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, the
Company 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 the Company by 1l:OO a.m. Eastern time on the day
following the Company's receipt of that information. "Business Day" shall mean
any day on which the New 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 the Company (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 the Company to be
necessary to meet the requirements of the Policies. 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, the Company 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:OO
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 Policies 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 Policies. The
selection of the particular subaccount is to be made by the Policy owner and
such selection may be changed in accordance with the terms of the Policies.
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 the Company in an
appropriate title for the corresponding Account or subaccount.
7. The Series shall furnish notice promptly to the Company (using a
mutually agreed upon format) of any dividend or distribution payable on any
shares underlying subaccounts. The Company hereby elects to receive all such
dividends and distributions as are payable on shares of
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a Fund recorded in the title for the corresponding subaccount in additional
shares of that Fund. The Series shall notify the Company of the number of shares
so issued. The Company reserves the right to revoke this election and to receive
all such income dividends and capital gain distributions in cash.
8. The Series shall redeem its shares in accordance with the terms of its
then current prospectus. For purposes of this Paragraph 8, the Company 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. The
Company 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 the Company's request, any full or
fractional shares of the designated portfolio held by the Company. 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 the Company after 2:00 p.m., Eastern time on
such Business Day, the Series shall, upon the Company's request, promptly
reimburse the Company 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:OO
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 Policy owners, proxy materials and reports, the printing and
distribution of such items to each Policy 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 the Company, at least
once a year, with enough copies of its Statement of Additional Information to be
able to distribute one to each Policy owner or prospective Policy owner who
requests such Statement of Additional Information.
10. The Company shall bear the expenses for the cost of printing and
distribution of Series prospectuses to be sent to prospective Policy 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 the Company once each year (or more frequently if the prospectus
for the Series is amended) to have the prospectus or prospectuses for the
Policies 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 Policy prospectus (the "Prospectus Booklet"), the Series shall bear
the costs of printing and mailing the Prospectus Booklet to existing Policy
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
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or more reports of investment options for the Policies (the "Report Booklet"),
the Series shall bear the costs of printing and mailing the Report Booklet to
existing Policy 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.
11. The Company represents and warrants to the Series that any information
furnished in writing by the Company 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. The Company 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 the Company. 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 Policy 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 the Company of the existence of irreconcilable material conflict and its
implications. If such a conflict exists for which the Company is responsible as
determined by the Board of Trustees, the Company will, at its own expense, take
whatever action it deems necessary to remedy such conflict; in any case, Policy
owners will not be required to bear such expenses.
15. The Company 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 the Company: (a) making untrue statements of
material facts or omitting material fact in the registration statement,
prospectus or sales literature of the Policies 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 the Company; (c) engaging
in unlawful conduct with respect to the sale of the Policies 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 the Company
harmless against, any and all losses, claims, damages, liabilities or litigation
(including reasonable legal and reasonable other expenses) to which the Company
may be subject under any statute, at
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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 the Company relies on information
supplied by or on behalf of the Series; (c) engaging in unlawful conduct with
respect to the sale of the Policies 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. The Company shall be responsible for assuring that the Accounts
provide pass-through voting privileges to Policy 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 Policies.
18. AFD will be responsible for conducting training activities for the
Company's wholesalers regarding CRMC's approach to investment management in
connection with the Company'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
the Company. AFD will provide speakers and panelists at national sales meetings
conducted by the Company regarding the Series.
In consideration of the activities performed by AFD for the Company, the
Company will pay AFD 0.25% on each new Policy purchase payment initially
allocated to the Series.
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;
(ii) at the option of the Company 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
Policies;
(iii) at the option of the Company, 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 the Company, immediately upon written notice to
the other parties, if the Series or CRMC fails to meet the
requirements for either diversification under Section 817 or
registered investment company status
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or if the Board of the Series terminates the Class 2 Plan of
Distribution pursuant to Rule 12b-1 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 precludes the use of such shares as an
underlying investment for the Policies issued or to be issued by
the Company; in such event prompt notice shall be given by the
Company 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
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxxx Xxxxx, Second Vice President
Facsimile No.: (000) 000-0000
IF TO LINCOLN NEW YORK:
Lincoln Life & Annuity Company of New York
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxx, Second Vice President
Facsimile No.: (000) 000-0000
IF TO SERIES:
American Funds Insurance Series
000 X. Xxxx Xxxxxx, 00xx Xxxxx
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
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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.
22. If this Agreement terminates, the Series, at the Company's option,
will continue to make additional shares of the Series available for all Policies
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 Policy owners), unless the Series liquidates or applicable laws
prohibit further sales. The Company agrees not to redeem shares unless
legitimately required to do so according to a Policy 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, the Company 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
the Company seeks satisfaction for the Series for any losses, claims, damages,
liabilities or litigation in respect of this Agreement, the Company and the
Accounts shall also have recourse against AFD and CRMC, which shall be jointly
and severally liable for all amounts due the Company 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, 19-26.
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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
ACCOUNT AND ITSELF)
Attest: By: [ILLEGIBLE]
-----------------------------------
Its: (Insert title)
------------------------------------
LINCOLN LIFE & ANNUITY COMPANY OF NEW
YORK (ON BEHALF OF THE ACCOUNT AND ITSELF)
Attest: By: [ILLEGIBLE]
-----------------------------------
Its: (Insert title)
------------------------------------
AMERICAN FUNDS INSURANCE SERIES
Attest: By: [ILLEGIBLE]
-----------------------------------
Its: Senior Vice President
------------------------------------
AMERICAN FUNDS DISTRIBUTORS, INC.
Attest: By: [ILLEGIBLE]
-----------------------------------
Its: Secretary
------------------------------------
CAPITAL RESEARCH AND MANAGEMENT COMPANY
Attest: By: [ILLEGIBLE]
-----------------------------------
Its: Vice President and Secretary
------------------------------------
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APPENDIX A
American Legacy VUL(cv)-III
American Legacy VUL(db)-II
American Legacy SVUL-III
American Legacy New York VUL(cv)-III
American Legacy New York VUL(db)-II
American Legacy New York SVUL-III
APPENDIX B
Lincoln Life Flexible Premium Variable Life Account Y
Lincoln Life & Annuity Flexible Premium Variable Life Account Y
APPENDIX C
AMERICAN FUNDS INSURANCE SERIES:
Asset Allocation Fund
Blue Chip Income and Growth Fund
Bond Fund
Cash Management Fund
Global Discovery Fund
Global Growth Fund
Global Small Capitalization Fund
Growth Fund
Growth-Income Fund
High-Income Bond Fund
International Fund
New World Fund
U.S. Government/AAA-Rated Securities Fund
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