FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the ___ day of ________, ________, by and between
BT Insurance Funds Trust ("TRUST"), a Massachusetts business trust, Bankers
Trust Company ("ADVISER"), a New York banking corporation, and The Lincoln
National Life Insurance Company ("LIFE COMPANY"), a life insurance company
organized under the laws of the State of Indiana.
WHEREAS, TRUST is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the "'40 Act"), as
an open-end, diversified management investment company; and
WHEREAS, TRUST is comprised of several series funds (each a "Portfolio"),
with those Portfolios currently available being listed on Appendix A hereto; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts ("Separate
Accounts") of such life insurance companies ("Participating Insurance
Companies"); and
WHEREAS, TRUST may also offer its shares to certain qualified pension and
retirement plans ("Qualified Plans"); and
WHEREAS, TRUST has received an order from the SEC, granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the TRUST to be sold to and held by Variable Contract Separate
Accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans ("Exemptive Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
Separate Accounts to offer Variable Contracts and is desirous of having TRUST as
one of the underlying funding vehicles for such Variable Contracts; and
WHEREAS, ADVISER is a "bank" as defined in the Investment Advisers Act of
1940, as amended (the "Advisers Act") and as such is excluded from the
definition of "Investment Adviser" and is not required to register as an
investment adviser pursuant to the Advisers Act; and
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WHEREAS, ADVISER serves as the TRUST's investment adviser; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares to
LIFE COMPANY at such shares' net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, and ADVISER agree as follows:
Article I. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts of LIFE
COMPANY shares of the selected Portfolios as listed on Appendix B for investment
of purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in TRUST's Registration Statement.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by TRUST or its
designee of the order for the shares of TRUST. For purposes of this Section
1.2, LIFE COMPANY shall be the designee of TRUST for receipt of such orders from
the designated Separate Account and receipt by such designee shall constitute
receipt by TRUST; provided that LIFE COMPANY receives the order by 4:00 p.m. New
York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile
(or by such other means as TRUST and LIFE COMPANY may agree in writing) of such
order by 9:00 a.m. New York time on the next Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading and
on which TRUST calculates its net asset value pursuant to the rules of the SEC.
1.3 TRUST agrees to redeem on LIFE COMPANY's request, any full or
fractional shares of TRUST held by LIFE COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by TRUST or its
designee of the request for redemption, in accordance with the provisions of
this Agreement and TRUST's Registration Statement. (In the event of a conflict
between the provisions of this Agreement and the Trust's Registration Statement,
the provisions of the Registration Statement shall govern.) For purposes of
this Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of
requests for redemption from the designated Separate Account and receipt by such
designee shall constitute receipt by TRUST; provided that LIFE COMPANY receives
the request for redemption by 4:00 p.m. New York time and TRUST receives notice
from LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and
LIFE COMPANY may agree in
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writing) of such request for redemption by 9:00 a.m. New York time on the next
Business Day.
1.4 TRUST shall furnish, on or before each ex-dividend date, notice to
LIFE COMPANY of any income dividends or capital gain distributions payable on
the shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. LIFE COMPANY reserves
the right to change such election. TRUST shall notify LIFE COMPANY or its
designee of the number of shares so issued as payment of such dividends and
distributions.
1.5 TRUST shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed on each day for which such incorrect information was
provided 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 LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount
of TRUST shares which shall be purchased or redeemed at that day's closing net
asset value per share. The net purchase or redemption orders so determined
shall be transmitted to TRUST by LIFE COMPANY by 9:00 a.m. New York Time on the
Business Day next following LIFE COMPANY's receipt of such requests and premiums
in accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account by 2:00 pm on the day the order is transmitted by
LIFE COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall use its best efforts
to wire the redemption proceeds to LIFE COMPANY by 2:00 pm that day, unless
doing so would require TRUST to dispose of Portfolio securities or otherwise
incur additional costs. In any event, proceeds shall be wired to LIFE COMPANY
within the time period permitted by the '40 Act or the rules, orders or
regulations thereunder, and TRUST shall
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notify the person designated in writing by LIFE COMPANY as the recipient for
such notice of such delay by 3:00 p.m. New York Time on the same Business Day
that LIFE COMPANY transmits the redemption order to TRUST. If LIFE COMPANY's
order requests the application of redemption proceeds from the redemption of
shares to the purchase of shares of another Fund advised by ADVISER, TRUST shall
so apply such proceeds on the same Business Day that LIFE COMPANY transmits such
order to TRUST.
1.8 TRUST agrees that all shares of the Portfolios of TRUST will be sold
only to Participating Insurance Companies which have agreed to participate in
TRUST to fund their Separate Accounts and/or to Qualified Plans, all in
accordance with the requirements of Section 817(h)(4) of the Internal Revenue
Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the
TRUST's Portfolios will not be sold directly to the general public.
1.9 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the shares of or liquidate any Portfolio of
TRUST if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board of Trustees of the TRUST
(the "Board"), acting in good faith and in light of its duties under federal and
any applicable state laws, deemed necessary, desirable or appropriate and in the
best interests of the shareholders of such Portfolios.
1.10 Issuance and transfer of Portfolio shares will be by book entry only.
Stock certificates will not be issued to LIFE COMPANY or the Separate Accounts.
Shares ordered from Portfolio will be recorded in appropriate book entry titles
for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance company
duly organized and validly existing under the laws of Indiana and that it has
legally and validly established each Separate Account as a segregated asset
account under such laws, and that LIFE COMPANY, the principal underwriter for
the Variable Contracts, is registered as a broker-dealer under the Securities
Exchange Act of 1934 (the "'34 Act").
2.2 LIFE COMPANY represents and warrants that it has registered or, prior
to any issuance or sale of the Variable Contracts, will register each Separate
Account as a unit investment trust ("UIT") in accordance with the provisions of
the '40 Act and cause each Separate Account to remain so registered to serve as
a segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will
be registered under the Securities Act of 1933 (the "'33 Act") unless an
exemption from
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registration is available prior to any issuance or sale of the Variable
Contracts, and that the Variable Contracts will be issued and sold in compliance
in all material respects with all applicable federal and state laws (including
all applicable blue sky laws and further that the sale of the variable contracts
shall comply in all material respects with applicable state insurance law
suitability requirements).
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance
policies, endowment or annuity contracts under applicable provisions of the
Code, that it will maintain such treatment and that it will notify TRUST
immediately upon having a reasonable basis for believing that the Variable
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5 TRUST represents and warrants that the Fund shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal laws, and TRUST shall be registered under
the '40 Act prior to and at the time of any issuance or sale of such shares.
TRUST, subject to Section 1.9 above, shall amend its registration statement
under the '33 Act and the '40 Act from time to time as required in order to
effect the continuous offering of its shares. TRUST shall register and qualify
its shares for sale in accordance with the laws of the various states only if
and to the extent deemed advisable by TRUST.
2.6 TRUST and ADVISER each represents and warrants that each Portfolio will
comply with the diversification requirements set forth in Section 817(h) of the
Code, and the rules and regulations thereunder, including without limitation
Treasury Regulation 1.817-5, and will notify LIFE COMPANY immediately upon
having a reasonable basis for believing any Portfolio has ceased to comply and
will immediately take all reasonable steps to adequately diversify the Portfolio
to achieve compliance.
2.7 TRUST represents and warrants that each Portfolio invested in by the
Separate Account will be treated as a "regulated investment company" under
Subchapter M of the Code, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
2.8 ADVISER represents and warrants that it shall perform its obligations
hereunder in compliance in all material respects with all applicable state and
federal laws.
2.9 TRUST and ADVISER each represents and warrants that all officers,
employees and agents of the TRUST having access to securities or funds of any
Portfolio shall be covered by a blanket fidelity bond in such minimum amount as
the SEC may prescribe under Section 17 (g) of the '40 act.
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Article III. PROSPECTUS AND PROXY STATEMENTS
3.1 TRUST shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes and filing fees to which an issuer is subject on the issuance and
transfer of its shares.
3.2 TRUST or its designee shall provide LIFE COMPANY, free of charge, with
as many copies of the current prospectus (or prospectuses), statements of
additional information, annual and semi-annual reports and proxy statements for
the shares of the Portfolios as LIFE COMPANY may reasonably request for
distribution to existing Variable Contract owners whose Variable Contracts are
funded by such shares. TRUST or its designee shall provide LIFE COMPANY, at LIFE
COMPANY's expense, with as many copies of the current prospectus (or
prospectuses) for the shares as LIFE COMPANY may reasonably request for
distribution to prospective purchasers of Variable Contracts. If requested by
LIFE COMPANY, TRUST or its designee shall provide such documentation [including
a "camera ready" copy of the current prospectus (or prospectuses) for the
Portfolios used in THE LIFE COMPANY'S Variable Contracts as set in type or, at
the request of LIFE COMPANY, as a diskette in the form sent to the financial
printer] and other assistance as is reasonably necessary in order for the
parties hereto once a year [or more frequently if the prospectus (or
prospectuses), for such Portfolios for the shares is supplemented or amended] to
have the prospectus for the Variable Contracts and the prospectus (or
prospectuses) for the TRUST shares printed together in one document. The
expenses of such printing will be apportioned between LIFE COMPANY and TRUST in
proportion to the number of pages of the Variable Contract and TRUST prospectus,
taking account of other relevant factors affecting the expense of printing, such
as covers, columns, graphs and charts; TRUST shall bear the cost of printing the
TRUST prospectus portion of such document for distribution only to owners of
existing Variable Contracts funded by the TRUST shares and LIFE COMPANY shall
bear the expense of printing the portion of such documents relating to the
Separate Account; provided, however, LIFE COMPANY shall bear all printing
expenses of such combined documents where used for distribution to prospective
purchasers or to owners of existing Variable Contracts not funded by the shares.
In the event that LIFE COMPANY requests that TRUST or its designee provide
TRUST's prospectus in a "camera ready" or diskette format, TRUST shall be
responsible for providing the prospectus (or prospectuses) in the format in
which it is accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus (or prospectuses) in such format (e.g. typesetting
expenses), and LIFE
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COMPANY shall bear the expense of adjusting or changing the format to conform
with any of its prospectuses.
3.3 TRUST will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, proxy statements, exemptive
applications and all amendments or supplements to any of the above that relate
to the Portfolios and any other material constituting sales literature or
advertising under NASD rules, the 40 Act or the 33 Act within 20 days of the
date of such material and annual and semi-annual reports and any amendments or
supplements thereto within 80 days of the date of such report or amendment or
supplement thereto. LIFE COMPANY will provide TRUST with at least one complete
copy of all prospectuses, statements of additional information, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account and any other material constituting
sales literature or advertising under NASD rules, the 40 Act or the 33 Act
within 20 days of the date of such material and annual and semi-annual reports
and any amendments within 80 days of the date of such report or amendment or
supplement thereto.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and
ADVISER, each piece of sales literature or other promotional material in which
TRUST or ADVISER is named, at least ten (10) Business Days prior to its intended
use. No such material will be used if TRUST or ADVISER objects to its use in
writing within seven (7) Business Days after receipt of such material.
4.2 TRUST and ADVISER will furnish, or will cause to be furnished, to LIFE
COMPANY, each piece of sales literature or other promotional material in which
LIFE COMPANY or its Separate Accounts are named, at least ten (10) Business Days
prior to its intended use. No such material will be used if LIFE COMPANY
objects to its use in writing within seven (7) Business Days after receipt of
such material.
4.3 TRUST and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other
than the information or representations contained in a registration statement or
prospectus for such Variable Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
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4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or prospectus for TRUST, as such registration statement and prospectus
may be amended or supplemented from time to time, or in sales literature or
other promotional material approved by TRUST or its designee, except with the
written permission of TRUST or ADVISER.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
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 (such as any written communication distributed or made
generally available to customers or the public, 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 literature or
advertising under National Association of Securities Dealers, Inc. ("NASD")
rules, the '40 Act, the '33 Act or rules thereunder.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that TRUST has received an order from the SEC
granting relief from various provisions of the '40 Act and the rules thereunder
to the extent necessary to permit TRUST shares to be sold to and held by
Variable Contract separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and Qualified Plans. The Exemptive Order
requires TRUST and each Participating Insurance Company to comply with
conditions and undertakings substantially as provided in this Section 5. The
TRUST will not enter into a participation agreement with any other Participating
Insurance Company unless it imposes the same conditions and undertakings as are
imposed on LIFE COMPANY hereby.
5.2 The Board will monitor TRUST for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners of all
separate accounts and with participants of Qualified Plans investing in TRUST.
An irreconcilable material conflict may arise for a variety of reasons, which
may include: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling 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
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the investments of TRUST are being managed; (e) a difference in voting
instructions given by Variable Contract owners; (f) a decision by a
Participating Insurance Company to disregard the voting instructions of Variable
Contract owners and (g) if applicable, a decision by a Qualified Plan to
disregard the voting instructions of plan participants.
5.3 LIFE COMPANY will report any potential or existing conflicts of which
it becomes aware to the Board. LIFE COMPANY will be responsible for assisting
the Board in carrying out its duties in this regard by providing the Board with
all information reasonably necessary for the Board to consider any issues
raised. The responsibility includes, but is not limited to, an obligation by
the LIFE COMPANY to inform the Board whenever it has determined to disregard
Variable Contract owner voting instructions. These responsibilities of LIFE
COMPANY will be carried out with a view only to the interests of the Variable
Contract owners.
5.4 If a majority of the Board or majority of its disinterested Trustees,
determines that a material irreconcilable conflict exists affecting LIFE
COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable
(as determined by a majority of the Board's disinterested Trustees), will take
any steps necessary to remedy or eliminate the irreconcilable material conflict,
up to and including; (a) withdrawing the assets allocable to some or all of the
Separate Accounts from TRUST or any Portfolio thereof and reinvesting those
assets in a different investment medium, which may include another Portfolio of
TRUST, or another investment company; (b) submitting the question as to whether
such segregation should be implemented to a vote of all affected Variable
Contract owners and as appropriate, segregating the assets of any appropriate
group (i.e variable annuity or variable life insurance Contract owners of one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract owners the option of making such a
change; and (c) establishing a new registered management investment company (or
series thereof) or managed separate account. If a material irreconcilable
conflict arises because of LIFE COMPANY's decision to disregard Variable
Contract owner voting instructions, and that decision represents a minority
position or would preclude a majority vote, LIFE COMPANY may be required, at the
election of TRUST, to withdraw the Separate Account's investment in TRUST, and
no charge or penalty will be imposed as a result of such withdrawal. The
responsibility to take such remedial action shall be carried out with a view
only to the interests of the Variable Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
TRUST or ADVISER (or any other investment adviser of TRUST) be required to
establish a new funding medium for any Variable Contract. Further, LIFE COMPANY
shall not be required by this Section 5.4 to establish a new funding medium for
any Variable Contracts [if any offer to do so has
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been declined by a vote of a majority of Variable Contract owners materially and
adversely affected by the irreconcilable material conflict.]
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 LIFE COMPANY shall from time to time submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out its obligations under this Article V.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as and to the extent the SEC continues to
interpret the '40 Act as requiring pass-through voting privileges for Variable
Contract owners. Accordingly, LIFE COMPANY, where applicable, will vote shares
of the Portfolio held in its 40 Act registered Separate Accounts in a manner
consistent with voting instructions timely received from its Variable Contract
owners. LIFE COMPANY will be responsible for assuring that each of its Separate
Accounts that participates in TRUST calculates voting privileges in a manner
consistent with other Participating Insurance Companies. LIFE COMPANY will vote
shares in a registered Separate Account for which it has not received timely
voting instructions in the same proportion as it votes those shares in that
Separate Account for which it has received voting instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the '40
Act or the rules thereunder with respect to mixed and shared funding on terms
and conditions materially different from any exemptions granted in the Exemptive
Order, then TRUST, and/or the Participating Insurance Companies, as
appropriate, shall take such steps as may be necessary to comply with Rule 6e-2
and Rule 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
Rules are applicable.
Article VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY LIFE COMPANY. LIFE COMPANY agrees to indemnify
and hold harmless TRUST, ADVISER and each of their Trustees, directors,
principals, officers, employees and agents and each person, if any, who controls
TRUST or ADVISER within the meaning of Section 15 of the '33 Act (collectively,
the "Indemnified Parties") against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
LIFE COMPANY, which consent shall not be unreasonably withheld) or litigation or
threatened litigation (including reasonable legal and other expenses), to which
the Indemnified Parties may become subject under any
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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 TRUST's shares or the Variable
Contracts and:
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the Registration
Statement or prospectus or sales literature for the Variable
Contracts or contained in the Variable 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 in writing to LIFE
COMPANY by or on behalf of TRUST for use in the registration statement
or prospectus for the Variable Contracts or in the Variable Contracts
or sales literature (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the
Variable Contracts or TRUST shares; or
(b) arise out of or result from (i) untrue statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature of TRUST not
supplied by LIFE COMPANY, or persons under its control) or (ii)
willful misfeasance, bad faith or gross negligence of LIFE COMPANY or
persons under its control, with respect to the sale or distribution of
the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature of TRUST or any amendment thereof or supplement
thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission or
such alleged statement or omission was made in reliance upon and in
conformity with information furnished in writing to TRUST by or on
behalf of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to provide
substantially the services and furnish the materials under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any representation
and/or warranty made by LIFE COMPANY in this Agreement or arise out
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of or result from any other material breach of this Agreement by LIFE
COMPANY.
7.2 LIFE 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 that such losses, claims,
damages, liabilities or litigation are attributable to 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.
7.3 LIFE 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 LIFE 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), but failure to notify LIFE COMPANY of any
such claim shall not relieve LIFE 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 an Indemnified Party, LIFE COMPANY shall be entitled to participate at
its own expense in the defense of such action. LIFE COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from LIFE COMPANY to such party of LIFE
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 LIFE
COMPANY will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.4 INDEMNIFICATION BY TRUST AND ADVISER. TRUST and ADVISER each agree
to indemnify and hold harmless LIFE COMPANY and each of its directors, officers,
employees, and agents and each person, if any, who controls LIFE COMPANY within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties") against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of TRUST or ADVISER (which
consent shall not be unreasonably withheld) or litigation or threatened
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, or 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 TRUST's shares for the Variable Contracts and:
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(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
registration statement or prospectus or sales literature of 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 in writing to
ADVISER or TRUST by or on behalf of LIFE COMPANY for use in the
registration statement or prospectus for TRUST or in sales
literature (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of
the Variable Contracts or TRUST shares; or
(b) arise out of or result from (i) untrue statements or
representations (other than statements or representations
contained in the registration statement, prospectus or sales
literature for the Variable Contracts not supplied by ADVISER or
TRUST or persons under its control) or (ii) gross negligence,
bad faith or willful misfeasance of TRUST or ADVISER or persons
under its control, with respect to the sale or distribution of
the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a registration statement,
prospectus, or sales literature covering the Variable Contracts,
or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity
with information furnished in writing to LIFE COMPANY for
inclusion therein by or on behalf of TRUST; or
(d) arise as a result of (i) a failure by TRUST or ADVISER to provide
substantially the services and furnish the materials under the
terms of this Agreement; or (ii) a failure by a Portfolio(s)
invested in by the Separate Account to comply with the
diversification requirements of Section 817(h) of the Code; or
(iii) a failure by a Portfolio(s) invested in by the Separate
Account to qualify as a
13
"regulated investment company" under Subchapter M of the Code; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by TRUST or ADVISER in this
Agreement or arise out of or result from any other material
breach of this Agreement by TRUST or ADVISER.
7.5 TRUST and ADVISER 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 that such
losses, claims, damages, liabilities or litigation are attributable to such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
7.6 TRUST and ADVISER 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 TRUST and ADVISER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify TRUST and ADVISER
of any such claim shall not relieve TRUST and ADVISER 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, TRUST and ADVISER shall be
entitled to participate at their own expense in the defense thereof. TRUST and
ADVISER also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from TRUST or
ADVISER to such party of TRUST's or ADVISER's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and TRUST and/or ADVISER as the case may be
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
Article VIII. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following
provisions:
14
(a) At the option of LIFE COMPANY or TRUST at any time from
the date hereof upon 180 days' written notice, unless a
shorter time is agreed to by the parties;
(b) At the option of LIFE COMPANY, if TRUST shares are not
reasonably available to meet the requirements of the
Variable Contracts as determined by LIFE COMPANY. Prompt
notice of election to terminate shall be furnished by LIFE
COMPANY, said termination to be effective ten days after
receipt of notice unless TRUST makes available a sufficient
number of shares to reasonably meet the requirements of the
Variable Contracts within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of
formal proceedings against TRUST or ADVISER or any
sub-adviser by the SEC, the NASD, or any other regulatory
body, the expected or anticipated ruling, judgment or
outcome of which would, in LIFE COMPANY's reasonable
judgment, after affording TRUST and ADVISER reasonable
opportunity for consultation with LIFE COMPANY, materially
impair TRUST's ability to meet and perform TRUST's
obligations and duties hereunder, or result in material harm
to the Separate Accounts, LIFE COMPANY, or owners of
Variable Contracts. Prompt notice of election to terminate
shall be furnished by LIFE COMPANY with said termination to
be effective upon receipt of notice;
(d) At the option of TRUST or ADVISER, upon the institution of
formal proceedings against LIFE COMPANY by the SEC, the
NASD, or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in
TRUST's or ADVISER's reasonable judgment, after affording
LIFE COMPANY reasonable opportunity for consultation with
TRUST and ADVISER, materially impair LIFE COMPANY's ability
to meet and perform its obligations and duties hereunder.
Prompt notice of election to terminate shall be furnished by
TRUST with said termination to be effective upon receipt of
notice;
(e) In the event TRUST's shares are not registered, issued or
sold in accordance with applicable state or federal law, or
such law precludes the use of such shares as the underlying
investment medium of Variable Contracts issued or to be
issued by LIFE COMPANY. Termination shall be effective upon
such occurrence without notice;
15
(f) At the option of TRUST if the Variable Contracts cease to
qualify as annuity contracts or life insurance contracts, as
applicable, under the Code, or if TRUST reasonably believes
that the Variable Contracts may fail to so qualify.
Termination shall be effective upon receipt of notice by
LIFE COMPANY;
(g) At the option of LIFE COMPANY, upon TRUST's or ADVISER's
breach of any material provision of this Agreement, which
breach has not been cured to the reasonable satisfaction of
LIFE COMPANY within ten days after written notice of such
breach is delivered to TRUST;
(h) At the option of TRUST or ADVISER, upon LIFE COMPANY's
breach of any material provision of this Agreement, which
breach has not been cured to the satisfaction of TRUST
within ten days after written notice of such breach is
delivered to LIFE COMPANY;
(i) At the option of TRUST or ADVISER, if the Variable Contracts
are not registered, issued or sold in accordance with
applicable federal and/or state law. Termination shall be
effective immediately upon such occurrence without notice;
(j) At the option of LIFE COMPANY, upon 75 days written notice
of a vote of Variable Contract owners having an interest in
a Portfolio and upon written approval of LIFE COMPANY, to
substitute the shares of another investment company for the
corresponding shares of a Portfolio in accordance with the
terms of the Variable Contracts;
(k) In the event this Agreement is assigned without the prior
written consent of LIFE COMPANY, TRUST, and ADVISER,
termination shall be effective immediately upon such
occurrence without notice.
8.3 Notwithstanding any termination of this Agreement pursuant to Section
8.2 hereof, TRUST at LIFE COMPANY'S option shall continue to make available
additional TRUST shares, as provided below, for so long as TRUST desires
pursuant to the terms and conditions of this Agreement, for all Variable
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if TRUST makes additional TRUST shares available, the owners of the
Existing Contracts or LIFE COMPANY, whichever shall have legal
16
authority to do so, shall be permitted to reallocate investments in TRUST,
redeem investments in TRUST and/or invest in TRUST upon the payment of
additional premiums under the Existing Contracts. If TRUST shares continue to
be made available after such termination, the provisions of this Agreement shall
remain in effect and thereafter either TRUST or LIFE COMPANY may terminate the
Agreement, as so continued pursuant to this Section 8.3, upon sixty (60) days
prior written notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts until thirty (30) days after the LIFE COMPANY shall have
notified TRUST of its intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail return
receipt requested 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 TRUST:
BT Insurance Funds Trust
c/o First Data Investor Services Group, Inc.
One Exchange Place
53 State Street, Mail Stop BOS865
Xxxxxx, XX 00000
AND
c/o BT Xxxx Xxxxx
One South Street, Mail Stop 1-18-6
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
If to ADVISER:
Bankers Trust Company
17
000 Xxxxxxx Xxxxxx, Mail Stop 2355
Xxx Xxxx, XX 00000
Attn.: Xxxxx Xxxxxxxxxx
If to LIFE COMPANY:
Lincoln National Life Insurance
Xxxxx X. Xxxxxxxxx
0000 X. Xxxxxxx Xxxxxx
Xxxx Xxxxx , XX 00000-0000
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the SEC granting exemptive
relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Trustees or officers of TRUST or
any Portfolio shall be personally liable hereunder. No Portfolio shall be
liable for the liabilities of any other Portfolio. All persons dealing with
TRUST or a Portfolio must look solely to the property of TRUST or that
Portfolio, respectively, for enforcement of any claims against TRUST or that
Portfolio. It is also understood that each of the Portfolios shall be deemed to
be entering into a separate Agreement with LIFE COMPANY so that it is as if each
of the
18
Portfolios had signed a separate Agreement with LIFE COMPANY and that a single
document is being signed simply to facilitate the execution and administration
of the Agreement.
10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
10.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
10.8 If the Agreement terminates, the parties agree that Article 7 and
Sections 10.5, 10.6 and 10.7 shall remain in effect after termination.
10.9 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by TRUST,
ADVISER and the LIFE COMPANY.
10.10 No failure or delay by a party in exercising any right or remedy
under this Agreement will operate as a waiver thereof and no single or partial
exercise of rights shall preclude a further or subsequent exercise. The rights
and remedies provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
BT INSURANCE FUNDS TRUST
By:
---------------------------------------
Name:
Title:
BANKERS TRUST COMPANY
19
By:
---------------------------------------
Name:
Title:
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By:
---------------------------------------
Name:
Title:
20
APPENDIX A
BT Insurance Funds Trust Portfolios
Equity 500 Index Fund
Small Cap Index Fund
APPENDIX B
