FUND PARTICIPATION AGREEMENT
THIS FUND PARTICIPATION AGREEMENT is made and entered into as of
September 26, 1996 by and between LINCOLN NATIONAL LIFE INSURANCE COMPANY (the
"Company") and TWENTIETH CENTURY SECURITIES, INC. (the "Distributor").
WHEREAS, the Company offers to the public certain group variable annuity
contracts and group variable life insurance contracts (the "Contracts"); and
WHEREAS, the Company wishes to offer as investment options under the
Contracts, TCI Balanced and TCI Growth (the "Funds"), both of which are a series
of mutual fund shares registered under the Investment Company Act of 1940, as
amended, and issued by TCI Portfolios, Inc. (the "Issuer"); and
WHEREAS, on the terms and conditions hereinafter set forth, Distributor
and the Issuer desire to make shares of the Funds available as investment
options under the Contracts and to retain the Company to perform certain
administrative services on behalf of the Funds;
WHEREAS, the Funds are open-end management investment companies that were
established for the purpose of serving as the investment vehicles for separate
accounts established for variable life insurance policies and variable annuity
contracts (collectively referred to as "Variable Insurance Products", the owners
of such products being referred to as "Contract Owners") to be offered by
insurance companies which have entered into participation agreements with the
Fund ("Participating Insurance Companies"); and
WHEREAS, the Issuer filed with the Securities and Exchange Commission
(the "SEC") and the SEC has declared effective a registration statement
(referred to herein as the "Fund Registration Statement" and the prospectus
contained therein, or filed pursuant to Rule 497 under the 1933 Act, referred to
herein as the "Fund Prospectus") on Form N-1A to register itself as an open-end
management investment company (File No. 40-811-5188) under the Investment
Company Act of 1940, as amended (the " 1940 Act"), and the Fund shares (File No.
33-14567) under the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC to
register under the 1933 Act certain variable annuity contracts described in
Schedule A to this Agreement as in effect at the time this Agreement is executed
and such other variable annuity contracts and variable life insurance policies
which may be added to Schedule A from time to time (each such registration
statement for a class or classes of contracts listed on Schedule A being
referred to as the "Contracts Registration Statement" and the prospectus for
each such class or classes being referred to herein as the "Contracts
Prospectus"); and
WHEREAS, each Account (defined in Section 7(a) below), a validly existing
separate account, duly authorized by resolution of the Board of Directors of the
Company, set forth on
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Schedule B sets aside and invests assets attributable to the Contracts; and
WHEREAS, the Company has registered or will have registered each Account
with the SEC as a unit investment trust under the 1940 Act before any Contracts
are issued by that Account; and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
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.
(the "NASD"); and
WHEREAS, the Distributor and the Issuer have entered into an agreement
(the "Distribution Agreement") pursuant to which the Distributor will distribute
Fund shares; and
WHEREAS, Investors Research Corporation (the "Investment Advisor") is
registered as an investment adviser under the 1940 Act and any applicable state
securities laws and serves as an investment manager to the Issuer and the Funds
pursuant to an agreement; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Fund shares on behalf of each
Account to fund its Contracts and the Distributor is authorized to sell such
Fund shares to purchasers such as the Accounts at net asset value;
NOW, THEREFORE, the Company and Distributor agree as follows:
1. TRANSACTIONS IN THE FUNDS. Subject to the terms and conditions of
this Agreement, the Distributor will cause the Issuer to make shares of the
Funds available to be purchased, exchanged, or redeemed, by the Company on
behalf of the Accounts through a single account per Fund at the net asset value
applicable to each order. The Funds' shares shall be purchased and redeemed on a
net basis in such quantity and at such time as determined by the Company to
satisfy the requirements of the Contracts for which the Funds serve as
underlying investment media. Dividends and capital gains distributions will be
automatically reinvested in full and fractional shares of the Funds.
2. ADMINISTRATIVE SERVICES. The Company shall be solely responsible
for providing all administrative services for the Contract Owners. The Company
agrees that it will maintain and preserve all records as required by law to be
maintained and preserved, and will otherwise comply with all laws, rules and
regulations applicable to the marketing of the Contracts and the provision of
administrative services to the Contract Owners.
3. TIMING OF TRANSACTIONS.
Distributor hereby appoints the Company as its agent and/or agent for the
Funds for the limited purpose of accepting purchase and redemption orders for
Fund shares from the Accounts and/or Contract Owners, as applicable. On each day
the New York Stock Exchange (the "Exchange") is open for trading (each, a
"Business Day"), the Company may receive instructions from the Accounts and/or
Contract Owners for the purchase or redemption of shares of the Funds
("Orders"). Orders received and accepted by the Company prior to the close of
regular trading on the Exchange (the "Close of
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Trading") on any given Business Day (currently, 4:00 p.m. Eastern time) and
transmitted to the Issuers by 10:00 a.m. Eastern time on the next following
Business Day will be executed at the net asset value determined as of the Close
of Trading on the previous Business Day. Any Orders received by the Company
after the Close of Trading, and all Orders that are transmitted to the Issuers
after 10:00 a.m. Eastern time on the next following Business Day, will be
executed by the Issuers at the net asset value next determined following receipt
of such Order. The day as of which an Order is executed by the Issuers pursuant
to the provisions set forth above is referred to herein as the "Trade Date".
4. PROCESSING OF TRANSACTIONS.
(a) By 7:00 p.m. Eastern time on each Business Day, Distributor will
provide to the Company, via facsimile or other electronic transmission
acceptable to the Company, the Funds' net asset value, dividend and capital gain
information and, in the case of income funds, the daily accrual for interest
rate factor (mil rate), determined at the Close of Trading.
(b) By 10:00 a.m. Eastern time on each Business Day, the Company will
provide to Distributor via facsimile or other electronic transmission acceptable
to Distributor a report stating whether the Orders received by the Company from
Contract Owners by the Close of Trading on the preceding Business Day resulted
in the Accounts being a net purchaser or net seller of shares of the Funds. As
used in this Agreement the phrase "other electronic transmission acceptable to
Distributor" includes the use of remote computer terminals located at the
premises of the Company, its agents or affiliates, which terminals may be linked
electronically to the computer system of Distributor, its agents or affiliates
(hereinafter, "Remote Computer Terminals").
(c) Upon the timely receipt from the Company of the report described
in (b) above, the Funds' transfer agent will execute the purchase or redemption
transactions (as the case may be) at the net asset value computed as of the
Close of Trading on the Trade Date. Payment for net purchase transactions shall
be made by wire transfer to the applicable Fund custodial account designated by
the Distributor on the Business Day next following the Trade Date. Such wire
transfers shall be initiated by the Company's bank prior to 4:00 p.m. Eastern
time and received by the Funds prior to 6:00 p.m. Eastern time on the Business
Day next following the Trade Date ("T + 1 "). If payments for a purchase Order
is not timely received, such Order will be executed at the net asset value next
computed following receipt of payment. Payments for net redemption transactions
shall be made by wire transfer by the Issuer to the account designated by the
Company on T + 1; PROVIDED, HOWEVER, the Issuer reserves the right to settle
redemption transactions within the time period set forth in the applicable
Fund's then-current prospectus. On any Business Day when the Federal Reserve
Wire Transfer System is closed, all communication and processing rules will be
suspended for the settlement of Orders. Orders will be settled on the next
Business Day on which the Federal Reserve Wire Transfer System is open and the
original Trade Date will apply.
5. PROSPECTUS, PROXY MATERIALS AND OTHER INFORMATION.
(a) Distributor shall provide the Company with copies of the Issuer's
proxy materials, periodic fund reports to shareholders and other materials that
are required by law to be sent to the
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Issuer's shareholders. In addition, Distributor shall provide the Company with a
sufficient quantity of prospectuses and Statements of Additional Information of
the Funds to be used in conjunction with the transactions contemplated by this
Agreement, together with such additional copies of the Issuer's prospectuses and
Statements of Additional Information as may be reasonably requested by Company.
If the Company provides for pass-through voting by the Contract Owners,
Distributor will provide the Company with a sufficient quantity of proxy
materials for each Contract Owner.
(b) The cost of preparing, printing and shipping of the prospectuses,
proxy materials, periodic fund reports and other materials of the Issuer to the
Company shall be paid by Distributor or its agents or affiliates; provided, that
if at any time Distributor or its agent reasonably deems the usage by the
Company of such items to be excessive, it may, prior to the delivery of any
quantity of materials in excess of what is deemed reasonable, request that the
Company demonstrate the reasonableness of such usage. If the Distributor
believes the reasonableness of such usage has not been adequately demonstrated,
it may request that the Company pay the cost of printing (including press time)
and delivery of any excess copies of such materials. Unless the Company agrees
to make such payments, Distributor may refuse to supply such additional
materials and Distributor shall be deemed in compliance with this SECTION 5 if
it delivers to the Company at least the number of prospectuses and other
materials as may be required by the Issuers under applicable law.
(c) The cost of distribution, if any, of any prospectuses, proxy
materials, periodic fund reports and other materials of the Issuer to the
Contract Owners shall be paid by the Company and shall not be the responsibility
of Distributor or the Issuer.
(d) Except with the prior written permission of the Company, the Fund
shall not give any information or make any representations on behalf of the
Company or concerning the Company, the Account or the Contracts other than the
information or representations contained in the Contracts Registration Statement
or Contracts Prospectus, as such Registration Statement and Prospectus may be
amended or supplemented from time to time, or in published reports of the
Account which are in the public domain or approved in writing by the Company for
distribution to Contract Owners, or in Company sales literature or other
promotional material. The Company agrees to respond to any request for
permission on a prompt and timely basis. If the Company fails to respond within
10 business days of a request by the Fund or the Distributor, then the Fund is
relieved of the obligation to obtain the prior written permission of the
Company.
(e) For purposes of this SECTION 5, 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, computer net site, 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, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or 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 agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports and proxy materials, and any other material
constituting sales
4
literature or advertising under NASD rules, the 1940 Act or the 1933 Act.
6. COMPENSATION AND EXPENSES.
(a) The Accounts shall be the sole shareholder of Fund shares
purchased for the Contract Owners pursuant to this Agreement (the "Record
Owners"). The Company and the Record Owners shall properly complete any
applications or other forms required by Distributor or the Issuer from time to
time.
(b) Distributor acknowledges that it will derive a substantial savings
in administrative expenses, such as a reduction in expenses related to postage,
shareholder communications and recordkeeping, by virtue of having a single
shareholder account per Fund for the Accounts rather than having each Contract
Owner as a shareholder In consideration of the Administrative Services and
performance of all other obligations under this Agreement by the Company,
Distributor will pay the Company a fee (the "Administrative Services fee") equal
to 20 basis points (0.20%) per annum of the average aggregate amount invested by
the Company under this Agreement. Distributor's obligation to pay the
Administrative Services Fee shall be suspended with respect to any month during
which the Company's average aggregate investment in the Funds drops below $10
million. Notwithstanding the above, if the Company's average investment in a
single Fund during a month exceeds $5 million, Distributor will pay the Company
the Administrative Services Fee with respect to all amounts invested in such
Fund. If the Company's investment in such Fund drops below $5 million, the
Distributor's obligation to pay the Administrative Services Fee shall be
suspended until the Company's average investment in the Fund exceeds $5 million
or average aggregate investment in the Funds exceeds $10 million. For purposes
of this SECTION 6(b), the average aggregate investment amount of Company's
investment shall include assets of UNUM Life Insurance Company of America and
First UNUM Life Insurance Company acquired by Company.
(c) The payments received by the Company under this Agreement are for
administrative and shareholder services only and do not constitute payment in
any manner for investment advisory services or for costs of distribution.
(d) For the purposes of computing the payment to the Company
contemplated by this SECTION 6, the average aggregate amount invested by the
Accounts in the Funds over a one month period shall be computed by totaling the
Company's aggregate investment (share net asset value multiplied by total number
of shares of the Funds held by the Company) on each Business Day during the
month and dividing by the total number of Business Days during such month.
(e) Distributor will calculate the amount of the payment to be made
pursuant to this Section 6 at the end of each calendar quarter and will make
such payment to the Company within 30 days thereafter. The check for such
payment will be accompanied by a statement showing the calculation of the
amounts being paid by Distributor for the relevant months and such other
supporting data as may be reasonably requested by the Company
and shall be mailed to:
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Lincoln National Life Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
(f) In the event Distributor reduces its management fee with respect
to any Fund after the date hereof, Distributor may amend the Administrative
Services fee payable with regard to such Fund by providing the Company 30 days'
advance written notice of any such adjustment. The revised Administrative
Services fee shall become effective as of the latter of 30 days from the date of
delivery of the notice or the date prescribed in the notice.
7. REPRESENTATIONS AND WARRANTIES.
(a) The Company represents and warrants that: (i) this Agreement has
been duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of the
Company, enforceable in accordance with its terms; (ii) it has established the
Separate Accounts listed on Schedule B (the "Accounts"), each of which is a
separate account under Indiana Insurance law, and has registered each Account as
a unit investment trust under the Investment Company Act of 1940 (the "1940
Act") to serve as an investment vehicle for the Contracts; (iii) each Contract
provides for the allocation of net amounts received by the Company to an Account
for investment in the shares of one of more specified investment companies
selected among those companies available through the Account to act as
underlying investment media; (iv) selection of a particular investment company
is made by the Contract Owner under a particular Contract, who may change such
selection from time to time in accordance with the terms of the applicable
Contract; and (v) the activities of the Company contemplated by this Agreement
comply with all provisions of federal and state insurance, securities, and tax
laws applicable to such activities.
(b) Distributor represents and warrants that: (i) this Agreement has
been duly authorized by all necessary corporate action and, when executed and
delivered, shall constitute the legal, valid and binding obligation of
Distributor, enforceable in accordance with its terms; and (ii) the investments
of the Funds will at all times be adequately diversified within the meaning of
Section 817(h) of the Internal Revenue Service Code of 1986, as amended (the
"Code"), and the regulations thereunder, and that at all times while this
Agreement is in effect, all beneficial interests in each of the Funds will be
owned by one or more insurance companies or by any other party permitted under
Section 1.817-5(f)(3) of the Regulations promulgated under the Code; and (iii)
each Fund currently qualifies as a Regulated Investment Company under Subchapter
M of the Code. The Distributor further represents and warrants that it will make
every effort to cause the Funds to continue to qualify and to maintain such
qualification (under Subchapter M or any successor or similar provision), and
that it will notify the Company immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future and (iv) that it is registered as a Broker-Dealer under the 1934
Act.
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(c) The Distributor represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for so long as the Fund shares
are sold. The Distributor further represents and warrants that the Issuer is a
corporation duly organized and in good standing under the laws of Maryland.
(d) The Distributor represents and warrants that the Funds have and
maintains a fidelity bond in accordance with Rule 17g- I under the 1940 Act. The
Fund will immediately notify the Company in the event the fidelity bond coverage
should lapse at any time.
8. ADDITIONAL COVENANTS AND AGREEMENTS.
(a) Each party shall comply with all provisions of federal and state
laws applicable to its respective activities under this Agreement. All
obligations of each party under this Agreement are subject to compliance with
applicable federal and state laws.
(b) Each party shall promptly notify the other parties in the event
that it is, for any reason, unable to perform any of its obligations under this
Agreement.
(c) The Company covenants and agrees that all Orders accepted and
transmitted by it hereunder with respect to each Account on any Business Day
will be based upon instructions that it received from the Contract Owners in
proper form prior to the Close of Trading of the Exchange on that Business Day.
The Company shall time stamp all Orders or otherwise maintain records that will
enable the Company to demonstrate compliance with SECTION 8(c) hereof
(d) The Company covenants and agrees that all Orders transmitted to
the Issuers, whether by telephone, telecopy, or other electronic transmission
acceptable to Distributor, shall be sent by or under the authority and direction
of a person designated by the Company as being duly authorized to act on behalf
of the owner of the Accounts. Absent actual knowledge to the contrary,
Distributor shall be entitled to rely on the existence of such authority and to
assume that any person transmitting Orders for the purchase, redemption or
transfer of Fund shares on behalf of the Company is "an appropriate person" as
used in Sections 8-308 and 8-404 of the Uniform Commercial Code with respect to
the transmission of instructions regarding Fund shares on behalf of the owner of
such Fund shares. The Company shall maintain the confidentiality of all
passwords and security procedures issued, installed or otherwise put in place
with respect to the use of Remote Computer Terminals and assumes full
responsibility for the security therefor. The Company further agrees to be
responsible for the accuracy, propriety and consequences of all data transmitted
to Distributor by the Company by telephone, telecopy or other electronic
transmission acceptable to Distributor.
(e) The Company agrees to make every reasonable effort to market its
Contracts. It will use its best efforts to give equal emphasis and promotion to
shares of the Funds as is given to other underlying investments of the Accounts.
(f) The Company shall not, without the written consent of Distributor,
make
7
representations concerning the Issuer or the shares of the Funds except those
contained in the thencurrent prospectus and in current printed sales literature
approved by Distributor or the Issuer.
(g) Advertising and sales literature with respect to the Issuer or the
Funds prepared by the Company or its agents, if any, for use in marketing shares
of the Funds as underlying investment media to Contract Owners shall be
submitted to Distributor for review and approval before such material is used.
All such materials shall be directed to Xxxx Tantra, Distributor's advertising
compliance manager (or such other person as Distributor may designate in
writing) by mail at 0000 Xxxx Xxxxxx Xxxxxx Xxxx, Xxxxxxxx 00000, or by fax at
(000) 0000000. Such materials shall be accompanied by a request for approval or
comments within a reasonable amount of time, which shall not be less than 10
business days from the date delivered to Distributor. The Company agrees to use
reasonable efforts to notify Distributor's advertising compliance manager of the
delivery of such materials (which includes leaving a voice mail message). If
Distributor fails, to respond within the time period set forth in the request
for review, Company may use such material as submitted without further approval
by Distributor. If subsequent to approval by Distributor (or the expiration of
the time period set forth in the request for approval), Distributor reasonably
determines any such material is or has become inaccurate, misleading or
otherwise inappropriate, it may request that the Company modify such advertising
and sales literature, which the Company will do at the next reprinting of any
such materials. If Distributor determines that such material should be modified
immediately, Distributor shall notify the Company of such fact and Company shall
accommodate Distributor's reasonable requests. In such instances, Distributor
shall pay the Company's reasonable out-of-pocket expenses in reprinting any such
advertising and sales materials. Notwithstanding anything contained herein,
Company shall be responsible for the compliance of all advertising and sales
literature prepared by the Company with all applicable federal, state and NASD
requirements
(h) The Company will provide to Distributor at least one complete copy
of all registration statements, prospectuses, statements of additional
information, annual and semi-annual reports, proxy statements, and all
amendments or supplements to any of the above that include a description of or
information regarding the Funds promptly after the filing of such document with
the SEC or other regulatory authority.
(i) Each party will comply with reasonable requests for information
and documents regarding the Funds or the other party's compliance with its
obligations under this Agreement made by the other party, by the Funds' Board of
Directors or by any appropriate governmental entity or self regulatory
organization.
9. USE OF NAMES. Except as otherwise expressly provided for in this
Agreement, neither Distributor nor the Funds shall use any trademark, trade
name, service xxxx or logo of the Company, or any variation of any such
trademark, trade name, service xxxx or logo; without the Company's prior written
consent, the granting of which shall be at the Company's sole option. Except as
otherwise expressly provided for in this Agreement the Company shall not use any
trademark, trade name, service xxxx or logo of the Issuer or Distributor, or any
variation of any such trademarks, trade names, service marks, or logos, without
the prior written consent of either the Issuer or Distributor, as appropriate,
the granting of which shall be at the sole option of Distributor and/or the
Issuer.
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10. PROXY VOTING.
(a) The Company shall provide pass-through voting privileges to all
Contract Owners so long as the SEC continues to interpret the 1940 Act as
requiring such privileges. It shall be the responsibility of the Company to
assure that it and the separate accounts of the other Participating Companies
(as defined in SECTION 12(a) below) participating in any Fund calculate voting
privileges in a consistent manner.
(b) The Company will distribute to Contract Owners all proxy material
furnished by Distributor and will vote shares in accordance with instructions
received from such Contract Owners. The Company shall vote Fund shares for which
no instructions have been received in the same proportion as shares for which
such instructions have been received. The Company shall not oppose or interfere
with the solicitation of proxies for Fund shares held for such Contract Owners.
11. INDEMNITY.
11.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and hold
harmless the Fund, the Distributor and each person who controls or is associated
with the Fund (other than another Participating Insurance Company) or the
Distributor within the meaning of such terms under the .federal securities laws
and any officer, trustee, director, employee or agent of the foregoing, against
any and all losses, claims, expenses, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, expenses, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Contracts
Registration Statement, Contracts Prospectus, sales literature or other
promotional material for the Contracts or the Contracts themselves (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 in light of the circumstances in which
they were made; provided that this obligation to indemnify shall not
apply if such statement or omission or such alleged statement or alleged
omission was made in reliance upon and in conformity with information
furnished in writing to the Company by the Distributor (or a person
authorized in writing to do so on behalf of the Fund or the Distributor)
for use in the Contracts Registration Statement, Contracts Prospectus 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 Fund
shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by or on behalf of the Company (other
than statements or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other
9
promotional material of the Fund 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
Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the Fund Registration Statement Fund
Prospectus or sales literature or other promotional material of the Fund
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 statements therein not misleading in
light of the circumstances in which they were made, if such statement or
omission was made in reliance upon and in conformity with information
furnished to the Distributor by or on behalf of the Company; or
(d) arise as a result of any failure by the Company to provide the
services and furnish the materials or to make any payments under the
terms of this Agreement; or
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to transmit a request
for redemption or purchase of Fund shares on a timely basis in accordance
with the procedures set forth in SECTION 3; or
(f) arise as a result of the Company's providing the Distributor
with inaccurate information, which causes the Distributor to calculate
its Net Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
1.1.2. INDEMNIFICATION BY THE DISTRIBUTOR. The Distributor agrees to indemnify
and hold harmless the Company and each person who controls or is associated with
the Company within the meaning of such terms under the federal securities laws
and any officer, director, employee or agent of the foregoing, against any and
all losses, claims, expenses, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, expenses, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or
sales literature or other promotional material of the Fund, 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 in light of the circumstances
in which they were made; provided that this obligation to indemnify shall
not apply if such statement or omission or alleged statement or alleged
omission was made in reliance upon and in conformity with information
furnished in writing by
10
the Company to the Distributor or its affiliates for use in the Fund
Registration Statement, Fund Prospectus (or any amendment or supplement
thereto) or sales literature or other promotional material of the Fund or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact made by the Distributor (other than
statements or representations contained in the Fund Registration
Statement Fund Prospectus or sales literature or other promotional
material of the Fund not supplied by the Distributor or persons under
their control) or gross negligence, willful misfeasance or bad faith of
the Distributor or persons under its control with respect to the sale or
distribution of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in the Contracts Registration Statement Contracts
Prospectus or sales literature or other promotional material for the
Contracts (or any amendment 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 statements therein not misleading in
light of the circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in writing by
the Distributor to the Company (or a person authorized in writing to do
so on behalf of the Fund or the Distributor); or
(d) arise as a result of any failure by the Distributor to provide
the services and furnish the materials under the terms of this Agreement
(including, but not by way of limitation, a failure, whether
unintentional or in good faith or otherwise: (i) to comply with the
diversification requirements specified in SECTION 7(b) of this Agreement;
and (ii) to provide the Company with accurate information sufficient for
it to calculate its accumulation and/or annuity unit values in timely
fashion as required by law and by the this Agreement); or
(e) arise out of any material breach by the Distributor of this
Agreement.
This indemnification will be in addition to any liability which the Distributor
may otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the wilful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
11.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Section 11 of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Section 11 ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Section 11, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel
11
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this SECTION 11. The
indemnification provisions contained in this SECTION 11 shall survive any
termination of this Agreement.
12. POTENTIAL CONFLICTS.
(a) The Company has received a copy of an application for exemptive
relief, as amended, filed by Investors Research and the Issuer on December 21,
1987, with the SEC and the order issued by the SEC in response thereto (the
"Shared Funding Exemptive Order"). The Company has reviewed the conditions to
the requested relief set forth in such application for exemptive relief As set
forth in such application, the Board of Directors of the Issuer (the "Board")
will monitor the Issuer for the existence of any material irreconcilable
conflict between the interests of the Contract Owners of all separate accounts
("Participating Companies") investing in funds of the Issuer. An irreconcilable
material conflict may arise for a variety of reasons, including: (i) an action
by any state insurance regulatory authority; (ii) 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
actions by insurance, tax or securities regulatory authorities; (iii) an
administrative or judicial decision in any relevant proceeding; (iv) the manner
in which the investments of any portfolio are being managed; (v) a difference in
voting instructions given by variable annuity Contract Owners and variable life
insurance Contract Owners; or (vi) a decision by an insurer to disregard the
voting instructions of Contract Owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and the
implications thereof.
(b) The Company will report any potential or existing conflicts of
which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever Contract Owner voting instructions are
disregarded.
(c) If a majority of the Board, or a majority of its disinterested
Board members, determines
12
that a material irreconcilable conflict exists with regard to Contract Owner
investments in a Fund, the Board shall give prompt notice to all Participating
Companies. If the Board determines that the Company is responsible for causing
or creating said conflict, the Company shall at its sole cost and expense, and
to the extent reasonably practicable (as determined by a majority of the
disinterested Board members), take such action as is necessary to remedy or
eliminate the irreconcilable material conflict. Such necessary action may
include but shall not be limited to (i) withdrawing the assets allocable to the
Accounts from the Fund and reinvesting such assets in a different investment
medium or submitting the question of 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 Companies) that votes in favor of such segregation, or offering to
the affected Contract Owners the option of making such a change and (ii)
establishing a new registered management investment company or managed separate
account. Nothing in this SECTION 12(c) shall be construed to waive any cause of
action which may be available to Company against any other Participating
Insurance Company or Companies, or against any other person or entity, in the
event Company determines in good faith that it (Company) is not responsible (or
is not solely responsible) for the material irreconcilable conflict.
(d) If a material irreconcilable conflict arises as a result of a
decision by the Company to disregard its Contract Owner voting instructions and
said decision represents a minority position or would preclude a majority vote
by all of its Contract Owners having an interest in the Issuer, the Company at
its sole cost, may be required, at the Board's election, to withdraw an Accounts
investment in the Issuer and terminate this Agreement; 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 members of the Board.
(e) For the purpose of this SECTION 12, a majority of the
disinterested Board members shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
the Issuer be required to establish a new funding medium for any Contract. The
Company shall not be required by this SECTION 12 to establish a new funding
medium for any Contract if an offer to do so has been declined by vote of a
majority of the Contract Owners materially adversely affected by the
irreconcilable material conflict.
13. APPLICABLE LAW. This agreement shall be subject to the provisions
of all applicable securities law, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and regulations
as the SEC may grant, and the terms hereof shall be limited, interpreted and
construed in accordance therewith.
14. TERMINATION. This agreement shall terminate as to the sale and
issuance of new Contracts:
(a) at the option of either the Company, Distributor or the Issuer
upon six months' advance written notice to the other;
13
(b) at the option of the Company if the Funds' shares are not
available for any reason to meet the requirement of Contracts as determined by
the Company. Reasonable advance notice of election to terminate shall be
furnished by Company;
(c) at the option of either party upon institution of formal
proceedings against the other party or against the Investment Advisor by the
National Association of Securities Dealers, Inc. (the "NASD"), the SEC or any
other regulatory body which the terminating party reasonably believes will
result in a material harm to the terminating party or the Funds or the Accounts
or the Contract Owners;
(d) upon termination of the Distribution Agreement between the Issuer
and Distributor or the Management Agreement between Investors Research and the
Funds. Notice of such termination shall be promptly furnished to the Company.
This subsection (d) shall not be deemed to apply if contemporaneously with such
termination a new contract of substantially similar terms is entered into
between the Issuer and Distributor with respect to the Distribution Agreement or
the Issuer and the Funds with respect to the Management Agreement;
(e) upon the requisite vote of Contract Owners having an interest in
the Issuer to substitute for the Issuer's shares the shares of another
investment company in accordance with the terms of Contracts for which the
Issuer's shares had been selected to serve as the underlying investment medium.
The Company will give 60 days' written notice to the Issuer and Distributor of
any proposed vote to replace the Funds' shares;
(f) upon assignment of this Agreement unless made with the written
consent of all other parties hereto;
(g) if the Issuer's shares are not registered, issued or sold in
conformance with Federal law or such law precludes the use of Fund shares as an
underlying investment medium of Contracts issued or to be issued by the Company.
Prompt notice shall be given by either party should such situation occur,
(h) at the option of the Issuer, if the Issuer reasonably determines
in good faith that the Company is not offering shares of the Fund in conformity
with the terms of this Agreement or applicable law;
(i) at the option of any party hereto upon a determination that
continuing to perform under this Agreement would, in the reasonable opinion of
the terminating party's counsel, violate any applicable federal or state law,
rule, regulation or judicial order;
(j) at the option of the Company or the Fund upon a determination by a
majority of the Fund Board, or a majority of disinterested Fund Board members,
that an irreconcilable material conflict exists among the interests of (i) any
Contract Owners or (ii) the interests of the Participating Insurance Companies
investing in the Fund;
14
(k) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code, or under any
successor or similar provision, or if the Company reasonably believes, based on
an opinion of its counsel, that the Fund may fail to so qualify;
(l) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Section 817(h) of the Code and any
regulations thereunder,
(m) at the option of either the Fund or the Distributor if the Fund or
the Distributor, respectively, shall determine, in their sole judgment exercised
in good faith, that either (1) the Company shall have suffered a material
adverse change in its business or financial condition; or (2) the Company shall
have been the subject of material adverse publicity which is likely to have a
material adverse impact upon the business and operations of either the Fund or
the Distributor; or
(n) at the option of the Company, if the Company shall determine, in
its sole judgment exercised in good faith, that either: (1) the investment
Advisor or Distributor shall have suffered a material adverse change in their
respective businesses or financial condition; or (2) the Investment Advisor or
Distributor shall have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and operations of the
Company.
15. CONTINUATION OF AGREEMENT.
(a) Termination as the result of any cause listed in SECTION 14 shall
not affect the Issuers obligation to furnish its shares to Contracts then in
force for which its shares serve or may serve as the underlying medium (unless
such further sale of Fund shares is proscribed by law or the SEC or other
regulatory body). Following termination, Distributor shall not have any
Administrative Services payment obligation to the Company (except for payment
obligations accrued but not yet paid as of the termination date).
(b) Notwithstanding any termination of this Agreement pursuant to
SECTION 14 of this Agreement, the Fund will, at the option of the Company,
continue to make available additional Fund shares for so long after the
termination of this Agreement as the Company desires, 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, if the Company so elects to make
additional Fund shares available, the owners of the Existing Contracts or the
Company, whichever shall have legal authority to do so, shall be permitted to
redeem investments in the Fund and/or invest in the Fund.
(c) If Fund shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect except as
set forth in SECTION 14(a) and thereafter either the Fund or the Company may
terminate the Agreement, as so continued pursuant to this SECTION 15, upon prior
written notice to the other party, such notice to be for a period that is
reasonable under the circumstances but, if given by the Fund, need not be for
more than six months.
15
(d) The parties agree that this Section 15 shall not apply to any
termination made pursuant to Section 12 or any conditions or undertakings
incorporated by reference in Section 12, and the effect of such Section 12
termination shall be governed by the provisions set forth or incorporated by
reference therein.
16. NON-EXCLUSIVITY. Each of the parties acknowledges and agrees that
this Agreement and the arrangement described herein are intended to be
non-exclusive and that each of the parties is free to enter into similar
agreements and arrangements with other entities.
17. SURVIVAL. The provisions of SECTION 9 (use of names) and Section
11 (indemnity) of this Agreement shall survive termination of this Agreement.
18. AMENDMENT. Neither this Agreement, nor any provision hereof, may
be amended, waived, discharged or terminated orally, but only by an instrument
in writing signed by all of the parties hereto.
19. NOTICES. All notices and other communications hereunder shall be
given or made in writing and shall be delivered personally, or sent by telex,
telecopier, express delivery or registered or certified mail, postage prepaid,
return receipt requested, to the party or parties to whom they are directed at
the following addresses, or at such other addresses as may be designated by
notice from such party to all other parties.
To the Company:
Lincoln National Life Insurance Company
0000 Xxxxx Xxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxxx
(000) 000-0000 (office number)
(000) 000-0000 (telecopy number)
To the Issuer or Distributor:
Twentieth Century Mutual Funds
0000 Xxxx Xxxxxx
Xxxxxx Xxxx, Xxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxxx, Esq.
(000) 0000000 (office number)
(000) 0000000 (telecopy number)
Any notice, demand or other communication given in a manner prescribed in this
Section 18 shall be deemed to have been delivered on receipt.
16
20. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned without
the written consent of all parties to the Agreement at the time of such
assignment. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective permitted successors and assigns.
21. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one agreement, and
any party hereto may execute this Agreement by signing any such counterpart.
22. SEVERABILITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
23. ENTIRE AGREEMENT. This Agreement, including the Attachments
hereto, constitutes the entire agreement between the parties with respect to the
matters dealt with herein, and supersedes all previous agreements, written or
oral, with respect to such matters.
17
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth above.
TWENTIETH CENTURY SECURITIES, INC. LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxx X. Xxxxxx
Xxxxxxx X. Xxxxx Name: Xxxx X. Xxxxxx
Executive Vice PRESIDENT Title: Vice President
18
SCHEDULE A
VARIABLE ANNUITY CONTRACTS
AND VARIABLE LIFE INSURANCE POLICIES
SUPPORTED BY SEPARATE ACCOUNTS
LISTED ON SCHEDULE B
Group Variable Annuity I Contracts
Group Variable Annuity II Contracts
Group Variable Annuity III Contracts
19
SCHEDULE B
SEPARATE ACCOUNTS OF LINCOLN NATIONAL LIFE INSURANCE COMPANY
INVESTING IN THE FUND
Lincoln National Variable Annuity Account L
20
AMENDMENT NO. 1 TO FUND PARTICIPATION AGREEMENT
THIS AMENDMENT NO. 1 TO FUND PARTICIPATION AGREEMENT (the "Amendment') is
effective as of February 1, 1999, by and among LINCOLN NATIONAL LIFE INSURANCE
COMPANY (the "Company'), AMERICAN CENTURY INVESTMENT MANAGEMENT, INC ("ACDX),
and AMERICAN CENTURY INVESTMENT SERVICES, INC., F/K/A TWENTIETH CENTURY
SECURITIES, INC. (the "ACIS"). Capitalized terms not otherwise defined herein
shall have the meaning ascribed to them in the Agreement (defined below).
RECITALS
WHEREAS, the Company and ACIS are parties to that certain Fund
Participation Agreement dated September 26, 1996 (the "Agreement") in connection
with the participation by the Funds in Contracts offered by the Company to its
clients and the parties wish to supplement the Agreement as provided herein;
WHEREAS, since the date of the Agreement, Twentieth Century Securities,
Inc. has changed its name to American Century Investment Services, Inc.; and
WHEREAS, since the date of the Agreement, the Funds have changed their
names; and
WHEREAS, since the date of the Agreement, ACIS has ceased being the
Distributor of the Funds; and
NOW, THEREFORE, in consideration of the mutual promises set forth herein,
the parties hereto agree as follows:
1. FUNDS UTILIZE . The second "Whereas" clause of the Agreement is hereby
deleted in its entirety and replaced with the following language:
"WHEREAS, the Company wishes to offer as investment options under certain
of the Contracts, those mutual funds (each a "Fund" and collectively, the
"Funds") listed on Schedule B hereto, each such Fund a series of mutual
fund shares registered under the Investment Company Act of 1940, as
amended, and issued by American Century Variable Portfolios, Inc.; and"
2. ASSIGNMENT BY COMPANY. . ACIS hereby assigns all of its rights and
obligations under the Agreement to ACIM, and ACIM hereby accepts such
assignment. The Company hereby consents to such assignment. After the date of
this Amendment, all references to "Distributor" in the Agreement shall be deemed
to refer to ACIM.
3. COMPENSATION AND EXPENSES. Section 6(b) of the Agreement is hereby
deleted in its entirety and replaced with the following language:
(b) ACIM acknowledges that it derives a substantial savings in
administrative expenses, such as a reduction in expenses related to postage,
shareholder communications and recordkeeping, by virtue of having a single
shareholder account per Fund for the Accounts rather than having each Contract
Owner as a shareholder. In consideration of the Administrative Services and
performance of all other obligations under this Agreement by the, Company, ACIM
will pay the Company a fee (the "Administrative Services Fee') equal to 25 basis
points (0.25%) per annum of the average aggregate amount invested by the Company
under this Agreement, for as long as the average aggregate market value of the
investments by the Company in the Funds exceeds $50 million. In the event the
average aggregate AMOUNT INVESTED BY THE COMPANY DROPS BELOW $50 million, ACIM
shall pay Company 20 basis points (0.20%) per annum of the average aggregate
amount invested by the Company. For purposes of this Section 6(b), the average
aggregate investment amount of Company's investment shall include assets of UNUM
Life Insurance Company of America and First UNUM Life Insurance Company acquired
by Company.
4. SCHEDULES. Schedules A and B to the Agreement are hereby deleted
and replaced in their entirety with Schedules A and B attached hereto.
5 RATIFICATION AND CONFIRMATION OF AGREEMENT. In the event of a
conflict between the terms of this Amendment and the Agreement, it is the
intention of the parties that the terms of this Amendment shall control and the
Agreement shall be interpreted on that basis. To the extent the provisions of
the Agreement have not been amended by this Amendment, the parties hereby
confirm and ratify the Agreement.
6. COUNTERPARTS. This Amendment may be executed in two or more
counterparts, each of which shall be an original and all of which together shall
constitute one instrument.
7. FULL FORCE AND EFFECT. . Except as expressly supplemented, amended
or consented to hereby, all of the representations, warranties, terms, covenants
and conditions of the Agreement shall remain unamended and shall continue to be
in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as
of the date first above written.
LINCOLN NATIONAL LIFE AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
INSURANCE COMPANY By: /s/ Xxxxx X. Xxxxxxxxx
Name: Xxxxx X. Xxxxxxxxx
Title: Vice President
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Executive Vice President
AMERICAN CENTURY INVESTMENT SERVICES, INC.
By: /s/ Xxxxxxx X. Xxxxx
Xxxxxxx X. Xxxxx
Executive Vice President
AS AMENDED EFFECTIVE
FEBRUARY 1, 1999
SCHEDULE A
VARIABLE ANNUITY CONTRACTS
AND VARIABLE LIFE INSURANCE POLICIES
SUPPORTED BY SEPARATE ACCOUNTS
LISTED ON SCHEDULE B
Group Variable Annuity I
Group Variable Annuity II
Group Variable Annuity III
e-Annuity Variable Annuity
Multi Fund Individual Variable Annuity
Multi Fund Group Variable Annuity
CVUL Variable Life
AS AMENDED EFFECTIVE
February 1, 1999
SCHEDULE B
SEPARATE ACCOUNTS OF LINCOLN NATIONAL LIFE INSURANCE COMPANY
INVESTING IN CERTAIN FUNDS
SEPARATE ACCOUNT NAME AMERICAN CENTURY VP FUND(S) UTILIZED
Lincoln National Variable Annuity Account L VP Balanced; VP Capital Appreciation
Lincoln National Variable Annuity Account C VP International
Lincoln Life Variable Annuity Account Q VP International
Lincoln National Variable Annuity Account 53 VP International
Lincoln Life Flexible Premium Variable Life VP International; VP Income and Growth
Account S
