FUND PARTICIPATION AGREEMENT
BETWEEN
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
AND
LINCOLN VARIABLE INSURANCE PRODUCTS TRUST
THIS AGREEMENT is made this ____ day of ___________, 2003, between Lincoln
Variable Insurance Products Trust, an open-end management investment company
organized as a Delaware business trust (the "Trust") and The Lincoln National
Life Insurance Company (the "Company"), an Indiana corporation, on its own
behalf and on behalf of each separate account of the Company set forth on
Schedule A as may be amended from time to time (the "Accounts").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended ("xxx 0000 Xxx")
and the offer and sale of its shares are registered under the Securities Act of
1933, as amended (the "1933 Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts (collectively, the "Variable Insurance Products") to be offered by
insurance companies that have entered into participation agreements with the
Trust (the "Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each designated a "Fund," which are set forth on Schedule B,
and representing the interest in a particular managed portfolio of securities
and other assets; and
WHEREAS, the Company has registered or will register certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act, unless
exempt therefrom, and any applicable state securities and insurance law; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act unless exempt therefrom; and
WHEREAS, each Account is a duly organized, validly existing separate
account, established by resolution of the Board of Directors of the Company, on
the date shown for that Account on Schedule A, to set aside and invest assets
attributable to one or more variable insurance contracts (the "Contracts"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in each Fund on behalf of
certain Accounts to fund the Contracts and the Trust 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 herein, the
parties agree as follows:
ARTICLE 1. SALE OF TRUST SHARES
1.1 The Trust agrees to sell to the Company those shares representing
interests in Funds which each Account orders, executing 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 of the Trust. For purposes of this Section
1.1, the Company shall be the designee of the Trust for receipt of such orders
from each Account and receipt by such designee shall constitute receipt by the
Trust; provided that the Trust receives notice of such order by 10:00 a.m. New
York time on the next following Business Day. "Business Day" shall mean any day
on which the New York Stock Exchange is open for trading and on which the Trust
calculates its net asset value pursuant to the rules of the Securities and
Exchange Commission. The initial Funds are set forth in Schedule A, as such
schedule is amended from time to time. The Trust will confirm receipt of each
trade (ending share balance by account and fund) by 2:30 p.m. New York time on
the day the trade is placed with the Trust (using a mutually agreed upon
format).
1.2 The Trust agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Trust calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Trust shall
use its best efforts to calculate such net asset value on each day on which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Trustees of the Trust (the "Trustees") may refuse to sell shares of any Fund to
the Company or any other person, or suspend or terminate the offering of shares
of any Fund if such action is required by law or by regulatory authorities
having jurisdiction over the Trust or if the Trustees determine, in the exercise
of their fiduciary responsibilities, that to do so would be in the best
interests of shareholders.
1.3 The Trust agrees that shares of the Trust will be sold only to
Participating Insurance Companies and their separate accounts. No shares of any
Fund will be sold to the general public.
1.4 The Trust shall redeem its shares in accordance with the terms of its
then current prospectus. For purposes of this Section 1.4, the Company shall be
the designee of the Trust for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Trust;
provided that the Trust receives notice of such request for redemption by 10:00
a.m., New York time, on the next following Business Day. Payment shall be made
the same business day that the Trust receives notice of the order in federal
funds initiated by wire no later than 2:30 p.m. New York 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.
1.5 The Company shall purchase and redeem the shares of Funds offered by
the then current prospectus of the Trust in accordance with the provisions of
such prospectus. Trust shall promptly notify Company of any changes to such
provisions.
1.6 The Company shall pay for Trust shares on the next Business Day after
an order to purchase Trust shares is made in accordance with the provisions of
Section 1.1 hereof. Payment shall be in federal funds initiated by wire no later
than 2:30 p.m. New York time as long as the banking system is open for business.
If
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the banking system is closed, payment will be transmitted the next day that
the banking system is open for business.
1.7 Issuance and transfer of the Trust's shares will be by book entry
only. Share certificates will not be issued to the Company or any Account.
Shares ordered from the Trust will be recorded as instructed by the Company in
an appropriate title for each Account or the appropriate sub-account of each
Account.
1.8 The Trust shall furnish prompt notice on or before ex-dividend date
(using a mutually agreed upon format) to the Company of the declaration of any
income, dividends or capital gain distributions payable on the Trust's shares.
The Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Fund shares in additional shares of that
Fund. The Company reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash. The Trust shall
notify the Company of the number of shares so issued as payment of such
dividends and distributions. Each year the Trust will provide the Company with a
dividend and capital gain payment schedule (using a mutually agreed upon
format).
1.9 The Trust shall make the net asset value per share for each Fund
available to the Company on a daily basis as soon as reasonably practical after
the net asset value per share is calculated, and the Trust shall use its best
efforts to make such net asset value per share available by 6:30 p.m. New York
time (using a mutually agreed upon format). The Trust will notify Company when
and if Trust does not communicate the net asset value per share by 6:30 pm New
York time.
1.10 If the Trust provides the Company with materially incorrect share net
asset value information through no fault of the Company, the Company on behalf
of the Separate Accounts, shall be entitled to an adjustment to the number of
shares purchased or redeemed to reflect the correct share net asset value. Any
material error in the calculation of net asset value per share, dividend or
capital gain information shall be reported promptly upon discovery to the
Company. The Trust shall not be liable for any information provided to the
Company pursuant to this Agreement which information is based on incorrect
information supplied by the Company to the Trust. In the event of any material
error in the calculation or communication of net asset value, dividends or
capital gain information or any delay in the communication, the responsible
party or parties shall reimburse the Company for any losses or reasonable costs
incurred as a result of the error or delay, including but not limited to,
amounts needed to make Contract owners whole and reasonable administrative costs
necessary to correct the error.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1 The Company represents and warrants that:
(a) at all times during the term of this Agreement the Contracts are or
will be registered under the 1933 Act or will be offered and sold in compliance
with exemptions from such registration; the Contracts will be issued and sold in
compliance in all material respects with all applicable laws. The Company
further represents and warrants that it is an insurance company duly organized
and validly existing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a separate
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account under applicable law and has registered or, prior to any issuance or
sale of the Contracts, will register each Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated
investment account for the Contracts or operate such Account in compliance with
exemption from such registration; and
(b) the Contracts are currently treated as endowment, annuity or life
insurance contracts, under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), and that it will make every effort to maintain
such treatment and that it will notify the Trust immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so treated
or that they might not be so treated in the future.
2.2 The Trust represents and warrants that:
(a) at all times during the term of this Agreement Trust shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold by the Trust to the Company in compliance with
all applicable laws, subject to the terms of Section 2.4 below, and the Trust is
and shall remain registered under the 1940 Act. The Trust shall amend the
Registration 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 advisable
by the Trust in connection with their sale by the Trust to the Company and only
as required by Section 2.4;
(b) the Trust is currently qualified as a Regulated Investment Company
under Subchapter M of the Code, and that it will use its best efforts to
maintain such qualification (under Subchapter M or any successor provision) and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future; and
(c) the Trust is lawfully organized and validly existing under the laws of
the State of Delaware and that it does and will comply in all material respects
with the 1940 Act.
2.3 The Trust shall not be responsible, and the Company shall take full
responsibility, for determining whether any qualification or registration of
Trust shares is required under such laws in connection with the sale of the
Contracts or the indirect interest of any Contractholder in any shares of the
Trust and advising the Trust thereof at such time and in such manner as is
necessary to permit the Trust to comply.
2.4 The Trust makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1 The Trust shall provide such documentation (including a camera-ready
copy of its prospectus) and other assistance as is reasonably necessary in order
for the Company once each year (or more frequently if
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the prospectus for the Trust is amended) to have the prospectus for the
Contracts and the Trust's prospectus printed together in one or more documents
(such printing to be at the Company's expense).
3.2 The Trust's Prospectus shall state that the Statement of Additional
Information for the Trust is available from the Trust, and the Trust, at its
expense, shall print and provide such Statement free of charge to the Company
and to any owner of a Contract or prospective owner who requests such Statement.
3.3 The Trust, at its expense, shall provide the Company with copies of
its reports to shareholders, proxy material and other communications to
shareholders in such quantity as the Company shall reasonably require for
distribution to the Contract owners, such distribution to be at the expense of
the Trust in the case of proxy material and at the expense of the Company in the
case of shareholder reports.
3.4 The Company shall vote all Trust shares as required by law. The
Company reserves the right to vote Trust shares held in any separate account in
its own right, to the extent permitted by law. The Company shall be responsible
for assuring that each of its separate accounts participating in the Trust
calculates voting privileges in a manner consistent with all legal requirements.
3.5 The Trust will comply with all applicable provisions of the 1940 Act
requiring voting by shareholders, and in particular the Trust will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Trust is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b). Further,
the Trust will act in accordance with the Securities and Exchange Commission's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of trustees and with whatever rules the Commission may promulgate with
respect thereto.
3.6 The Trust agrees to use its best efforts to provide the Company all
Trust proxies, reports, and prospectuses (including supplements) in HTML, PDF
and hard copy in final form no later than 15 calendar days before they must be
mailed: Reports - February 13th and August 14th, Prospectuses - April 15th.
Trust will customize prospectuses (including supplements) to include only funds
offered in the Company's products.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1 Without limiting the scope or effect of Section 4.2 hereof, the
Company shall furnish, or shall cause to be furnished, to the Trust each piece
of sales literature or other promotional material (as defined hereafter) in
which the Trust is named at least 15 days prior to its use. No such material
shall be used if the Trust objects to such use within five Business Days after
receipt of such material.
4.2 The Company shall not give any information or make any representations
or statements on behalf of the Trust or concerning the Trust in connection with
the sale of the Contracts other than the information or representations
contained in the registration statement or prospectus for the Trust shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in annual or semi-annual reports or proxy statements for the
Trust, or in sales literature or other promotional material approved by the
Trust or its designee, except with the written permission of the Trust or the
designee or as is required by law.
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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 prepared by the Trust in which the Company and/or its
separate account(s) is named at least 15 days prior to its use. No such material
shall be used if the Company or its designee objects to such use within five
Business Days after receipt of such material.
4.4 The Trust shall not give any information or make any representations
on behalf of the Company or concerning the Company, each Account, or the
Contracts other than the information or representations contained in a
registration statement or prospectus for the Contracts, as such registration
statement and prospectus may be amended or supplemented from time to time, or in
published reports for each Account which are in the public domain or approved by
the Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company or its designee, except with the
written permission of the Company or as is required by law.
4.5 For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media), sales literature
(i.e. any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all registered representatives.
4.6 The Trust will support onsite visits by Company no less frequently
than biannually and visit the Company no less frequently than annually. The
Trust will provide a signed compliance report as reasonably requested by the
Company or its designee, on a quarterly basis to include but not limited to: 817
(h), subchapter M, and Prospectus guidelines. The Trust will provide State of
California Bulletin 97-2 compliance certification upon reasonable request. The
Trust will provide fund statistics and commentaries (as reasonably required by
Company) in electronic format each calendar quarter, no later than the 17th of
the month following quarter-end. The Trust will support the Company's marketing
and due diligence efforts by granting reasonable requests for visits to the
Trust and its affiliates' offices by representatives of the Company.
ARTICLE V. FEES AND EXPENSES
5.1 All expenses incident to performance by the Trust under this Agreement
shall be paid by the Trust. The Trust shall bear the expenses for the cost of
registration and qualification of the Trust's shares, preparation and filing of
the Trust's prospectus and registration statement, proxy materials and reports,
setting the prospectus and shareholder reports in type, setting in type and
printing the proxy materials, and the preparation of all statements and notices
required by any federal or state law, in each case as may reasonably be
necessary for the performance by it of its obligations under this Agreement.
5.2 The Trust shall bear the expenses of printing and distributing the
Trust's proxy materials to existing Contract owners. The Trust will bear the
expense of printing its shareholder reports sent to existing Contract owners.
The Company will pay the costs of distributing such reports.
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5.3 The Company shall bear the expenses of printing and distributing
materials, including the Trust's prospectus, used in connection with the sales
of the Contracts. The Company shall also bear the expenses of printing and
distributing the Account's prospectus (including supplements) to existing
Contract owners.
ARTICLE VI. DIVERSIFICATION
7.1 The Trust represents and warrants that the Trust will at all times comply
with Section 817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, and life insurance
contracts and any amendments or other modifications to such Section or
Regulations. Trust will notify Company immediately upon failure to comply with
the diversification requirements and take all steps necessary to remedy the
failure.
ARTICLE VII. POTENTIAL CONFLICTS
8.1 The Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
separate accounts investing in the Trust. A material irreconcilable 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 law 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 Fund 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 if the Trustees determine that a
material irreconcilable conflict exists and the implications thereof.
8.2 The Company will 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. This includes, but is not limited to, an
obligation by the Company to inform the Trustees whenever Contract owner voting
instructions are disregarded.
8.3 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 to the extent reasonably practicable (as determined by a majority
of the disinterested Trustees), take, at the Company's expense, whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, up to
and including: (1) withdrawing the assets allocable to some or all of the
Accounts from the Trust or any Fund and reinvesting such assets in a different
investment medium, including (but not limited to) another Fund of the Trust, or
submitting the question whether such segregation should be implemented to a vote
of all affected contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity Contract owners, life insurance Contract
owners, or variable Contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (2) establishing a new
registered management investment company or managed separate account.
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8.4 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 one or more portfolios of 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. No charge or penalty shall be imposed as a result of such withdrawal.
Any such withdrawal and termination must take place within six (6) months after
the Trust gives written notice that this provision is being implemented , and
until the end of that six month period the Trust shall, to the extent permitted
by law and any exemptive relief previously granted to the Trust, continue to
accept and implement orders by the Company for the purchase (or redemption) of
shares of the Trust.
8.5 If a material irreconcilable conflict arises because of a particular
state insurance regulator's decision applicable to the Company to disregard
Contract owner voting instructions and that decision represents a minority
position that would preclude a majority vote, then the Company may be required,
at the Trust's direction, to withdraw the affected Account's investment in one
or more Funds of the Trust; 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 , unless a shorter period is required by law, and until the end of
the foregoing six month period (or such shorter period if required by law), the
Trust shall, to the extent permitted by law and any exemptive relief previously
granted to the Trust, continue to accept and implement orders by the Company for
the purchase (and redemption) of shares of the Trust. No charge or penalty will
be imposed as a result of such withdrawal.
8.6 For purposes of Sections 8.3 through 8.6 of this Agreement, a majority
of the disinterested Trustees shall determine whether any proposed action
adequately remedies any material irreconcilable conflict. The Trust shall not be
required to establish a new finding medium for the Contracts, nor shall the
Company be required to do so, if an offer to do so has been declined by vote of
a majority of Contract owners materially adversely affected by the material
irreconcilable conflict. In the event that the Trustees determine that any
proposed action does not adequately remedy any material irreconcilable conflict,
then the Company will withdraw the Account's investment in one or more Funds of
the Trust and terminate this Agreement within six (6) months (or such shorter
period as may be required by law or any exemptive relief previously granted to
the Trust) 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. No charge or penalty
will be imposed as a result of such withdrawal.
8.7 The responsibility to take remedial action in the event of the
Trustees' determination of a material irreconcilable conflict and to bear the
cost of such remedial action shall be the obligation of the Company, and the
obligation of the Company set forth in this Article VII shall be carried out
with a view only to the interests of Contract owners.
8.8 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
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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 (a) 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; and (b) Sections 3.4, 3.5, 8.1, 8.2, 8.3, 8.4
and 8.5 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 IX. INDEMNIFICATION
9.1. INDEMNIFICATION BY THE COMPANY
9.1 (a). The Company shall indemnify and hold harmless the Trust and each
of the Trustees, officers, employees or agents of the Trust and each person, if
any, who controls the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 9.1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company which consent may not be
unreasonably withheld) or litigation (including reasonable legal and other
expenses), to which the Indemnified Parties 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 Trust's shares or the Contracts or
the performance by the parties of their obligations hereunder and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in a Registration
Statement, Prospectus or Statement of Additional Information for the
Contracts or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, 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 reliance upon and in conformity with information
furnished to the Company by or on behalf of the Trust for use in the
Registration Statement, Prospectus or Statement of Additional
Information for the Contracts or in the Contracts or sales literature
(or any amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Trust shares; or
(ii) arise out of or as a result of written statements or
representations (other than statements or representations contained in
the Trust's Registration Statement or Prospectus, or in sales
literature for Trust shares not supplied by the Company, or persons
under its control) or wrongful conduct of the Company or persons under
its control, with respect to the sale or distribution of the Contracts
or Trust shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, Prospectus, or
sales 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
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stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Trust by or on behalf of the Company; or
(iv) arise out of or result from any breach of any representation
and/or warranty made by the Company in this Agreement or arise out of
or result from any other breach of this Agreement by the Company, as
limited by and in accordance with the provisions of Sections 9.1(b)
and 9.1(c) hereof.
9.1 (b) The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party to the extent 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 or duties under this
Agreement or to the Trust, whichever is applicable.
9.1 (c) The Company 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 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 after such Indemnified Party shall have received notice of
such service on any designated agent), on the basis of which the Indemnified
Party should reasonably know of the availability of indemnity hereunder in
respect of such claim 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 Indemnified Party
named in the action. After notice from the Company to such Indemnified 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 Indemnified Party under this Agreement for
any legal or other expenses subsequently incurred by such Indemnified Party
independently in connection with the defense thereof other than reasonable costs
of investigation.
9.1 (d) The Trust shall promptly notify the Company of the commencement of
any litigation or proceedings against the Trust in connection with the issuance
or sale of the Trust Shares or the Contracts or the operation of the Trust.
9.1 (e) The provisions of this Section 9.1 shall survive any termination
of this Agreement.
9.2 INDEMNIFICATION BY THE TRUST
9.2 (a) The Trust shall indemnify and hold harmless the Company, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act and any director, officer, employee or agent of the foregoing
(collectively, the "Indemnified Parties" for purposes of this Section 9.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Trust which consent may not be
unreasonably withheld) or litigation (including reasonable legal and other
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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 are related to the
operations of the Trust and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in a Registration Statement,
Prospectus and Statement of Additional Information of the Trust (or any
amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, 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 reliance upon and in conformity
with information furnished to the Trust by or on behalf of the Company for
use in the Registration Statement, Prospectus, or Statement of Additional
Information for the Trust (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 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 breach of this Agreement by the Trust, as
limited by and in accordance with the provisions of Sections 9.3(b) and
9.3(c) hereof.
9.2 (b) The Trust shall not be liable under the indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party as such may arise from such Indemnified
Party s willful misfeasance, bad faith, or gross negligence or by reason of such
Indemnified Party's reckless disregard of obligations and duties under this
Agreement or to the Company, the Trust, or each Account, whichever is
applicable.
9.2 (c) The Trust shall not be liable under this indemnification provision
with respect to any claim made against any 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 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) on the basis of which the Indemnified Party should reasonably
know of the availability of indemnity hereunder in respect of such claim, 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
reasonably satisfactory to the Indemnified Party named in the action. After
notice from the Trust to such Indemnified 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 Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof other than reasonable costs of
investigation.
9.2 (d) The Company agrees promptly to notify the Trust of the
commencement of any litigation or proceedings against it or any of its officers
or, directors, in connection with this Agreement, the issuance or sale of the
Contracts or the sale or acquisition of shares of the Trust.
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9.2 (e) The provisions of this Section 9.2 shall survive any termination
of this Agreement.
ARTICLE X. APPLICABLE LAW
10.1 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Indiana.
10.2 This Agreement 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 regulations as the Securities and
Exchange Commission may grant (including, but not limited to, the Shared Funding
Exemptive Order) and the terms hereof shall be interpreted and construed in
accordance therewith.
ARTICLE XI. TERMINATION
11.1.This Agreement shall terminate:
(a) at the option of any party upon six months advance written notice to
the other parties; or
(b) at the option of the Trust in the event that formal administrative
proceedings are instituted against the Company by the NASD, the Securities and
Exchange Commission, any State Insurance Commissioner or any other regulatory
body regarding the Company's duties under this Agreement or related to the sales
of the Contracts, with respect to the operation of any Account, or the purchase
of the Trust shares, provided, however, that the Trust determines in its sole
judgment exercised in good faith, that any such administrative proceedings will
have a material adverse effect upon the ability of the Company to perform its
obligations under this Agreement; or
(c) at the option of the Company in the event that formal administrative
proceedings are instituted against the Trust by the NASD, the Securities and
Exchange Commission, or any state securities or insurance department or any
other regulatory body regarding the Trust's duties under this Agreement or with
respect to the operation of any Trust, or the sale of shares of the Trust to the
Company, provided, however, that the Company determines in its sole judgment
exercised in good faith, that any such administrative proceedings will have a
material adverse effect upon the ability of the Trust to perform its obligations
under this Agreement; or
(d) with respect to any Account, upon requisite vote of the Contract
owners having an interest in such Account (or any subaccount) to substitute the
shares of another investment company for the corresponding Fund shares of the
Trust in accordance with the terms of the Contracts for which those Fund shares
had been selected to serve as the underlying investment media. The Company will
give 30 days' prior written notice to the Trust of the date of any proposed vote
to replace the Trust's shares; or
(e) at the option of the Company in the event that the Trust fails to
maintain its status as a Registered Investment Company or fails to comply with
Section 817(h) of the Code.
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11.2. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11.1 (a) may be exercised for any
reason or for no reason.
11.3 No termination of this Agreement shall be effective unless and until
the party terminating this Agreement gives prior written notice to all other
parties to this Agreement of its intent to terminate, which notice shall set
forth the basis for such termination. Such prior written notice shall be given
in advance of the effective date of termination as required by this Article XI.
11.4 Notwithstanding any termination of this Agreement, subject to Section
1.2 of this Agreement, the Trust shall, at the option of the Company, continue
to make available additional shares of the Trust pursuant to the terms and
conditions of this Agreement, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, subject to Section 1.2 of this
Agreement, the owners of the Existing Contracts shall be permitted to reallocate
investments in the Trust, redeem investments in the Trust and/or invest in the
Trust upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 11.4 shall not apply to any
termination under Article VIII and the effect of such Article VIII termination
shall be governed by Article VIII of this Agreement.
11.5 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in either Account) except (i) as necessary to implement Contract owner initiated
transactions, or (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"). Upon request, the Company will promptly
furnish to the Trust an opinion of counsel for the Company, reasonably
satisfactory to the Trust, to the effect that any redemnification pursuant to
clause (ii) above is a Legally Required Redemption. Furthermore, except in cases
where permitted under the terms of the Contracts, subject to Section 1.2 of this
Agreement, the Company shall not prevent Contract owners from allocating
payments to an Fund that was otherwise available under the Contracts without
first giving the Trust 45 days notice of its intention to do.
ARTICLE XII. 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:
Lincoln Variable Insurance Products Trust
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Attn: Secretary
If to the Company:
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The Lincoln National Life Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx
Xxxx Xxxxx, XX 00000
Attn: Rise X. X. Xxxxxx
ARTICLE XIII. MISCELLANEOUS
13.1 A copy of the Agreement and Declaration of Trust of the Trust is on
file with the Secretary of State of the State of Delaware, and notice is hereby
given that this instrument is executed on behalf of the Trustees of the Trust as
Trustees and not individually and that the obligations of or arising out of this
instrument, including without limitation Article VII, are not binding upon any
of the Trustees or shareholders individually but binding only upon the assets
and property of the Trust.
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 two 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.
13.5 Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Commission, 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.
13.6 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.
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 below.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
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Name:
Title:
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LINCOLN VARIABLE INSURANCE PRODUCTS TRUST
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Name:
Title:
15
SCHEDULE A
LINCOLN LIFE SEPARATE ACCOUNTS
SEPARATE ACCOUNT NAME
16
SCHEDULE B
FUNDS
17
