PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN XXXXXXXXX DISTRIBUTORS, INC. AND
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT made as of May 22, 1998, among Templeton Variable Products
Series Fund (the "Trust"), an open-end management investment company organized
as a business trust under Massachusetts law, Franklin Xxxxxxxxx Distributors,
Inc., a California corporation, the Trust's principal underwriter
("Underwriter"), and The Lincoln National Life Insurance Company, a life
insurance company organized as a corporation under Indiana law (the "Company"),
on its own behalf and on behalf of each segregated asset account of the Company
set forth in Schedule A, as may be amended from time to time (the "Accounts").
WITNESSETH:
WHEREAS, -the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its Shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Underwriter desire that Trust shares be used as
an investment vehicle for separate accounts established for variable life
insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets, and certain of those series, named in
Schedule B, (the "Portfolios") are to be made available for purchase by the
Company for the Accounts; and
WHEREAS, the Trust has received an order from the SEC, dated November 16,
1993 (File No. 812-8546), granting Participating Insurance Companies and their
separate accounts exemptions from, the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2 (b) 0 5) and 6e-3 M (b) (15)
thereunder, to the extent necessary to permit shares of the Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Shared Funding Exemptive Order");
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised; and has
registered or will register certain variable annuity contracts and variable life
insurance policies, listed on Schedule C attached hereto (the "Contracts"),
under which the portfolios are to be made available as investment vehicles under
the 1933 Act unless such interests under the Contracts in the Accounts are
exempt from registration under the 1933 Act and the Trust has been so advised;
WHEREAS, each Account is a duly organized, validly existing segregated
asset account, established by resolution of the Board of Directors of the
Company, on the date shown for such account on Schedule A hereto, to set aside
and invest assets attributable to one or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and is a member in good standing of the National
Association of Securities Dealers, Inc. (NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an "Adviser")
is duly registered as an investment adviser under the Investment Advisers Act of
1940, as amended ("Advisers Act");
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid Contracts and the Underwriter
is authorized to sell such shares to unit investment trusts such as each Account
at net asset value;
NOW THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE 1.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article 1, the Company shall be the Trust's
agent for receipt of purchase orders and requests for redemption relating to
each Portfolio from each Account, provided that the Company notifies the Trust
of such purchase orders and requests for redemption by 9:00 a.m. Eastern time on
the next following Business Day, as defined in Section 1.3.
1.2. The Trust agrees to make shares of the Portfolios available to the
Accounts for purchase at the net asset value per share next computed after
receipt of
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a purchase order by the Trust (or its agent), as established in accordance with
the provisions of the then current prospectus of the Trust describing Portfolio
purchase procedures on those days on which the Trust calculates its net asset
value pursuant to rules of the SEC, and the Trust shall use its best efforts to
calculate Such net asset value on each day on which the New York Stock Exchange
("NYSE") is open for trading. The Company will transmit orders from time to time
to the Trust for the purchase of shares of the Portfolios. The Trustees of the
Trust (the "Trustees") may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such action is
deemed in the best interests of the shareholders of such Portfolio.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than 2:00 P.M. Eastern time on the
next Business Day after the Trust receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Trust or its designated
custodian. Upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust for this purpose. "Business Day" shall mean any day
on which the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio redemption procedures.
Redemption with respect to a Portfolio will normally be paid to the Company for
an Account in federal funds transmitted by wire to the Company before 2:00 p.m.
Eastern time on the next Business Day after the receipt of the request for
redemption. Such payment may be delayed if, for example, the Portfolio's cash
position so requires as when portfolio securities must be sold, or if
extraordinary market conditions exist, but in no event shall Payment be delayed
for a greater period than is permitted by the 0000 Xxx.
1.5 Payments for the purchase of shares of the Trust's Portfolios by the
Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 may be netted against one another on any
Business Day for the purpose of determining the amount of any wire transfer on
that Business Day.
1.6 issuance and transfer of the Trust's Portfolio shares will be by book
entry only. Stock certificates will not be issued to the Company or the Account.
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Portfolio Shares purchased from the Trust will be recorded in the appropriate
title for each Account or the appropriate subaccount of each Account.
1.7 The Trust Shall furnish, on or before the ex-dividend date, notice to
the Company of any income dividends or capital gain distributions payable on the
shares of any Portfolio of the Trust. The Company hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the net asset
value per share for each Portfolio available to the Company or its designated
agent on a daily basis as soon as reasonably practical after the net asset value
per share is calculated (normally by 6:30 p.m. Eastern time).
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Funding Exemptive Order. No shares of any Portfolio will be sold directly to the
general public. The Company agrees that it will use Trust shares only for the
purposes of funding the Contracts through the Accounts listed in Schedule A, as
amended from time to time.
1.10 The Company agrees that all net amounts available under the Contracts
shall be invested in (I) the Company's general account, (ii) investment
companies currently available as funding vehicles for the Contracts and
appearing on Schedules B and D to this Agreement, or (iii) other investment
companies, provided that the Company shall have given the Trust and the
Underwriter sixty (60) days' advance written notice of its intention to add such
other investment companies.
1.11 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.10 and
Article IV of this Agreement.
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any affiliate of
any other party), and shall not be liable in the event that an error results
from any incorrect information or confirmations supplied by any other party. If
an error is made in reliance upon incorrect information or confirmations, any
amount required to make a Contract owner's account whole shall be borne by the
party who provided the incorrect information or confirmation.
ARTICLE 11.
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OBLIGATIONS OF THE PARTIES; FEES AND EXPENSE
2.1 The Trust Shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
The Trust shall bear the costs of registration -and qualification of its shares
of the Portfolios, preparation and filing of the documents listed in this
Section 2.1 and all taxes to which an issuer is subject on the issuance and
transfer of its shares.
2.2 At the option of the Company, the Trust or the Underwriter shall
either (a) provide the Company with as many copies of portions of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
pertaining specifically to the Portfolios as the Company shall reasonably
request; or (b) provide the Company with a camera ready copy of such documents
in a form suitable for printing and from which information relating to series of
the Trust other than the Portfolios has been deleted to the extent practicable.
The Trust or the Underwriter shall provide the Company with a copy of its
current statement of additional information, including any amendments or
supplements, in a form suitable for duplication by the Company. Expenses of
furnishing such documents for marketing purposes shall be borne by the Company
and expenses of furnishing such documents for current contract owners invested
in the Trust shall be borne by the Trust or the Underwriter. The Company assumes
sole responsibility for ensuring that such materials are delivered to Contract
owners in accordance with applicable federal and state securities laws.
2.3 The Trust shall bear the costs of preparation, solicitation and
mailing Trust-sponsored proxy materials (or similar materials such as voting
solicitation instructions) to Contract owners, and the Company (at its expense)
shall. provide all necessary information for and otherwise fully cooperate with
the proxy distribution process. The Company shall bear the cost of distributing
all other proxy materials (or similar materials such as voting solicitation
instructions). The Company assumes sole responsibility for ensuring that such
materials are delivered to Contract owners in accordance with applicable federal
and state securities laws.
2.4 If and to the extent required by law, the Company shall: (i) solicit
voting instructions from Contract owners; (I!) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares held in a separate account for which no instructions have been
received in the same proportion as Trust shares of such Portfolio in that
separate account for which instructions have been received, so long 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
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Company reserves the right to vote Trust shares held in any segregated asset
account in its own right, to the extent permitted by law.
2.5 Except as provided in se section 2.7, the Company shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Xxxxxxxxx" or any other Trademark relating to the Trust or Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
the Company shall cease all use of any such name or xxxx as soon as reasonably
practicable.
2.6 Except as provided in section 2.7, the Trust or Underwriter shall not
use any designation comprised in whole or in part of the names or marks
"Lincoln" or "Lincoln Life" or any other Trademark relating to the Company
without prior written consent, and upon termination of this Agreement for any
reason, the Trust or the Underwriter shall cease all use of any such name or
xxxx as soon as reasonably practicable.
2.7 The Company shall furnish, or cause to be furnished to the Trust or
its designee, at least one complete copy of each registration statement,
prospectus, statement of additional information, retirement plan disclosure
information or other disclosure documents or similar information, as applicable
(collectively "disclosure documents"), as well as any report, solicitation for
voting instructions, sales literature and other promotional materials, and all
amendments to any of the above that relate to the Contracts or the Accounts and
their investment in the Trust prior to its first use with investors. 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 or an
Adviser is named, at least 10 Business Days prior to its use. No such material
shall be used if the Trust or its designee reasonably objects to such use within
seven Business Days after receipt of such material. For purposes of this
paragraph, "sales literature or other promotional material" includes, but is not
limited to, portions of the following that use any Trademark related to the
Trust or Underwriter or refer to the Trust or affiliates of the Trust:
advertisements (such as material published or designed for use in a newspaper,
magazine or other periodical, radio, television, telephone or tape recording,
videotape display signs or billboards, motion pictures or electronic
communication or other public media), sales literature (i.e., any written
communication distributed or made generally available to customers or the
public, including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts or any other advertisement, sales
literature or published article or electronic communication), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and disclosure documents,
shareholder reports and proxy materials.
The Trust shall furnish or cause to be furnished, to the Company or its
designee each piece of sales literature or other promotional material (as
defined above) in which the Company's products are promoted is named, at least
10 Business Days prior to
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its use. No such material shall be used if the Company or its designee
reasonably objects to such use within five Business Days after receipt of such
material. In addition, in marketing literature regarding the Trust, the Trust
and the Underwriter may include the Company's name in a list of insurance
companies whose separate accounts invest in the Trust, provided the Company
receives a copy of such literature three (3) business days in advance of first
use and does not affirmatively object.
2.8 The Company and its agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser in connection with the sale of the Contracts other
than information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
annual and semi-annual reports of the Trust, Trust-sponsored proxy statements,
or in sales literature or other promotional material approved by the Trust or
its designee, except as required by legal process or regulatory authorities or
with the written permission of the Trust or its designee.
2.9 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and each
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of disclosure
documents and annual and semi-annual reports pertaining to the Contracts.
2.10 The Trust shall not give any information or make any representations
or statements on behalf of the Company or concerning the Company, the Accounts
or the Contracts other than information or representations contained in and
accurately derived from disclosure documents for the Contracts (as such
disclosure documents may be amended or supplemented from time to time), or in
materials approved by the Company for distribution including sales literature or
other promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.11 The Trust Shall require all Participating Insurance Companies to
calculate voting privileges as set forth in section 2.4 and the Company shall be
responsible for assuring that the Accounts calculate voting privileges in the
manner established by the Trust. The Company will in no way recommend or oppose
or interfere with the solicitation of proxies for Portfolio shares held to fund
the Contracts without the prior written consent of the Trust, which consent may
be withheld in the Trust's sole discretion.
2.12 The Trust and Underwriter Shall pay no fee or other compensation to
the Company under this Agreement except as provided on Schedule E, if attached.
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Nevertheless, the Trust or the Underwriter or an affiliate may make payments
(other than pursuant to a Rule 12b-1 Plan) to the Company or its affiliates or
to the Contracts' underwriter in amounts agreed to by the Underwriter in writing
and such payments may be made out of fees otherwise payable to the Underwriter
or its affiliates, profits of the Underwriter or its affiliates, or other
resources available to the Underwriter or its affiliates.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 The Company represents and warrants that it is an insurance company
duly organized and validly existing under the laws of its state of incorporation
and that it has legally and validly established each Account as a segregated
asset account under such law as of the date set forth in Schedule A.
3.2 The Company represents and warrants that, with respect to each
Account, (1) the Company has registered or, prior to any issuance or sale of
the Contracts, will register the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated asset
account for the Contracts, or (2) if the Account is exempt from registration
as an investment company under Section 3(c) of the 1940 Act, the Company will
make every effort to maintain such exemption and will notify the Trust and
the Adviser immediately upon having a reasonable basis for believing that
such exemption no longer applies or might not apply in the future.
3.3 The Company represents and warrants that, with respect to each
Contract, (1) the Contract will be registered under the 1933 Act, or (2) if the
Contract is exempt from registration under Section 3(a)(2) of the 1933 Act or
under Section 4(2) and Regulation D of the 1933 Act, the Company will make every
effort to maintain such exemption and will notify the Trust and the Adviser
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future. The Company further represents
and warrants that the Contracts will be sold by broker dealers, or their
registered representatives, who are registered with the SEC under the 1934 Act
and who are members in good standing of the NASD; the Contracts will be issued
and sold in compliance in all material respects with all applicable federal and
state laws; and the sale of the Contracts shall comply in all material respects
with applicable state insurance suitability requirements.
For any unregistered Accounts which are exempt from registration under
the '40 Act in reliance upon Sections YOM or 3(c)(7) thereof, the Company
represents and warrants that:
(a) each Account and sub-account thereof has a principal underwriter
which is
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registered as a broker-dealer under the Securities Exchange Act of
1934, as amended;
(b) Trust shares are and will continue to be the only investment
securities held by the corresponding Account sub-accounts; and
(c) with regard to each Portfolio, Company, on behalf of the
corresponding sub-account, will:
(1) seek instructions from all Contract owners with regard to the
voting of all proxies with respect to Trust shares and vote
such proxies only in accordance with such instructions or vote
such shares held by it in the same proportion as the vote of
all other holders of such shares; and
(2) refrain from substituting shares of another security for such
shares unless the SEC has approved such substitution in the
manner provided in Section 26 of the '40 Act. 1
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Massachusetts and that it does
and will comply in all material respects with the 1940 Act and the rules and
regulations thereunder.
3.5 The Trust represents and warrants that the Portfolio shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
the Trust shall be registered under the 1940 Act prior to and at the time of any
issuance or sale of such shares. The Trust shall amend its registration
statement 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 its shares for sale in accordance with the laws of the various
states only if and to the extent deemed advisable by the Trust or the
Underwriter.
3.6 The Trust represents and warrants that (i) the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h) of
the Internal Revenue Code of 1986, as amended ("Code"), and the rules and
regulations thereunder, including without limitation Treasury
Regulation 1.817-5, and that (ii) it has adopted such diversification policies,
as reflected in its registration statement, and has contractually obligated each
Portfolio's investment adviser to comply with Trust policies. The Trust will
notify the Company immediately upon having a reasonable basis for believing any
Portfolio has ceased to comply or might not so comply and will in that event
immediately take all
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reasonable steps to adequately diversify the Portfolio to achieve compliance
within the grace period afforded by Regulation 1.817-5.
3.7 The Trust represents and warrants that it is currently qualified as a
"regulated investment company" under Subchapter M of the Code, that it will make
every effort to maintain such qualification and will notify the Company
immediately upon having a reasonable basis for believing it has ceased to so
qualify or might not so qualify in the future.
3.8 The Trust and Underwriter each represents and warrants that should
it ever desire to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act, the Trustees, including a majority who are
not "interested persons" of the Trust under the 1940 Act ( "disinterested
Trustees"), will formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
3.9 The Trust represents and warrants that it, its directors, officers,
employees and others dealing with the money or securities, or both, of a
Portfolio shall at all times be covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust in an amount not less that the minimum
coverage required by Rule 17g-I or other regulations under the 1940 Act. Such
bond shall include coverage for larceny and embezzlement and be issued by a
reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust, in an amount not less than $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be issued by a reputable
bonding company. The Company agrees to make all reasonable efforts to see that
this bond or another bond containing these provisions is always in effect, and
agrees to notify the Trust and the Underwriter in the event that Such coverage
no longer applies.
3.11 The Underwriter represents that each Adviser is duly organized and
validly existing under applicable corporate law and that it is registered and
will during the term of this Agreement remain registered as an investment
adviser under the Advisers Act.
3.12 The Trust currently intends for one or more Classes to make payments
to finance its distribution expenses, including service fees, pursuant to a Plan
adopted under Rule 12b-1 under the 1940 Act ("Rule 12b-1"), although it may
determine to discontinue such practice in the future. To the extent that any
Class of the Trust finances its distribution expenses pursuant to a Plan adopted
under Rule 12b-1, the Trust undertakes to comply with any then current SEC and
SEC staff interpretations concerning Rule 12b-1 or any successor provisions.
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ARTICLE IV.
POTENTIAL CONFLICTS
4.1 The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may arise
for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a Change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f)
a decision by an insurer to disregard the voting instructions of contract
owners. The Trust shall promptly inform the Company of any determination by the
Trustees that an irreconcilable material conflict exists and of the implications
thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions. All communications from the Company to the Trustees
may be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation with
other Participating insurance Companies whose contract owners are also affected,
at its own expense and to the extent reasonably practicable (as determined by
the Trustees) take whatever steps are necessary to remedy or eliminate the
irreconcilable material conflict, which steps could include: (a) withdrawing the
assets allocable to some or all of the Accounts from 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 the question of
whether or not such withdrawal should be implemented to a vote of all affected
Contract owners and, as appropriate, withdrawal of the assets of any appropriate
group (i.e. , annuity contract owners, life insurance policy owners, or variable
contract owners of one or more Participating Insurance Companies) that votes in
favor of such withdrawal, or offering to the affected Contract owners the option
of making such a change; and (b) establishing a new registered
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management investment company or managed separate account.
4.4 if a material irreconcilable conflict arises because of a decision by
the Company to disregard Contract owner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
may be required, at the Trust's election, to withdraw the affected Account's
investment in the Trust and terminate this Agreement with respect to such
Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested Trustees. Any such withdrawal
and termination must take place within six (6) months after the Trust gives
written notice that this provision is being implemented. Until the end of such
six (6) month period, the Trust shall continue to accept and implement orders by
the Company for the purchase and redemption of shares of the Trust.
4.5 if a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with a
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination shall
be limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of the
Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Company or Trust be required to establish a new funding medium for the
Contracts. In the event that the Trustees determine that any proposed action
does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Trustees.
4.7 The Company shall at least annually Submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Funding
Exemptive order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
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4.8 If and to the extent that Rule 6e-2 and Rule 6e-3M 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 Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Shared Funding Exemptive Order,
then the Trust and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rules 6e-2 and 6e-3(T),
as amended, and Rule 6e-3, as adopted, to the extent such rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless the
Trust and each of its Trustees, officers, employees and agents and
each person, if any, who controls the Trust within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties"
and individually the "Indemnified Party" for purposes of this
Article V) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent. of
the Company, which consent shall not be unreasonably withheld) or
expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and
reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may
become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or
acquisition of Trust Shares or the Contracts and
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact contained in
a disclosure document for the Contracts or in the Contracts
themselves or in sales literature generated or approved by the
Company on behalf of the Contracts or Accounts (or any
amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes of this
Article V), 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 indemnity shall not
apply as to any Indemnified Party if such statement or
omission or Such alleged statement or omission was made in
reliance upon and was accurately derived from
13
written information furnished to the Company by or on behalf
of the Trust for use in Company Documents or otherwise for use
in connection with the sale of the Contracts or Trust shares;
or
(ii) arise out of or result from statements or
representations (other than statements or representations
contained in and accurate1y derived from Trust Documents as
defined in Section 5.2 (a)(0) or wrongful conduct of the
Company or persons under its control, with respect to the sale
or acquisition of the Contracts or Trust shares; or
(III) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a)(i) or the omission or
alleged -omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading if such statement or omission was made
in reliance upon and accurately derived from written
information furnished to the Trust by or on behalf of the
Company; or
(iv) arise out of or result from any failure by the
Company to provide the services or furnish the materials
required under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company.
(b) The Company shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Trust or Underwriter, whichever is
applicable. The Company shall also not be liable under this
indemnification provision with respect to any claim made against an
indemnified Party unless such Indemnified Party shall have notified
the Company in writing within a reasonable time after the summons
or other first legal process giving information of the nature of
the claim shall have been served upon such indemnified Party (or
14
after such Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify the Company
of any Such claim shall not relieve the Company from any liability
which it may have to the Indemnified Party against whom such action
is brought otherwise than on account of this indemnification
provision. in case any such action is brought against the
Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from
the Company to such party of the Company's election to assume the
defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Company
will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently
in connection with the defense thereof other than reasonable costs
of investigation.
(c) The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings against them
in connection with the issuance or sale of the Trust Shares or the
Contracts or the operation of the Trust.
5.2 INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter agrees to indemnify and hold harmless the Company,
the underwriter of the Contracts 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 (collectively, the "Indemnified Parties" and
individually an "Indemnified Party" for purposes of this Section 5.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter, which
consent shall not be unreasonably withheld) or expenses (including the
reasonable costs of investigating or defending any alleged loss, claim,
damage, liability or expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses") to which the Indemnified
Parties become subject under any statute, at common law or otherwise,
insofar as such Losses are related to the sale or acquisition of the Trust's
Shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement,
15
prospectus or sales literature of the Trust (or any amendment or
supplement to any of the foregoing) (collectively, the "Trust Documents")
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 of such alleged statement or omission was made in
reliance upon and in conformity with information furnished to the
Underwriter or Trust by or on behalf of the Company for use in the
Registration Statement or prospectus for the Trust or in sales literature
(or any amendment or supplement) or otherwise for use in connection with
the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of statements or representations
(other than statements or representations contained in the disclosure
documents or sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or wrongful conduct of the
Trust, Adviser or Underwriter or persons under their -control, with
respect to the sale or distribution of the Contracts or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a disclosure document or sales
literature covering the Contracts, 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 Company by or on behalf of
the Trust; or
(iv) arise as a result of any failure by the Trust to provide the
services and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or otherwise,
to comply with the qualification representation specified in Section 3.7
Of this Agreement and the diversification requirements specified in
Section 3.6 of this Agreement); or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in this Agreement
or arise out of or result from any other material breach of this Agreement
by the Underwriter; as limited by and in accordance with the provisions of
Sections 5.2(b) and 5.2(c) hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of
16
such Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to each Company or the Account, whichever is applicable.
(c) The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom Such action is brought otherwise than
on account of this indemnification provision. in case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to Such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party Shall bear the expenses of any additional counsel retained by it, and the
Underwriter will not be liable to Such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
(d) The Company agrees promptly to notify the Underwriter of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Contracts or the
operation of each Account.
5.3 INDEMNIFICATION BY THE TRUST
(a) The Trust agrees to indemnify 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 (collectively, the "Indemnified
Parties" for purposes of this Section 5.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become 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 result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Trust, and arise -out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material
17
breach of this Agreement by the Trust; as limited by and in accordance with the
provisions of Section 5.3(b) and 5.3(c) hereof. It is understood and expressly
stipulated that neither the holders of shares of the Trust nor any Trustee,
officer, agent or employee of the Trust shall be personally liable hereunder,
nor shall any resort to be had to other private property for the satisfaction of
any claim or obligation hereunder, but the Trust only shall be liable.
(b) The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against any Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Trust, the Underwriter or each Account, whichever is
applicable.
(c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified the Trust in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claims shall have been served upon such Indemnified Party (or
after such Indemnified Party shall have received notice of such service on any
designated agent), but failure to notify the Trust of any such claim shall not
relieve the Trust from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Trust will be entitled to participate, at its own
expense, in the defense thereof. The Trust also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the action.
After notice from the Trust to such party of the Trust's election to assume the
defense thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Trust will not be liable to such
party under this Agreement for any legal or other expenses subsequently incurred
by such party independently in connection with the defense thereof other than
reasonable costs of investigation.
(d) The Company and the Underwriter agree promptly to notify the Trust of
the commencement of any litigation or proceedings against it any of its
respective officers or directors in connection with the Agreement, the issuance
or sale of the Contracts, with respect to the operation of either the Account,
-or the sale or acquisition of share of the Trust.
ARTICLE V1.
TERMINATION
18
6.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios or any reason by ninety (90) days advance
written notice delivered to the other parties, and shall terminate immediately
in the event of its assignment, as that term is used in the 1940 Act.
6.2 This Agreement may be terminated immediately by either the Trust or
the Underwriter following consultation with the Trustees upon written notice to
the Company if :
(a) the Company notifies the Trust or the Underwriter that the
exemption from registration under Section 3(c) of the 1940 Act no longer
applies, or might not apply in the future, to the unregistered Accounts,
or that the exemption from registration under Section 4(2) or Regulation D
promulgated under the 1933 Act no longer applies or might not apply in the
future, to interests under the unregistered Contracts; Or
(b) either one or both of the Trust or the Underwriter 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 is the subject of material adverse publicity.
6.3 This Agreement may be terminated immediately by the Company upon
written notice to the Trust and the Underwriter:
(a) if the Company Shall determine, in its sole judgment exercised
in good faith, that either the Trust or the Underwriter has suffered a
material adverse change in its business, operations, financial conditions
or prospects since the date of this Agreement or is the subject of
material adverse publicity; or
(b) if the Trust and Underwriter fail to promptly remedy a breach of
section 3.6 hereof.
6.4 If this Agreement is terminated for any reason, except under Article
IV (Potential Conflicts) above, the Trust shall, at the option of the Company,
continue to make available additional shares of any Portfolio and redeem shares
of any Portfolio pursuant to all of the terms and conditions of this Agreement
for all Contracts in effect on the effective date of termination of this
Agreement. If this Agreement is terminated pursuant to Article IV, the
provisions of Article IV shall govern.
6.5 The provisions of Articles 11 (Representations and Warranties) and V
(Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement,
19
as long as shares of the Trust are held on behalf of Contract owners in
accordance with Section 6.4, except that the Trust and the Underwriter shall
have no further obligation to sell Trust shares with respect to Contracts issued
after termination.
6.6 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated or
approved transactions, (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption"), or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Trust and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Trust and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Trust or
the Underwriter 90 days notice of its intention to do so.
ARTICLE VII.
NOTICES.
Any notice Shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such Party may from time to time specify in
writing to the other party.
If to the Trust or the Underwriter:
Templeton Variable Products Series Fund or
Franklin Xxxxxxxxx Distributors, Inc.
000 X. Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Trust Secretary
WITH A COPY TO
Franklin Resources, Inc.
000 Xxxxxxxx Xxxxxx Xxxxxxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Senior Corporate Counsel
If to the Company:
20
The Lincoln National Life Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx, 0X-00
Xxxx Xxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx, Vice President
ARTICLE VIIII.
MISCELLANEOUS
8.1 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.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 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.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Florida. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the SEC granting exemptive
relief therefrom and the conditions of Such orders. Copies of any such orders
shall be promptly forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any Such
liabilities.
8.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD, and
state insurance regulators) and Shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
8.7 Each party hereto shall treat as confidential the names and addresses
of the Contract owners and all information reasonably identified as confidential
in writing by any other party hereto, and, except as permitted by this Agreement
or as required by legal process or regulatory authorities, shall not disclose,
disseminate, or utilize
21
such names and addresses and other confidential information until such time as
they may come into the public domain, without the express written consent of the
affected party. Without limiting the foregoing, no party hereto shall disclose
any information that such party has been advised is proprietary, except such
information that such party is required to disclose by any appropriate
governmental authority (including, without limitation, the SEC, the NASD, and
state securities and insurance regulators).
8.8 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.
8.9 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided in
Section 1.10.
8.10 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the prior written approval of the other party.
8.11 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
The Company:
The Lincoln National Life Insurance Company
-------------------------------------------
By its authorized officer
By:
Name:
Title:
The Trust:
Templeton Variable Products Series Fund
---------------------------------------
By its authorized officer
By:
Name:
Title:
22
The Underwriter:
Franklin Xxxxxxxxx Distributors, Inc.
-------------------------------------
By its authorized officer
By:
Name:
Title:
SCHEDULE A
SEPARATE ACCOUNTS OF
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
1. Lincoln Life Flexible Premium Variable Life Account R
Date Established:
SEC Registration Number: 333-43107
2. Lincoln Life Variable Life Account M
Date Established:
SEC Registration Number: 333-42479
23
SCHEDULE B
TRUST PORTFOLIOS AND CLASSES AVAILABLE
Templeton Variable Products Series Adviser
---------------------------------- -------
Templeton Asset Allocation Fund Xxxxxxxxx Investment Counsel, Inc.
-Class 1
Xxxxxxxxx international Fund Xxxxxxxxx Investment Counsel, Inc.
-Class 1
Templeton Stock Fund Xxxxxxxxx Investment Counsel, Inc.
-Class 1
24
SCHEDULE C
VARIABLE ANNUITY CONTRACTS
ISSUED BY LINCOLN NATIONAL LIFE INSURANCE COMPANY
REPRESENTATIVE
CONTRACT FORM NUMBER
1. Lincoln Life Flexible Premium Variable Life Account R
Title: SVUL I Form: LN650LL
SEC Registration Number: 333-43107
2. Lincoln Life Variable Account M
Title: VUL I Form: LN605LL
SEC Registration Number: 333-42479
25
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
AIM Capital Appreciation Fund
AIM Diversified income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
BT Equity 500 Index Fund
Delaware Emerging Markets Series
Delaware Small Cap Value Series
Delaware Trend Series
Fidelity VIP Equity-Income Portfolio
Fidelity VIP 11 Asset Manager Portfolio
Fidelity VIP 11 Investment Grade Bond Portfolio
Lincoln National Money Market Fund
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
OpCap Global Equity Portfolio
OpCap Managed Portfolio
26
