<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON April 26, 2000
Registration No. 333-5827
Registration No. 811-7645
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM N-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
(GROUP VARIABLE ANNUITY I, II & III)
Pre-Effective Amendment No. [_]
Post-Effective Amendment No. 7 [X]
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 17 [X]
___________
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L
(Exact Name of Registrant)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(Name of Depositor)
1300 South Clinton Street
P.O. Box 1110
Fort Wayne, Indiana 46802
(Address of Depositor's Principal Executive Offices)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: 219-455-2000
ELIZABETH A. FREDERICK, ESQUIRE
The Lincoln National Life Insurance Company
1300 S. Clinton Street
P.O. Box 1110
Fort Wayne, Indiana 46802
(Name and Complete Address of Agent for Service)
Copy to:
Kimberly J. Smith, Esquire
Sutherland Asbill & Brennan LLP
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
It is proposed that this filing will become effective (check appropriate
box)
[_] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 2000, pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] on ________________ pursuant to paragraph (a)(1) of Rule 485
If appropriate, check the following box:
[_] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of securities being registered:
Interests in a separate account under group variable annuity contracts.
Pursuant to Rule 429 under the Securities Act of 1933, as amended, the
prospectus and statement of additional information included herein also relate
to the registrant's registration statements on Form N-4 (File No. 333-04999 and
File No. 333-05815).
<PAGE>
Lincoln National Variable Annuity Account L
Group Variable Annuity Contracts I, II, & III
Servicing Office: Home Office:
Lincoln National Life Insurance Company Lincoln National Life Insurance
P.O. Box 9740 Company
Portland, ME 04104 1300 South Clinton Street
(800) 341-0441 Fort Wayne, IN 46802
www.LincolnLife.com
This Prospectus describes group annuity contracts and individual certificates
issued by Lincoln National Life Insurance Company (Lincoln Life). They are for
use with qualified and non-qualified retirement plans. Generally, neither the
contractowner nor the individual participant pays federal income tax on the
contract's growth until it is paid out. The contract is designed to accumulate
account value and, as permitted by the plan for which the contractowner pur-
chases the contract, to provide retirement income that a participant cannot
outlive or for an agreed upon time. These benefits may be a variable or fixed
amount or a combination of both. If a participant dies before the annuity com-
mencement date, we pay the beneficiary or the plan a death benefit.
If the contractowner gives certain rights to plan participants, we issue active
life certificates to them. Participants choose whether account value accumu-
lates on a variable or a fixed (guaranteed) basis or both. If a participant al-
locates contributions to the fixed account, we guarantee principal and a mini-
mum interest rate.
All contributions for benefits on a variable basis will be placed in Lincoln
National Variable Annuity Account L (variable annuity account [VAA]). The VAA
is a segregated investment account of Lincoln Life. If a participant puts all
or some contributions into one or more of the contract's subaccounts, the par-
ticipant takes all the investment risk on the account value and the retirement
income. If the selected subaccounts make money, account value goes up; if they
lose money, it goes down. How much it goes up or down depends on the perfor-
mance of the selected subaccounts. We do not guarantee how any of the
subaccounts or their funds will perform. Also, neither the U.S. Government nor
any federal agency insures or guarantees the investment in the contract.
The available subaccounts, and the funds in which they invest, are listed be-
low. The contractowner decides which of these subaccounts are available under
the contract for participant allocations. For more information about the in-
vestment objectives, policies and risks of the funds please refer to the Pro-
spectuses for the funds.
Balanced Account -- American Century Variable Portfolios, Inc.: VP Balanced
Small Cap Growth Account -- Baron Capital Funds Trust: Baron Capital Asset Fund
Insurance Shares
Index Account -- Dreyfus Stock Index Fund
Small Cap Account -- Dreyfus Variable Investment Fund: Small Cap Portfolio
Growth I Account -- Fidelity Variable Insurance Products Fund: Growth Portfolio
Initial Class
Equity-Income Account -- Fidelity Variable Insurance Products Fund: Equity-
Income Portfolio Initial Class
Asset Manager Account -- Fidelity Variable Insurance Products Fund II: Asset
Manager Portfolio Initial Class
Global Growth Account -- Janus Aspen Series: Worldwide Growth Portfolio
Mid Cap Growth I Account -- Lincoln National Aggressive Growth Fund, Inc.
Social Awareness Account -- Lincoln National Social Awareness Fund, Inc.
Mid Cap Value Account -- Neuberger Berman Advisers Management Trust: Partners
Portfolio
International Stock Account -- T. Rowe Price International Series, Inc.
This Prospectus gives you information about the contracts and certificates that
contractowners and participants should know before investing. Please review the
Prospectuses for the funds, and keep them for reference.
Neither the SEC nor any state securities commission has approved the contracts
or determined that this Prospectus is accurate and complete. Any representation
to the contrary is a criminal offense.
A Statement of Additional Information (SAI), dated the same date as this Pro-
spectus, has more information about the contracts and certificates. Its terms
are made part of this Prospectus. For a free copy, write: Lincoln National Life
Insurance Company, P.O. Box 9740, Portland, ME 04104, or call 1-800-341-0441.
The SAI and other information about Lincoln Life and Account L are also avail-
able on the SEC's web site (http://www.sec.gov). There is a table of contents
for the SAI on the last page of this Prospectus.
May 1, 2000
1
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
- -------------------------------------------------
<S> <C>
Special Terms 2
- -------------------------------------------------
Expense Tables 3
- -------------------------------------------------
Summary 5
- -------------------------------------------------
Condensed Financial Information 7
- -------------------------------------------------
Investment Results 8
- -------------------------------------------------
Financial Statements 8
- -------------------------------------------------
The Lincoln National Life Insurance Company 8
- -------------------------------------------------
Fixed Side of the Contract 8
- -------------------------------------------------
Variable Annuity Account (VAA) 8
- -------------------------------------------------
Investments of the VAA 9
- -------------------------------------------------
Description of the Funds 9
- -------------------------------------------------
Charges and Other Deductions 11
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Page
- ---------------------------------------------------
<S> <C>
The Contracts 13
- ---------------------------------------------------
Annuity Payouts 17
- ---------------------------------------------------
Federal Tax Matters 18
- ---------------------------------------------------
Voting Rights 22
- ---------------------------------------------------
Distribution of the Contracts 22
- ---------------------------------------------------
Return Privilege 22
- ---------------------------------------------------
State Regulation 22
- ---------------------------------------------------
Records and Reports 22
- ---------------------------------------------------
Other Information 22
- ---------------------------------------------------
Group Variable Annuity Contracts I, II, & III
Statement of Additional Information
Table of Contents 23
- ---------------------------------------------------
</TABLE>
Special Terms
Account or variable annuity account (VAA)--The segregated investment account,
Account L, into which Lincoln Life sets aside and invests the assets for the
variable side of the contracts offered in this Prospectus.
Account value--At a given time before the annuity commencement date, the value
of all accumulation units for a contract plus the value of the fixed side of
the contract.
Accumulation unit--A measure used to calculate account value for the variable
side of the contract.
Annuitant--The person on whose life the annuity benefit payments made after an
annuity commencement date are based.
Annuity commencement date--The date on which Lincoln Life makes the first an-
nuity payout to the annuitant.
Annuity payout--An amount paid at regular intervals after the annuity com-
mencement date under one of several options available to the annuitant and/or
any other payee. This amount may be paid on a variable or fixed basis, or a
combination of both.
Annuity unit--A measure used to calculate the amount of each annuity payout
for the variable side of the contract after an annuity commencement date.
Beneficiary--The person the participant chooses to receive any death benefit
paid if the participant dies before the annuity commencement date.
Contractowner--The party named on the group annuity contract (for example, an
employer, a retirement plan trust, an association, or other entity allowed by
law).
Contributions--Amounts paid into the contract.
Death benefit--An amount payable to a designated beneficiary if a participant
dies before his or her annuity commencement date.
Lincoln Life (we, us our)--The Lincoln National Life Insurance Company.
Participant--An employee or other person affiliated with the contractowner on
whose behalf we maintain an account under the contract.
Participation year--A period beginning with one participation anniversary and
ending the day before the next participation anniversary, except for the first
participation year which begins with the participation date.
Plan--The retirement program that an employer offers to its employees for
which a contract is used to accumulate funds.
Subaccount--The portion of the VAA that reflects investments in accumulation
and annuity units of a class of a particular fund available under the con-
tracts. There is a separate subaccount which corresponds to each fund.
Valuation date--Each day the New York Stock Exchange (NYSE) is open for trad-
ing.
Valuation period--The period starting at the close of trading (currently nor-
mally 4:00 p.m. New York time) on each day that the NYSE is open for trading
(valuation date) and ending at the close of such trading on the next valuation
date.
2
<PAGE>
Expense Tables
Contractowner transaction expenses for GVA I, II, & III:
The maximum surrender charge (contingent deferred sales charge)
as a percentage of the gross withdrawal amount: GVA I GVA II GVA III
5% 6% None
The surrender charge percentage is reduced over time. The later the redemption
occurs, the lower the surrender charge with respect to that surrender or with-
drawal.
Contract fees for GVA I, II, & III:
Annual administration charge (per participant): $25
Loan establishment fee (per loan): $50
Systematic withdrawal option fee: $30
The annual administration charge may be paid by an employer on behalf of par-
ticipants. It is not charged during the annuity period.
We may reduce or waive these charges in certain situations. See Fixed Side of
the Contract, Charges and Other Deductions and Systematic withdrawal options.
- --------------------------------------------------------------------------------
Account L annual expenses for GVA I, II, & III subaccounts:
(as a percentage of daily net asset value):
"Standard" mortality and expense risk charge: 1.00%
"Breakpoint" mortality and expense risk charge: .75%
Contracts issued with respect to plans meeting specified eligibility require-
ments will generally impose a lower "breakpoint" mortality and expense risk
charge, as shown above and described in detail under Charges and Other Deduc-
tions.
Annual expenses of the funds for the year ended December 31, 1999:
(as a percentage of each fund's average net assets):
<TABLE>
<CAPTION>
Management 12b-1 Other Total
fees + fees + Expenses = Expenses
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1. American Century - VP Balanced 0.90% 0.00% 0.00% 0.90%
- -----------------------------------------------------------------------------------------------------
2. Baron Capital Funds Trust:
Baron Capital Asset Fund Insurance Shares/1/ 0.62 0.25 0.63 1.50
- -----------------------------------------------------------------------------------------------------
3. Dreyfus Stock Index Fund 0.25 0.00 0.01 0.26
- -----------------------------------------------------------------------------------------------------
4. Dreyfus VIF: Small Cap Portfolio 0.75 0.00 0.03 0.78
- -----------------------------------------------------------------------------------------------------
5. Fidelity VIP - Growth Portfolio Initial Class 0.58 0.00 0.08 0.66
- -----------------------------------------------------------------------------------------------------
6. Fidelity VIP - Equity-
Income Portfolio Initial Class 0.48 0.00 0.09 0.57
- -----------------------------------------------------------------------------------------------------
7. Fidelity VIP II - Asset Manager Initial Class 0.53 0.00 0.10 0.63
- -----------------------------------------------------------------------------------------------------
8. Janus Aspen Series:
Worldwide Growth Portfolio Institutional Shares/2/ 0.65 0.00 0.05 0.70
- -----------------------------------------------------------------------------------------------------
9. Lincoln National Aggressive Growth Fund 0.73 0.00 0.14 0.87
- -----------------------------------------------------------------------------------------------------
10. Lincoln National Social Awareness Fund 0.33 0.00 0.05 0.38
- -----------------------------------------------------------------------------------------------------
11. Neuberger Berman AMT: Partners Portfolio 0.80 0.00 0.07 0.87
- -----------------------------------------------------------------------------------------------------
12. T. Rowe Price International Series 1.05 0.00 0.00 1.05
- -----------------------------------------------------------------------------------------------------
</TABLE>
/1/The Adviser is contractually obligated to reduce its fee to the extent re-
quired to limit Baron Capital Asset Fund's total operating expenses to 1.5%
for the first $250 million of assets in the Fund, 1.35% for Fund assets over
$250 million and 1.25% for Fund assets over $500 million. Without the expense
limitations, total operating expenses for the Fund for the period January 1,
1999 through December 31, 1999 would have been 1.88%.
/2/Expenses are based upon expenses for the fiscal year ended December 31,
1999, restated to reflect a reduction in the management fee for the Worldwide
Growth Portfolio.
3
<PAGE>
Examples
(expenses of the subaccounts and the funds):
If you surrender your contract at the end of the time period shown, you would
pay the following expenses on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
Standard*
GVA I GVA II GVA III
------------------------------- ----------------------------------- -----------------------------------
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------- -------- -------- --------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. American
Century - VP
Balanced $74 $124 $177 $270 $83 $130 $181 $320 $24 $73 $125 $268
- --------------------------------------------------------------------------------------------------------------------------------
2. Baron
Capital
Funds Trust:
Baron
Capital
Asset Fund
Insurance
Shares 80 141 205 329 88 147 209 376 30 91 155 327
- --------------------------------------------------------------------------------------------------------------------------------
3. Dreyfus
Stock Index
Fund 68 106 146 203 77 112 150 256 17 54 93 202
- --------------------------------------------------------------------------------------------------------------------------------
4. Dreyfus VIF:
Small Cap
Portfolio 73 121 171 258 82 127 175 308 23 70 119 256
- --------------------------------------------------------------------------------------------------------------------------------
5. Fidelity VIP
- Growth
Portfolio
Initial
Class 72 117 166 245 81 123 169 297 21 66 113 244
- --------------------------------------------------------------------------------------------------------------------------------
6. Fidelity VIP
- Equity
Income
Portfolio
Initial
Class 71 115 161 236 80 121 165 288 20 63 109 234
- --------------------------------------------------------------------------------------------------------------------------------
7. Fidelity VIP
II - Asset
Manager
Initial
Class 72 116 164 242 80 123 168 294 21 65 112 241
- --------------------------------------------------------------------------------------------------------------------------------
8. Janus Aspen
Series:
Worldwide
Growth
Portfolio 72 119 168 250 81 125 171 300 22 67 115 248
- --------------------------------------------------------------------------------------------------------------------------------
9. Lincoln
National Aggressive
Growth Fund 74 123 176 267 83 129 179 317 23 72 124 265
- --------------------------------------------------------------------------------------------------------------------------------
10. Lincoln
National
Social
Awareness
Fund 69 109 152 216 78 115 155 268 19 57 99 214
- --------------------------------------------------------------------------------------------------------------------------------
11. Neuberger
Berman AMT:
Partners
Portfolio 74 123 176 267 83 129 179 317 23 72 124 265
- --------------------------------------------------------------------------------------------------------------------------------
12. T. Rowe
Price
International
Series 76 129 184 285 84 135 188 334 25 78 133 283
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
If you do not surrender your contract, you would pay the following expenses on
a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
Standard*
GVA I GVA II GVA III
------------------------------- ----------------------------------- -----------------------------------
1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years 1 year 3 years 5 years 10 years
------ ------- ------- -------- ------- -------- -------- --------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1. American
Century - VP
Balanced $23 $70 $120 $257 $21 $65 $111 $240 $24 $73 $125 $268
- -------------------------------------------------------------------------------------------------------------------------
2. Baron
Capital
Funds Trust:
Baron
Capital
Asset Fund
Insurance
Shares 29 88 150 316 27 83 141 300 30 91 155 327
- -------------------------------------------------------------------------------------------------------------------------
3. Dreyfus
Stock Index
Fund 16 50 87 189 15 45 78 171 17 54 93 202
- -------------------------------------------------------------------------------------------------------------------------
4. Dreyfus VIF:
Small Cap
Portfolio 21 66 114 244 20 61 105 227 23 70 119 256
- -------------------------------------------------------------------------------------------------------------------------
5. Fidelity VIP
- Growth
Portfolio
Initial
Class 20 63 107 232 19 57 99 214 21 66 113 244
- -------------------------------------------------------------------------------------------------------------------------
6. Fidelity VIP
- Equity
Income
Portfolio
Initial
Class 19 60 103 222 18 55 94 205 20 63 109 234
- -------------------------------------------------------------------------------------------------------------------------
7. Fidelity VIP
II - Asset
Manager
Initial
Class 20 62 106 229 18 57 97 211 21 65 112 241
- -------------------------------------------------------------------------------------------------------------------------
8. Janus Aspen
Series:
Worldwide
Growth
Portfolio 21 64 109 236 19 59 101 219 22 67 115 248
- -------------------------------------------------------------------------------------------------------------------------
9. Lincoln
National
Aggressive
Growth Fund 22 69 118 254 21 64 110 237 23 72 124 265
- -------------------------------------------------------------------------------------------------------------------------
10. Lincoln
National
Social
Awareness
Fund 17 54 93 202 16 49 84 184 19 57 99 214
- -------------------------------------------------------------------------------------------------------------------------
11. Neuberger
Berman AMT:
Partners
Portfolio 22 69 118 254 21 64 110 237 23 72 124 265
- -------------------------------------------------------------------------------------------------------------------------
12. T. Rowe
Price
International
Series 24 74 127 272 22 69 119 255 25 78 133 283
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
We provide these examples, which are unaudited, to show the direct and indirect
costs and expenses of the contract.
For more information, see Charges and Other Deductions in this Prospectus, and
in the Prospectuses for the funds. Premium taxes may also apply, although they
do not appear in the examples. These examples should not be considered a repre-
sentation of past or future expenses. Actual expenses may be more or less than
those shown.
* Examples shown may be less for plans qualifying for "breakpoint" mortality
and expense risk charge.
4
<PAGE>
Summary
What kind of contracts are these? They are group variable annuity contracts be-
tween the contractowner and Lincoln Life. They may provide for a fixed annuity
and/or a variable annuity. This Prospectus describes the variable side of the
contracts. See The Contracts.
What is the variable annuity account (VAA)? It is a separate account we estab-
lished under Indiana insurance law, and registered with the SEC as a unit in-
vestment trust. VAA assets are allocated to one or more subaccounts, according
to your investment choices. VAA assets are not chargeable with liabilities
arising out of any other business which Lincoln Life may conduct. See the Vari-
able Annuity Account.
What are the contract's investment choices? Based on instructions, the VAA ap-
plies contributions to buy fund shares in one or more of the investment funds
of the subaccounts: American Century Variable Portfolios, Inc.: VP Balanced;
Baron Capital Funds Trust: Baron Capital Asset Fund; Dreyfus Stock Index Fund;
Dreyfus Variable Investment Fund: Small Cap Portfolio; Fidelity Variable Insur-
ance Products Fund: Growth Portfolio; Fidelity Variable Insurance Products
Fund: Equity-Income Portfolio; Fidelity Variable Insurance Products Fund II:
Asset Manager Portfolio; Janus Aspen Series: Worldwide Growth Portfolio; Lin-
coln National Aggressive Growth Fund, Inc.; Lincoln National Social Awareness
Fund, Inc.; Neuberger Berman Advisers Management Trust: Partners Portfolio; and
T. Rowe Price International Series, Inc. In turn, each fund holds a portfolio
of securities consistent with its investment policy. See the Variable Annuity
Account and Description of the Funds for a description of the subaccounts.
Who advises the funds? American Century Investment Management, Inc. is the in-
vestment advisor of American Century VP Balanced. BAMCO, Inc. is advisor to the
Baron fund. The investment advisor of the Dreyfus funds is The Dreyfus Corpora-
tion, New York, NY. The investment advisor of the Fidelity funds is Fidelity
Management & Research Company, Boston, MA. Janus Capital Corporation is the ad-
visor to the Janus fund. Lincoln Investments, Inc. is the investment advisor of
the Lincoln funds; Neuberger Berman Management Incorporated is the investment
advisor to the Neuberger Berman fund. Putnam Investments is sub-advisor to the
Lincoln National Aggressive Growth Fund and Vantage Investment Advisors is sub-
advisor to the Lincoln National Social Awareness Fund. T. Rowe Price-Fleming
International, Inc. is investment advisor of the T. Rowe Price International
Series. See Description of the Funds.
How do the contracts work? If we approve the application, we will send the
contractowner a contract. When participants make contributions, they buy accu-
mulation units. If the participant decides to purchase retirement income pay-
ments, we convert accumulation units to annuity units. Retirement income pay-
ments will be based on the number of annuity units received and the value of
each annuity unit on payout days. See The Contracts.
What charges do I pay under the contract? If participants in GVA I or GVA II
withdraw account value, a surrender charge of 0-5% or 0-6%, respectively, of
the gross withdrawal amount applies depending upon how many participation years
the participant has been in the contract. We may reduce or waive surrender
charges in certain situations. See Surrender Charges for GVA I and GVA II.
There is no surrender charge for GVA III.
We charge an annual administration charge of $25 per participant account.
We will deduct any applicable premium tax from contributions or account value
at the time the tax is incurred or at another time we choose.
We apply an annual charge totaling 1.00% "standard", or .75% "breakpoint", to
the daily net asset value of the VAA. See Charges and Other Deductions.
We may charge $50 to set up a participant loan and $30 to establish a system-
atic withdrawal option.
We may waive these charges in certain situations.
The funds' investment management fees, 12b-1 fees, expenses and expense limita-
tions, if applicable, are more fully described in the Prospectuses for the
funds.
What contributions are necessary, and how often? Contributions made on behalf
of participants may be in any amount unless the contractowner or the plan has a
minimum amount. See The Contracts--Contributions.
How will annuity payouts be calculated? If a participant decides to annuitize,
they select an annuity option and start receiving retirement income payments
from the contract as a fixed option or variable option or a combination of
both. See Annuity payout options. Remember that participants in the VAA benefit
from any gain, and take a risk of any loss, in the value of the securities in
the funds' portfolios.
What happens if a participant dies before he or she annuitizes? The beneficiary
has options as to how any death benefit is paid. See The Contracts--Death bene-
fit before the annuity commencement date.
May participants transfer account value between subaccounts, and between the
VAA and the fixed account? Before the annuity commencement date, yes, subject
to the terms of the plan. See The Contracts--Transfers on or before the annuity
commencement date.
May a participant withdraw account value? Yes, during the accumulation period,
subject to contract requirements, to the restrictions of any plan, and to cer-
tain restrictions under GVA III. See Charges and Other Deductions. Under GVA
III, a participant may not transfer more than 20% of his or her fixed account
holdings to
5
<PAGE>
the VAA each year, unless the participant intends to liquidate their fixed ac-
count value. Under GVA III, liquidation of the entire fixed account value must
be over 5 annual installments. See Fixed account withdrawal/ transfer limits
for GVA III. The contractowner must also approve participant withdrawals under
Section 401(a) plans and plans subject to Title I of ERISA. Certain charges may
apply. See Charges and Other Deductions. A portion of withdrawal proceeds may
be taxable. In addition, a 10% Internal Revenue Service (IRS) tax penalty may
apply to distributions before age 59 1/2. A withdrawal also may be subject to
20% withholding. See Federal Tax Matters.
Do participants get a free look at their certificates? A participant under a
Section 403(b) or 408 plan and certain non-qualified plans can cancel the ac-
tive life certificate within ten days (in some states longer) of the date the
participant receives the certificate. The participant needs to give notice to
our servicing office. We will refund the participant's contributions less with-
drawals, or for the variable side of the contract if greater, the participant's
account balance on the day we receive the written notice. See Return Privilege.
6
<PAGE>
Condensed Financial Information
The financial data included below should be read along with the financial
statements of the VAA and the related data included in the SAI.
Accumulation unit values (For an accumulation unit outstanding throughout the
period)
<TABLE>
<CAPTION>
1999
--------------------
1996 1997 1998
------- ------ ------- Standard Breakpoint+
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Asset Manager Account*
.. Beginning of period unit
value......................... $16.309 17.267 20.583 23.445 24.279
.. End of period unit value..... $17.267 20.583 23.445 25.787 25.819
.. End of period number of units
(000's omitted)............... 25 4,471 4,638 4,152 251
- --------------------------------------------------------------------------------
Balanced Account*
.. Beginning of period unit
value......................... $15.698 16.213 18.550 21.263 21.702
.. End of period unit value..... $16.213 18.550 21.263 23.168 23.198
.. End of period number of units
(000's omitted)............... 2 1,267 1,269 1,099 94
- --------------------------------------------------------------------------------
Equity-Income Account*
.. Beginning of period unit
value......................... $14.763 15.790 19.985 22.087 24.433
.. End of period unit value..... $15.790 19.985 22.087 23.252 23.281
.. End of period number of units
(000's omitted)............... 10 3,608 4,155 3,856 182
- --------------------------------------------------------------------------------
Global Growth Account**
.. Beginning of period unit
value......................... $10.000 12.520 13.979
.. End of period unit value..... $12.520 20.385 20.410
.. End of period number of units
(000's omitted)............... 75 1,054 74
- --------------------------------------------------------------------------------
Growth I Account*
.. Beginning of period unit
value......................... $22.793 23.220 28.328 39.122 44.085
.. End of period unit value..... $23.220 28.328 39.122 53.234 53.301
.. End of period number of units
(000's omitted)............... 8 4,982 5,291 5,554 151
- --------------------------------------------------------------------------------
Index Account*
.. Beginning of period unit
value......................... $21.013 22.705 29.827 37.861 41.583
.. End of period unit value..... $22.705 29.827 37.861 45.208 45.265
.. End of period number of units
(000's omitted)............... 3 3,317 3,913 3,815 352
- --------------------------------------------------------------------------------
International Stock Account*
.. Beginning of period unit
value ........................ $11.687 12.276 12.503 14.342 14.861
.. End of period unit value..... $12.276 12.503 14.342 18.931 18.955
.. End of period number of units
(000's omitted)............... 5 1,837 2,049 1,818 122
- --------------------------------------------------------------------------------
Mid Cap Growth I Account**
.. Beginning of period unit
value......................... $10.000 12.454 12.865
.. End of period unit value..... $12.454 17.563 17.585
.. End of period number of units
(000's omitted)............... 19 1,486 202
- --------------------------------------------------------------------------------
Mid Cap Value Account**
.. Beginning of period unit
value......................... $10.000 11.861 13.254
.. End of period unit value..... $11.861 12.609 12.625
.. End of period number of units
(000's omitted)............... 27 150 21
- --------------------------------------------------------------------------------
Small Cap Account*
.. Beginning of period unit
value......................... $14.854 15.286 17.632 16.856 18.723
.. End of period unit value .... $15.286 17.632 16.856 20.552 20.578
.. End of period number of units
(000's omitted)............... 12 3,524 3,954 3,430 192
- --------------------------------------------------------------------------------
Small Cap Growth Account**
.. Beginning of period unit
value......................... $10.000 13.218 15.583
.. End of period unit value .... $13.218 17.775 17.800
.. End of period number of units
(000's omitted)............... 27 460 23
- --------------------------------------------------------------------------------
Social Awareness Account**
.. Beginning of period unit
value......................... $10.000 12.791 13.358
.. End of period unit value .... $12.791 14.619 14.637
.. End of period number of units
(000's omitted)............... 33 1,107 88
- --------------------------------------------------------------------------------
Pending Allocation Account*
.. Beginning of period unit
value......................... $11.123 11.277 11.894 12.544 12.843
.. End of period unit value..... $11.277 11.894 12.544 13.192 13.195
.. End of period number of units
(000's omitted)............... 1 30 17 12 0
- --------------------------------------------------------------------------------
</TABLE>
+Breakpoint unit values commenced on June 29, 1999.
*The Sub-Account indicated commenced operations on September 26, 1996.
**The Sub-Account indicated commenced operation on October 1, 1998.
7
<PAGE>
Investment Results
At times, the VAA may compare its investment results to various unmanaged in-
dices or other variable annuities in reports to shareholders, sales literature
and advertisements. The results will be calculated on a total return basis for
various periods, with or without surrender charges. Results calculated without
surrender charges will be higher. Total returns include the reinvestment of
all distributions, which are reflected in changes in unit value. See the SAI
for further information.
Financial Statements
The financial statements for the VAA and Lincoln Life are located in the SAI.
For a free copy of the SAI, complete and mail the enclosed form, or call
1-800-341-0441.
The Lincoln National Life Insurance Company
Lincoln Life was founded in 1905 and is organized under Indiana law. We are
one of the largest stock life insurance companies in the United States. We are
owned by Lincoln National Corp. (LNC) which is also organized under Indiana
law. LNC's primary businesses are insurance and financial services.
Fixed Side of the Contract
Contributions allocated to the fixed account become part of Lincoln Life's
general account, and do not participate in the investment experience of the
VAA. The general account is subject to regulation and supervision by the Indi-
ana Insurance Department as well as the insurance laws and regulations of the
jurisdictions in which the contracts are distributed.
In reliance on certain exemptions, exclusions and rules, Lincoln Life has not
registered interests in the general account as a security under the Securities
Act of 1933 (1933 Act) and has not registered the general account as an in-
vestment company under the Investment Company Act of 1940 (1940 Act). Accord-
ingly, neither the general account nor any interests in it are subject to reg-
ulation under the 1933 Act or the 1940 Act. Lincoln Life has been advised that
the staff of the SEC has not made a review of the disclosures which are in-
cluded in this Prospectus which relate to our general account and to the fixed
side of the contract. These disclosures, however, may be subject to certain
provisions of the federal securities laws relating to the accuracy and com-
pleteness of statements made in the Prospectus. This Prospectus is generally
intended to serve as a disclosure document only for aspects of the contract
involving the VAA, and therefore contains only selected information regarding
the fixed side of the contract. Complete details regarding the fixed side of
the contract can be found in the contract.
Contributions allocated to the fixed account are guaranteed to be credited
with a minimum interest rate, specified in the contract, of at least 3.0%. A
contribution allocated to the fixed side of the contract is credited with in-
terest beginning on the next calendar day following the date of receipt if all
participant data is complete. Lincoln Life may vary the way in which it cred-
its interest to the fixed side of the contract from time to time.
ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE IN LINCOLN LIFE'S
SOLE DISCRETION. PARTICIPANTS BEAR THE RISK THAT NO INTEREST IN EXCESS OF 3.0%
WILL BE DECLARED.
Under GVA III, special limits apply to transfers and withdrawals from the
fixed account. See Fixed account withdrawal/transfer limits for GVA III.
If the Plan permits loans, then during the participant's accumulation period,
the participant may apply for a loan by completing a loan application that we
provide. The participant's account balance in the fixed account secures the
loan. Loans are subject to restrictions imposed by the IRC, Title I of the Em-
ployee Retirement Income Security Act of 1974 (ERISA), and the participant's
plan. For plans subject to Title I of ERISA, the initial amount of a partici-
pant loan cannot exceed the lesser of 50% of the participant's vested account
balance in the fixed account or $50,000 and must be at least $1,000. For plans
not subject to Title I of ERISA, a participant may borrow up to $10,000 of his
or her vested account balance. A participant may have only one loan outstand-
ing at a time and may not take more than one loan in any six-month period.
Amounts serving as collateral for the loan are not subject to the minimum in-
terest rate under the contract and will accrue interest at a rate below the
loan interest rate provided in the contract. Under certain contracts, a fee of
up to $50 may be charged for a loan. More information about loans and loan in-
terest rates is in the contract, the active life certificates, the annuity
loan agreement and is available from us.
Variable Annuity Account (VAA)
On April 29, 1996, the VAA was established as an insurance company separate
account under Indiana law. It is registered with the SEC as a unit investment
trust under the provisions of the 1940 Act. The SEC does not supervise the VAA
or Lincoln Life. The VAA is a segregated investment account, meaning that its
assets may not be charged with liabilities resulting from any other
8
<PAGE>
business that we may conduct. Income, gains and losses, whether realized or
not, from assets allocated to the VAA are, in accordance with the applicable
annuity contracts, credited to or charged against the VAA. They are credited or
charged without regard to any other income, gains or losses of Lincoln Life.
The VAA satisfies the definition of a separate account under the federal secu-
rities laws. We do not guarantee the investment performance of the VAA. Any in-
vestment gain or loss depends on the investment performance of the funds. You
assume the full investment risk for all amounts placed in the VAA.
Investments of the VAA
The contractowner decides which of the subaccounts available under the contract
will be available for participant allocations. There is a separate subaccount
which corresponds to each fund. Participant allocations may be changed without
penalty or charges. Shares of the funds will be sold at net asset value with no
initial sales charge to the VAA in order to fund the contracts. The funds are
required to redeem fund shares at net asset value on our request. We reserve
the right to add, delete, or substitute funds.
Each fund, described below, is an investment vehicle for insurance company sep-
arate accounts. Certain funds offered as part of this contract have similar in-
vestment objectives and policies to other portfolios managed by the fund's ad-
visor. The investment results of the funds, however, may be higher or lower
than the results of other portfolios that are managed by the advisor. There can
be no assurance, and no representation is made, that the investment results of
any of the funds will be comparable to the investment results of any other
portfolio managed by the advisor.
Description of the Funds
Following are brief summaries of the investment objectives and policies of the
funds, and a description of their managers. Each fund is subject to certain in-
vestment policies and restrictions which may not be changed without a majority
vote of shareholders of that fund. More detailed information can be obtained
from the current Prospectus for the fund, which is included in this booklet.
There is no assurance that any of the funds will achieve its stated objective.
1. American Century Variable Portfolios, Inc.--American Century VP Balanced
seeks capital growth and current income. Its investment team intends to
maintain approximately 60% of the portfolio's assets in common stocks that
are considered by its manager to have better than average prospects for ap-
preciation and the balance in bonds and other fixed income securities. Amer-
ican Century Investment Management, Inc. is the investment manager of this
portfolio.
2. Baron Capital Funds Trust--Baron Capital Asset Fund's investment objective
is to purchase stocks, judged by the advisor, to have the potential of in-
creasing their value at least 50% over two subsequent years, although that
goal may not be achieved. BAMCO, Inc. serves as the Fund's investment advi-
sor.
3. Dreyfus Stock Index Fund is a non-diversified index fund that seeks to match
the total return of the Standard & Poor's 500 Composite Stock Price Index.
The Fund is neither sponsored by nor affiliated with Standard & Poor's Cor-
poration. The Dreyfus Corporation acts as the Fund manager and Mellon Equity
Associates, an affiliate of Dreyfus, is the Fund index manager.
4. Dreyfus Variable Investment Fund--Small Cap Portfolio seeks to maximize cap-
ital appreciation by investing primarily in common stocks of domestic and
foreign issuers with market capitalizations of less than $1.5 billion at the
time of purchase. The portfolio manager seeks companies believed to be char-
acterized by new or innovative products or services which should enhance
prospects for growth in future earnings. The Portfolio may also invest in
special situations such as corporate restructurings, mergers or acquisi-
tions. The Dreyfus Corporation serves as the Portfolio's investment adviser.
5. Fidelity Variable Insurance Products Fund (VIP)--Growth Portfolio seeks
long-term capital appreciation. The Portfolio normally purchases common
stocks. Fidelity Management & Research Company ("FMR") is the manager of
this portfolio.
6. Fidelity Variable Insurance Products Fund (VIP)--Equity-Income Portfolio
seeks reasonable income by investing primarily in income-producing equity
securities, with some potential for capital appreciation, seeking a yield
that exceeds the composite yield on the securities comprising the Standard
and Poor's 500 Index (S&P 500). FMR is the investment manager of this port-
folio.
7. Fidelity Variable Insurance Products Fund II (VIP II)--Asset Manager Portfo-
lio seeks high total return with reduced risk over the long term by allocat-
ing its assets among domestic and foreign stocks, bonds and short-term money
market instruments. FMR is the investment manager of this portfolio.
8. Janus Aspen Series--Worldwide Growth Portfolio seeks long-term growth of
capital in a manner consistent with the preservation of capital. The Portfo-
lio pursues its objective by investing primarily in common stocks of compa-
nies of any size throughout the world. The Portfolio normally invests in is-
suers from at least 5 different countries, including the U.S. The Portfolio
may at times invest in fewer than five countries or even a single country.
Janus Capital Corporation serves as the Fund's investment advisor.
9
<PAGE>
9. Lincoln National Aggressive Growth Fund, Inc. seeks to maximize capital ap-
preciation. The fund invest in stocks of small, lesser known companies which
have a chance to grow significantly in a short time. Lincoln Investment* is
the fund's investment advisor, and Putnam Investments is the fund's invest-
ment sub-advisor.
10. Lincoln National Social Awareness Fund, Inc. seeks long-term capital appre-
ciation. The fund buys stocks of established companies which adhere to cer-
tain specific social criteria. Lincoln Investment Management, Inc. (Lincoln
Investment*) is the fund's investment advisor and Vantage Investment Advi-
sors is the fund's investment sub-advisor.
11. Neuberger Berman Advisers Management Trust--Partners Portfolio seeks capi-
tal growth by investing mainly in common stocks of mid- to large-capital-
ization established companies using the value-oriented investment approach.
Neuberger Berman Management Incorporated serves as the Fund's investment
advisor. Neuberger Berman, LLC serves as the Fund's investment sub-advisor.
12. T. Rowe Price International Series, Inc.--T. Rowe Price International Stock
Portfolio seeks long-term growth of capital through investments primarily
in common stocks of established, non-U.S. companies. Rowe Price-Fleming In-
ternational, Inc. is the investment manager of this portfolio.
Fidelity VIP--Money Market Portfolio seeks to obtain as high a level of current
income as is consistent with preserving capital and providing liquidity. For
more information about the Portfolio into which initial contributions are in-
vested pending Lincoln Life's receipt of a complete order, see The Contracts.
*Lincoln Investments has informed the funds to which it provides advisory serv-
ices that it intends to merge into a newly created series of its affiliate,
Delaware Management Business Trust, during the second or third quarter of 2000.
Lincoln Investments does not expect the merger to result in any change in the
level of advisory services that it currently provides to these funds, although
there may be some changes in, and additions to, personnel. See the prospectuses
for these funds for more information.
As compensation for their services to the fund, the investment advisors receive
a fee from the fund, which is accrued daily and paid monthly or quarterly. This
fee is based on the net assets of each fund, defined under Purchase and Redemp-
tion of Shares, in the Prospectus for the fund.
With respect to a fund, the advisor and/or distributor, or an affiliate there-
of, may compensate Lincoln Life (or an affiliate) for administrative, distribu-
tion, or other services. Some funds may compensate us more than other funds. It
is anticipated that such compensation will be based on assets of the particular
fund attributable to the contracts along with certain other variable contracts
issued or administered by Lincoln Life (or an affiliate).
Sale of shares by the funds
We will purchase shares of the funds at net asset value and direct them to the
appropriate subaccounts of the VAA. We will redeem shares of the appropriate
funds to pay annuity payouts, death benefits, surrender/ withdrawal proceeds or
for other purposes described in the contract. If a participant wants to trans-
fer all or part of his or her account balance from one subaccount to another,
we redeem shares held in the first and purchase shares of the other. The shares
are retired, but they may be reissued later.
Shares of the funds are not sold directly to the general public. They are sold
to Lincoln Life and may be sold to other insurance companies for investment of
assets of the subaccounts established by those insurance companies to fund
variable annuity and variable life insurance contracts.
When a fund sells shares both to variable annuity and to variable life insur-
ance separate accounts, it is engaging in mixed funding. When a fund sells
shares to separate accounts of unaffiliated life insurance companies, it is en-
gaging in shared funding.
The funds may engage in mixed and shared funding. Due to differences in redemp-
tion rates or tax treatment, or other considerations, the interests of various
contractowners participating in a fund could conflict. The funds' Directors or
Trustees will monitor for the existence of any material conflicts, and deter-
mine what action, if any, should be taken. See the Prospectuses of the funds.
Reinvestment of dividends and capital gain distributions
All dividend and capital gain distributions of the funds are automatically
reinvested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to contractowners as
additional units, but are reflected as changes in unit values.
Addition, deletion or substitution of investments
We reserve the right, within the law, to make additions, deletions and substi-
tutions for the funds in which the VAA participates. (We may substitute shares
of other funds for shares already purchased, or to be purchased in the future,
under the contract. This substitution might occur if shares of a fund should no
longer be available, or if investment in any fund's shares should become inap-
propriate, in the judgment of our management, for the purposes of the con-
tract.) We cannot substitute shares without approval by the SEC. We will also
notify contractowners and participants.
10
<PAGE>
Charges and Other Deductions
We will deduct the charges described below to cover our costs and expenses,
services provided, and risks assumed under the contracts. We will incur cer-
tain costs and expenses for distribution and administration of the contracts
and for providing the benefits payable thereunder. More particularly, our ad-
ministrative services include: processing applications and enrollment forms
and issuing the contracts and active life certificates, processing purchases
and redemptions of fund shares as required, maintaining records, administering
annuity payout options, furnishing accounting and valuation services (includ-
ing the calculation and monitoring of daily subaccount values), reconciling
and depositing cash receipts, providing contract confirmations, providing
toll-free inquiry services and furnishing telephone fund transfer services.
The risks we assume include: the risk that annuitants receiving annuity
payouts under the contract will live longer than we assumed when we calculated
our guaranteed rates (these rates cannot be changed); the risk that death ben-
efits paid will exceed actual participant account balances (less outstanding
loans); the risk that more participants than expected will qualify for waiver
of the surrender charge under GVA I or GVA II; and the risk that our costs in
providing the services will exceed our revenues from contract charges which we
cannot change. The amount of a charge may not necessarily correspond to the
costs associated with providing the services or benefits indicated by the de-
scription of the charge. For example, the surrender charge collected under GVA
I or GVA II may not fully cover all of the sales and distribution expenses ac-
tually incurred by us.
Deductions from the VAA for GVA I, II, & III
We deduct from the VAA an amount, computed daily, which is equal to a maximum
annual rate of 1.00% or .75% of the daily net asset value. The charge is a
mortality and expense risk charge. It is assessed during the accumulation pe-
riod and during the annuity period, even though during the annuity period, we
bear no mortality risk on annuity options that do not have life contingencies.
Contracts eligible for the lower, or "breakpoint", mortality and expense risk
charge are those contracts which, either at issue or after issue and at the
end of a calendar quarter, satisfy eligibility criteria anticipated to result
in lower issue and administrative costs for us over time. Such criteria in-
clude, for example, expected size of account value and contributions, adminis-
trative simplicity, and/or limited competition. For cases not eligible for the
lower mortality and risk expense charge at issue, the lower charge will be im-
plemented on the calendar quarter-end valuation date following the end of the
calendar quarter in which the contract becomes eligible for the lower charge.
We periodically modify the criteria for eligibility. Modifications will not be
unfairly discriminatory against any person. Contact your agent for our current
eligibility criteria.
Annual administration charge
During the accumulation period, we currently deduct $25 (or the balance of the
participant's account, if less) per year from each participant's account bal-
ance on the last business day of the month in which a participant anniversary
occurs. We also deduct the charge from a participant's account balance if the
participant's account is totally withdrawn. The charge may be increased or de-
creased.
Surrender charge for GVA I and GVA II*
Under GVA I and GVA II, a surrender charge applies (except as described below)
to total or partial withdrawals of a participant's account balance during the
accumulation period as follows:
<TABLE>
<CAPTION>
During Participation Year GVA I GVA II
- ------------------------- ----- ------
<S> <C> <C>
1-5 5% 6%
6 5% 3%
7 4% 3%
8 3% 3%
9 2% 3%
10 1% 3%
11-15 0% 1%
16 and later 0% 0%
</TABLE>
* There is no surrender charge taken on withdrawals from GVA III.
The surrender charge is imposed on the gross withdrawal amount, and is de-
ducted from the subaccounts and the fixed account in proportion to the amount
withdrawn from each. We do not impose a surrender charge on death benefits, or
on account balances converted to an annuity payout option. For any partici-
pant, the surrender charge will never exceed 8.5% of the cumulative contribu-
tions to the participant's account.
We impose the surrender charge on GVA I and GVA II to compensate us for the
loss we experience on our distribution costs when a participant withdraws ac-
count value before distribution costs have been recovered. We may also recover
distribution costs from other contract charges, including the mortality and
expense risk charge.
Fixed account waiver of surrender charges and withdrawal/transfer limits
Under certain conditions, a participant may withdraw part or all of his or her
fixed account balance without incurring a surrender charge under GVA I or GVA
II, or without being subject to the fixed account withdrawal/transfer limits
under GVA III. We must receive reasonable proof of the condition with the
withdrawal request. The chart below shows the standard conditions provided by
GVA I, GVA II, and
11
<PAGE>
GVA III, as well as optional conditions the contractowner may or may not make
available under the contracts:
Standard conditionsOptional conditions
- -------------------------------------------------------------------------------
GVA I
. the partici- . the partici-
pant has at- pant has
tained age separated
59 1/2 from service
with their
employer and
is at least
55 years of
. the partici- age
pant has
died
. the partici-
pant has in-
curred a . the partici-
disability pant is ex-
(as defined periencing
under the financial
contract) hardship
. the partici-
pant has
separated
from service
with their
employer
GVA II
. the partici- . the partici-
pant has at- pant has
tained age separated
59 1/2 from service
with their
employer
. the partici-
pant has
died
. the partici- . the partici-
pant has in- pant is ex-
curred a periencing
disability financial
(as defined hardship
under the
contract)
. the partici-
pant has
separated
from service
with their
employer and
is at least
55 years of
age
GVA III
. the partici- . the partici-
pant has at- pant has
tained age separated
59 1/2 from service
with their
employer and
is at least
55 years of
age
. the partici-
pant has
died
. the partici-
pant has in-
curred a
disability
(as defined
under the
contract)
. the partici-
pant has
separated
from service
with their
employer
. the partici-
pant is ex-
periencing
financial
hardship*
* A GVA III contractowner has the option not to include the financial hardship
condition.
Under GVA I and GVA II, a contractowner may also elect an optional contract
provision that permits participants to make a withdrawal once each contract
year of up to 20% of the participant's account balance without a surrender
charge.
Fixed account withdrawal/transfer limits for GVA III
GVA III has no surrender charges, but under GVA III, special limits apply to
withdrawals and transfers from the fixed account. During any one calendar year
a participant may make one withdrawal from the fixed account, OR one transfer
to the VAA from the fixed account, of up to 20% of their fixed account
balance.
Participants who want to liquidate their entire fixed account balance or
transfer it to the VAA, however, may make one withdrawal or transfer request
from their fixed account in each of five consecutive calendar years, according
to the following percentages:
<TABLE>
<CAPTION>
Year Request Received Percentage of Fixed Account
By Lincoln Life Available Under GVA III
- --------------------- ---------------------------
<S> <C>
1 20%
2 25%
3 33.33%
4 50%
5 100%
</TABLE>
Each consecutive withdrawal or transfer may not be made more frequently than
twelve months apart. This liquidation schedule is also subject to the same
conditions as other withdrawals and transfers. We reserve the right to pro-
hibit any additional contributions by a participant that notifies us their in-
tention to liquidate their fixed account balance and stop contributions to the
contract.
In addition, at contract termination certain 403(b) GVA III contracts offer
lump sum payouts from the fixed account which may have a market value
adjustment. Lump sum payouts will never be less than net contributions
accumulated at an annual effective rate of 3%. See The Contract.
A contractowner choosing one or more of the optional provisions may receive a
different declared interest rate on the fixed account than will holders of
contracts without these provisions.
Deductions for premium taxes
Any premium tax or other tax levied by any governmental entity as a result of
the existence of the contracts or the VAA will be deducted from account value
when incurred, or at another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administrative interpretation or by judicial action. The tax ranges from 0% to
5.0% in those states where the tax is imposed.
Other charges and deductions
There are deductions from and expenses paid out of the assets of the under-
lying funds that are more fully described in the Prospectuses for the funds.
We may impose a $50 fee to establish a participant loan from the fixed ac-
count, and loans are subject to loan interest charges. In addition, we may im-
pose a $30 fee to set up a systematic withdrawal option for a participant.
Additional information
The annual administration charge and surrender charge described previously may
be reduced or eliminated under a particular contract. However, these charges
will
12
<PAGE>
be reduced only to the extent that we anticipate lower distribution and/or ad-
ministrative expenses, or that we perform fewer sales or administrative serv-
ices than those originally contemplated in establishing the levels of those
charges. Lower distribution and/or administrative expenses may be the result
of economies associated with (i) the size of a particular group; (ii) an ex-
isting relationship with the contractowner or employer; (iii) the use of mass
enrollment procedures; (iv) the performance of administrative or sales func-
tions by the employer; or (v) the use by an employer of automated techniques
in submitting contributions or information relating to contributions on behalf
of its employees. In addition, an employer may pay the annual administration
charge on behalf of participants under a contract, or by election impose this
charge only on participants with account balances in the VAA.
The Contracts
Purchase of the contracts
We designed the contracts for employers and other entities to enable partici-
pants and employers to accumulate funds for retirement programs meeting the
requirements of the following Sections of the Internal Revenue Code of 1986,
as amended (tax code): 401(a), 403(b), 408 and other related sections, as well
as for programs offering non-qualified annuities. An employer, association or
trustee in some circumstances, may apply for a contract by completing an ap-
plication and returning it to us. If we accept the application, the
contractowner or an affiliated employer can forward contributions on behalf of
employees who then become participants under the contracts. For plans that
have allocated rights to the participant, we will issue to each participant a
separate active life certificate that describes the basic provisions of the
contract to each participant.
Contributions
Contractowners generally forward contributions to us for investment. Depending
on the plan, the contributions may consist of salary reduction contributions,
employer contributions or post-tax contributions.
Contributions may accumulate on either a guaranteed or variable basis selected
from those subaccounts made available by the contractowner.
Contributions made on behalf of participants may be in any amount unless there
is a minimum amount set by the contractowner or plan. A contract may require
the contractowner to contribute a minimum annual amount on behalf of all par-
ticipants. Annual contributions under qualified plans may be subject to maxi-
mum limits imposed by the tax code. Annual contributions under non-qualified
plans may be limited by the terms of the contract.
Subject to any restrictions imposed by the plan or the tax code, we will ac-
cept transfers from other contracts and qualified rollover contributions.
Section 830.205 of the Texas Education Code provides that employer or state
contributions (other than salary reduction contributions) on behalf of partic-
ipants in the Texas Optional Retirement Program ("ORP") vest after one year of
participation in the program. We will return employer contributions to the
contractowner for those employees who terminate employment in all Texas insti-
tutions of higher education before becoming vested. During this first partici-
pation year in the ORP, ORP Participants may only direct employer and state
contributions to the fixed account.
Contributions must be in U.S. funds, and all withdrawals and distributions un-
der the contract will be in U.S. funds. If a bank or other financial institu-
tion does not honor the check or other payment method used for a contribution,
we will treat the contribution as invalid. All allocation and subsequent
transfers resulting from the invalid contributions will be reversed and the
party responsible for the invalid contribution must reimburse us for any
losses or expenses resulting from the invalid contribution.
Initial contributions
When we receive a completed enrollment form and all other information neces-
sary for processing a contribution, we will price the initial contribution for
a participant to his or her account no later than two business days after we
receive the contribution.
If we receive contributions without a properly completed enrollment form, we
will notify the contractowner and deposit the contributions to the pending al-
location account. Within two business days of receipt of a properly completed
enrollment form, we will transfer the participant's account balance in the
pending allocation account in accordance with the allocation percentages
elected on the enrollment form. We will allocate all future contributions in
accordance with these percentages until the participant notifies us of a
change. If we do not receive a properly completed enrollment form after we
send three monthly notices, then we will refund the participant's account bal-
ance in the pending allocation account within 105 days of the date of the ini-
tial contribution. The pending allocation account invests in Fidelity VIP--
Money Market Portfolio, which is not available as an investment option under
the contract. We do not impose the mortality and expense risk charge or the
annual administration charge on the pending allocation account. We begin im-
posing these charges when we receive a properly completed enrollment form. The
participant's participation date will be the date we deposited the partici-
pant's contribution into the pending allocation account.
Valuation date
Accumulation units and annuity units will be valued once daily at the close of
trading (currently normally 4:00
13
<PAGE>
p.m., New York time) on each day the New York Stock Exchange is open (valua-
tion date). On any date other than a valuation date, the accumulation unit
value and the annuity unit value will not change.
Allocation of contributions
The contractowner forwards contributions to us, specifying the amount being
contributed on behalf of each participant and allocation information in accor-
dance with our procedures. Contributions are placed into the VAA's
subaccounts, each of which invests in shares of a fund, and/or the fixed ac-
count, according to written participant instructions and subject to the plan.
The contribution allocation percentage to the subaccounts or the fixed account
can be in any whole percent. A participant may allocate contributions to a
maximum of ten subaccounts, or to a maximum of nine subaccounts and the fixed
account.
Upon allocation to the appropriate subaccount, contributions are converted to
accumulation units. The number of accumulation units credited is determined by
dividing the amount allocated to each subaccount by the value of an accumula-
tion unit for that subaccount on the valuation date on which the contribution
is received by us if received before the end of the valuation date (normally
4:00 p.m., New York time). If the contribution is received at or after the end
of the valuation date, we will use the accumulation unit value computed on the
next valuation date. The number of accumulation units determined in this way
is not changed by any subsequent change in the value of an accumulation unit.
However, the dollar value of an accumulation unit will vary depending not only
upon how well the underlying fund's investments perform, but also upon the ex-
penses of the VAA and the underlying funds.
Subject to the terms of the plan, a participant may change the allocation of
contributions by notifying us in writing or by telephone in accordance with
our published procedures. The change is effective for all contributions re-
ceived concurrently with the allocation change form and for all future contri-
butions, unless the participant specifies a later date. Changes in the alloca-
tion of future contributions have no effect on amounts a participant may have
already contributed. Such amounts, however, may be transferred between
subaccounts and the fixed account pursuant to the requirements described in
"Transfers on or before the annuity commencement date." Allocations of em-
ployer contributions may be restricted by the applicable plan.
Valuation of accumulation units
Contributions allocated to the VAA are converted into accumulation units. This
is done by dividing each contribution by the value of an accumulation unit for
the valuation period during which the contribution is allocated to the VAA.
The accumulation unit value for each subaccount was or will be established at
the inception of the subaccount. It may increase or decrease from valuation
period to valuation period. The accumulation unit value for a subaccount for a
later valuation period is determined as follows:
(1) The total value of the fund shares held in the subaccount is calculated by
multiplying the number of fund shares owned by the subaccount at the be-
ginning of the valuation period by the net asset value per share of the
fund at end of the valuation period, and adding any dividend or other dis-
tribution of the fund if an ex-dividend date occurs during the valuation
period; minus
(2) The liabilities of the subaccount at the end of the valuation period;
these liabilities include daily charges imposed on the subaccount, and may
include a charge or credit with respect to any taxes paid or reserved for
by us that we determine result from the operations of the VAA; and
(3) The result of (2) is divided by the number of subaccount units outstanding
at the beginning of the valuation period.
The daily charges imposed on a subaccount for any valuation period are equal
to the mortality and expense risk charge multiplied by the number of calendar
days in the valuation period.
Transfers on or before the annuity commencement date
Subject to the terms of a plan, a participant may transfer all or a portion of
the participant's account balance from one subaccount to another, and between
the VAA and the fixed account.
Under GVA III transfers from the fixed account are subject to special limits.
See Fixed account withdrawals/ transfer limits for GVA III.
A transfer from a subaccount involves the surrender of accumulation units in
that subaccount, and a transfer to a subaccount involves the purchase of accu-
mulation units in that subaccount. Subaccount transfers will be done using ac-
cumulation unit values determined at the end of the valuation date on which we
receive the transfer request. There is no charge for a transfer. We do not re-
quire any minimum transfer amount, and do not limit the number of transfers
other than for transfers from the fixed account under GVA III.
A transfer may be made by writing to us or, if a Telephone Exchange Authoriza-
tion form (available from us) is on file with us, by a toll-free telephone
call. In most instances, a transfer between subaccounts can also be made
through the Internet Service Center or Voice Response Unit. In order to pre-
vent unauthorized or fraudulent telephone transfers, we may require the caller
to provide certain identifying information before we will act upon their in-
structions. We may also assign the participant a Personal Identification Num-
ber (PIN)
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to serve as identification. We will not be liable for following telephone in-
structions we reasonably believe are genuine. Telephone requests may be re-
corded and written confirmation of all transfer requests will be mailed to the
participant on the next valuation date. If the participant or contractowner de-
termines that a transfer was made in error, the contractowner or participant
must notify us within 30 days of the confirmation date. Telephone transfers
will be processed on the valuation date that they are received when they are
received by us before the end of the valuation date (normally 4:00 p.m. New
York time).
When thinking about a transfer of account value, the participant should con-
sider the inherent risk involved. Frequent transfers based on short-term expec-
tations may increase the risk that a transfer will be made at an inopportune
time.
Transfers after the annuitycommencement date
We do not permit transfers of a participant's account balance after the annuity
commencement date.
Death benefit before the annuity commencement date
The payment of death benefits is governed by the applicable plan and the tax
code. The participant may designate a beneficiary during the participant's
lifetime and change the beneficiary by filing a written request with us. Each
change of beneficiary revokes any previous designation.
If the participant dies before the annuity commencement date, the death benefit
paid to the participant's designated beneficiary will be the greater of: (1)
the net contributions; or (2) the participant's account balance less any out-
standing loan (including principal and due and accrued interest), provided
that, if we are not notified of the participant's death within six months of
such death, we pay the beneficiary the amount in (2).
We determine the value of the death benefit as of the date on which the death
claim is approved for payment. This payment will occur when we receive (1)
proof, satisfactory to us, of the death of the participant; (2) written autho-
rization for payment; and (3) all required claim forms, fully completed.
If a death benefit is payable, the beneficiary may elect to receive payment of
the death benefit either in the form of a lump sum settlement or an annuity
payout, or as a combination of these two. If a lump sum settlement is request-
ed, the proceeds will be mailed within seven days of receipt of satisfactory
claim documentation as discussed previously, subject to the laws and regula-
tions governing payment of death benefits. If no election is made within 60
days after we receive satisfactory notice of the participant's death, we will
pay a lump sum settlement to the beneficiary at that time. This payment may be
postponed as permitted by the 1940 Act.
Payment will be made in accordance with applicable laws and regulations
governing payment of death benefits.
Under qualified contracts, if the beneficiary is someone other than the spouse
of the deceased participant, the tax code provides that the beneficiary may not
elect an annuity which would commence later than December 31st of the calendar
year following the calendar year of the participant's death. If a non-spousal
beneficiary elects to receive payment in a single lump sum, the tax code pro-
vides that such payment must be received no later than December 31st of the
fourth calendar year following the calendar year of the participant's death.
If the beneficiary is the surviving spouse of the deceased participant, distri-
butions generally are not required under the tax code to begin earlier than De-
cember 31st of the calendar year in which the participant would have attained
age 70 1/2. If the surviving spouse dies before the date distributions com-
mence, then, for purposes of determining the date distributions to the benefi-
ciary must commence, the date of death of the surviving spouse is substituted
for the date of death of the participant.
Other rules apply to non-qualified annuities. See Federal Tax Matters.
If there is no living named beneficiary on file with us at the time of a par-
ticipant's death and unless the plan directs otherwise, we will pay the death
benefit to the participant's estate in the form of a lump sum payment, upon re-
ceipt of satisfactory proof of the participant's death, but only if we receive
proof of death no later than the end of the fourth calendar year following the
year of the participant's death. In such case, the value of the death benefit
will be determined as of the end of the valuation period during which we re-
ceive due proof of death, and the lump sum death benefit generally will be paid
within seven days of that date.
Withdrawals
Before the annuity commencement date and subject to the terms of the plan,
withdrawals may be made from the subaccounts or the fixed account of all or
part of the participant's account balance remaining after deductions for any
applicable (1) surrender charge; (2) annual administration charge (imposed on
total withdrawals), (3) premium taxes, and (4) outstanding loan.
Converting all or part of the account balance or death benefit to an annuity
payout is not considered a withdrawal.
Under GVA III, special limits apply to withdrawals from the fixed account. See
Fixed account withdrawal/transfer limits for GVA III.
The account balance available for withdrawal is determined at the end of the
valuation period during which we receive the written withdrawal request. Unless
a request for withdrawal specifies otherwise, withdrawals
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will be made from all subaccounts within the VAA and from the fixed account in
the same proportion that the amount of withdrawal bears to the total partici-
pant account balance. Unless prohibited, withdrawal payments will be mailed
within seven days after we receive a valid written request. The payment may be
postponed as permitted by the 1940 Act.
There are charges associated with withdrawals of account value. See Charges
and Other Deductions.
The tax consequences of a withdrawal are discussed later in this booklet. See
Federal Tax Matters.
Total withdrawals. Only participants with no outstanding loans can make a to-
tal withdrawal. A total withdrawal of a participant's account will occur when
(a) the participant or contractowner requests the liquidation of the partici-
pant's entire account balance, or (b) the amount requested plus any surrender
charge results in a remaining participant account balance of an amount less
than or equal to the annual administration charge, in which case we treat the
request as a request for liquidation of the participant's entire account
balance.
Any active life certificate must be surrendered to us when a total withdrawal
occurs. If the contractowner resumes contributions on behalf of a participant
after a total withdrawal, the participant will receive a new participation
date and active life certificate.
Partial withdrawals. A partial withdrawal of a participant's account balance
will occur when less than a total withdrawal is made from a participant's ac-
count.
Systematic withdrawal option. Participants who are at least age 59 1/2, are
separated from service from their employer, or are disabled, and certain
spousal beneficiaries and alternate payees who are former spouses, may be eli-
gible for a Systematic Withdrawal Option ("SWO") under the contract. Payments
are made only from the fixed account. Under the SWO a participant may elect to
withdraw either a monthly amount which is an approximation of the interest
earned between each payment period based upon the interest rate in effect at
the beginning of each respective payment period, or a flat dollar amount with-
drawn on a periodic basis. A participant must have a vested pre-tax account
balance of at least $10,000 in the fixed account in order to select the SWO. A
participant may transfer amounts from the VAA to the fixed account in order to
support SWO payments. These transfers, however, are subject to the transfer
restrictions imposed by any applicable plan. A one-time fee of up to $30 will
be charged to set up the SWO. This charge is waived for total vested pre-tax
account balances of $25,000 or more. More information about SWO, including ap-
plicable fees and charges, is available in the contracts and active life cer-
tificates and from us.
Required minimum distribution program (formerly known as maximum conservation
option). Under certain contracts participants who are at least age 70 1/2 may
ask us to calculate and pay to them the minimum annual distribution required
by Sections 401(a)(9), 403(b)(10) or 408 of the tax code. The participant must
complete the forms we require to elect this option. We will base our calcula-
tion solely on the participant's account value with us. Participants who se-
lect this option are responsible for determining the minimum distributions
amount applicable to their non-Lincoln Life contracts.
Withdrawal restrictions. Withdrawals under Section 403(b) contracts are sub-
ject to the limitations under Section 403(b)(11) of the tax code and regula-
tions thereof and in any applicable plan document. That section provides that
withdrawals of salary reduction contributions deposited and earnings credited
on any salary reduction contributions after December 31, 1988 can only be made
if the participant has (1) died; (2) become disabled; (3) attained age 59 1/2;
(4) separated from service; or (5) incurred a hardship. If amounts accumulated
in a Section 403(b)(7) custodial account are deposited in a contract, these
amounts will be subject to the same withdrawal restrictions as are applicable
to post-1988 salary reduction contributions under the contracts. For more in-
formation on these provisions see Federal Tax Matters.
Withdrawal requests for a participant under Section 401(a) plans and plans
subject to Title I of ERISA must be authorized by the contractowner on behalf
of a participant. All withdrawal requests will require the contractowner's
written authorization and written documentation specifying the portion of the
participant's account balance which is available for distribution to the par-
ticipant.
As required by Section 830.105 of the Texas Education Code, withdrawal re-
quests by participants in the Texas Optional Retirement Program ("ORP") are
only permitted in the event of (1) death; (2) retirement; (3) termination of
employment in all Texas institutions of higher education; or (4) attainment of
age 70 1/2. A participant in an ORP contract is required to obtain a certifi-
cate of termination from the participant's employer before a withdrawal re-
quest can be granted.
For withdrawal requests (other than transfers to other investment vehicles) by
participants under plans not subject to Title I of ERISA and non-401(a) plans,
the participant must certify to us that one of the permitted distribution
events listed in the tax code has occurred (and provide supporting informa-
tion, if requested) and that we may rely on this representation in granting
the withdrawal request. See Federal Tax Matters. A participant should consult
his or her tax adviser as well as review the provisions of their plan before
requesting a withdrawal.
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A plan and applicable law may contain additional withdrawal or transfer re-
strictions.
Withdrawals may have Federal tax consequences. In addition, early withdrawals,
as defined under Section 72(q) and 72(t) of the tax code, may be subject to a
10% excise tax.
Amendment of the contract
We reserve the right to amend the contract to meet the requirements of the
1940 Act or other applicable federal or state laws or regulations. The
contractowner will be notified in writing of any changes, modifications or
waivers.
Commissions
We pay commissions of up to 3.5% of contributions to dealers. In some instanc-
es, we may lower commissions on contributions by as much as 3.5% and include a
commission of up to .50% of annual contract values (or an equivalent sched-
ule). These commissions are not deducted from contributions or account value;
they are paid by us.
Ownership
Contractowners have all rights under the contract except those allocated to
participants. According to Indiana law, the assets of the VAA are held for the
exclusive benefit of all contractowners, participants, and their designated
beneficiaries; and the assets of the VAA are not chargeable with liabilities
arising from any other business that we may conduct. Qualified contracts and
active life certificates may not be assigned or transferred except as permit-
ted by ERISA and on written notification to us. In addition, a participant,
beneficiary, or annuitant may not, unless permitted by law, assign or encumber
any payment due under the contract.
Contractowner questions
The obligations to purchasers under the contracts are those of Lincoln Life.
Questions about the contract should be directed to us at 1-800-341-0441 or
visit www.LincolnLife.com.
Annuity Payouts
As permitted by the plan, the participant, or the beneficiary of a deceased
participant, may elect to convert all or part of the participant's account
balance or the death benefit to an annuity payout. The contract provides op-
tional forms of annuity payouts (annuity payout options), each of which is
payable on a variable basis, a fixed basis or a combination of both as speci-
fied. If the contractowner does not give us instructions, we will apply the
participant's account balance in the fixed account to a fixed annuity, and ac-
count balance in the VAA to a variable annuity.
If the participant's account balance or the beneficiary's death benefit is
less than $2,000 or if the amount of the first payout is less than $20, we
have the right to cancel the annuity and pay the participant or beneficiary
the entire amount in a lump sum.
We may maintain variable annuity payouts in the VAA, or in another separate
account of Lincoln Life (variable payout division). We do not impose a charge
when the annuity conversion amount is applied to a variable payout division to
provide an annuity payout option. The contract benefits and charges for an an-
nuity payout option, whether maintained in the VAA or in a variable payout di-
vision, are as described in this Prospectus. The selection of funds available
through a variable payout division may be different from the funds available
through the VAA. If we will maintain a participant's variable annuity payout
in a variable payout division, we will provide a Prospectus for the variable
payout division before the annuity commencement date.
Under qualified plans, any annuity selected must be payable over a period that
does not extend beyond the life expectancy of the participant and the benefi-
ciary. If the beneficiary is not the participant's spouse, the present value
of payouts to be made to the participant must be more than 50% of the present
value of the total payouts to be made to the participant and the beneficiary.
If an annuitant dies before the end of a designated annuity period, the bene-
ficiary, if any, or the annuitant's estate will receive any remaining payouts
due under the annuity option in effect.
Annuity payout options
Note Carefully: Under the Single Life Annuity and Joint Life Annuity options
it would be possible for only one annuity payout to be made if the
annuitant(s) were to die before the due date of the second annuity payout;
only two annuity payouts if the annuitant(s) were to die before the due date
of the third annuity payout; and so forth.
Single Life Annuity. Payouts are made monthly during the lifetime of the annu-
itant, and the annuity terminates with the last payout preceding death.
Life Annuity with Guaranteed Periods of 10, 15 or 20 Years. Payouts are made
monthly during the lifetime of the annuitant with a monthly payout guaranteed
to the beneficiary for the remainder of the selected number of years, if the
annuitant dies before the end of the period selected. Payouts under this annu-
ity option are smaller than a single life annuity without a guaranteed payout
period.
Joint Life Annuity. Payouts are made monthly during the joint lifetime of the
annuitant and a designated second person.
Non-Life Annuities. Annuity payouts are guaranteed monthly for the selected
number of years. While there is no right to make any total or partial with-
drawals during the annuity period, an annuitant or beneficiary who has se-
lected this annuity option as a variable annuity may request at any time dur-
ing the payout period that the present value of any remaining installments be
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paid in one lump sum. This lump sum payout will be treated as a total with-
drawal during the accumulation period and may be subject to a surrender
charge. See
Charges and Other Deductions and Federal Tax Matters.
Additional information
Annuity payout options are only available if consistent with the contract, the
plan, the tax code, and ERISA.
The annuity commencement date is the date on which we make the first annuity
payout to an annuitant. For plans subject to Section 401(a)(9)(B) of the tax
code, a beneficiary must select an annuity commencement date that is not later
than one year after the date of the participant's death. A participant or
contractowner may select an annuity commencement date for the annuitant, which
is shown in the retired life certificate. Selection of an annuity commencement
date may be affected by the distribution restrictions under the tax code and
the minimum distribution requirements under Section 401(a)(9) of the tax code.
See Federal Tax Matters.
You must send us written notice of the selected annuity commencement date, the
annuity payout option (including whether fixed or variable), and the annuity
conversion amount to be converted on behalf of a participant or beneficiary,
at least 30 days before the selected annuity commencement date. If proceeds
become available to a beneficiary in a lump sum, the beneficiary may choose
any annuity payout option.
The annuity conversion amount is either the participant's account balance or a
portion thereof, or the death benefit plus interest, as of the annuity payout
calculation date. For a fixed annuity, the annuity commencement date is usu-
ally one month after the annuity payout calculation date; subsequent annuity
payouts are at one-month intervals from the annuity commencement date. For a
variable annuity, the annuity commencement date is ten business days after the
initial annuity payout calculation date; subsequent monthly payouts have annu-
ity payout calculation dates which are ten business days prior.
Annuity payout calculation
Fixed annuity payouts are determined by dividing the participant's annuity
conversion amount in the fixed account as of the initial annuity payout calcu-
lation date by the applicable annuity conversion factor (in the contract) for
the annuity payout option selected.
Variable annuity payouts will be determined using:
1. The participant's annuity conversion amount in the VAA as of the initial
annuity payout calculation date;
2. The annuity conversion factor in the contract;
3. The annuity payout option selected; and
4. The investment performance of the funds selected.
To determine the amount of annuity payouts, we make this calculation:
1. Determine the dollar amount of the first payout; then
2. Credit the retired life certificate with a specific number of annuity units
equal to the first payout divided by the annuity unit value; and
3. Calculate the value of the annuity units each period thereafter.
We assume an investment return of a specified percentage per year, as applied
to the applicable mortality table. The amount of each annuity payout after the
initial payout will depend upon how the underlying fund(s) perform, relative
to the assumed rate. If the actual net investment rate (annualized) exceeds
the assumed rate, the payment will increase at a proportional rate to the
amount of such excess. Conversely, if the actual rate is less than the assumed
rate, annuity payouts will decrease. There is a more complete explanation of
this calculation in the SAI.
Federal Tax Matters
Introduction
The Federal income tax treatment of the contract is complex and sometimes un-
certain. The Federal income tax rules may vary with your particular circum-
stances. This discussion does not include all the Federal income tax rules
that may affect the contractowner, participant and contract. This discussion
also does not address other Federal tax consequences, or state or local tax
consequences, associated with the contract. As a result, a contractowner and a
participant should always consult a tax advisor about the application of tax
rules to their individual situation.
Taxation of nonqualified annuities
This part of the discussion describes some of the Federal income tax rules ap-
plicable to nonqualified annuities. A nonqualified annuity is a contract not
issued in connection with a qualified retirement plan, such as an IRA or a
section 403(b) plan, receiving special tax treatment under the tax code.
Tax deferral on earnings
The Federal income tax law generally does not tax any increase in the contract
value until the contractowner or participant receives a contract distribution.
However, for this general rule to apply, certain requirements must be satis-
fied:
.. An individual must own the contract (or the tax law must treat the contract
as owned by an individual).
.. The investments of the VAA must be "adequately diversified" in accordance
with IRS regulations.
.. The right to choose particular investments for a contract must be limited.
.. The annuity commencement date must not occur near the end of the annuitant's
life expectancy.
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Contracts not owned by an individual
If a contract is owned by an entity (rather than an individual) the tax code
generally does not treat it as an annuity contract for Federal income tax pur-
poses. This means that the entity owning the contract pays tax currently on
the excess of the contract value over the contributions for the contract. Ex-
amples of contracts where the owner pays current tax on the contract's earn-
ings are contracts issued to a corporation or a trust. Exceptions to this rule
exist. For example, the tax code treats a contract as owned by an individual
if the named owner is a trust or other entity that holds the contract as an
agent for an individual. However, this exception does not apply in the case of
any employer that owns a
contract to provide deferred compensation for its employees.
Investments in the VAA must be diversified
For a contract to be treated as an annuity for Federal income tax purposes,
the investments of the VAA must be "adequately diversified." IRS regulations
define standards for determining whether the investments of the VAA are ade-
quately diversified. If the VAA fails to comply with these diversification
standards, the participant could be required to pay tax currently on the ex-
cess of the contract value over the contract contributions. Although we do not
control the investments of the underlying investment options, we expect that
the underlying investment options will comply with the IRS regulations so that
the VAA will be considered "adequately diversified."
Restrictions
Federal income tax law limits the contractowner's and the participant's rights
to choose particular investments for the contract. Because the IRS has not is-
sued guidance specifying those limits, the limits are uncertain and your right
to allocate contract values among the subaccounts may exceed those limits. If
so, the contractowner and/or participant would be treated as the owner of the
assets of the VAA and thus subject to current taxation on the income and gains
from those assets. We do not know what limits may be set by the IRS in any
guidance that it may issue and whether any such limits will apply to existing
contracts. We reserve the right to modify the contract without the
contractowner's or participant's consent to try to prevent the tax law from
considering them as the owner of the assets of the VAA.
Age at which annuity payouts begin
Federal income tax rules do not expressly identify a particular age by which
annuity payouts must begin. However, those rules do require that an annuity
contract provide for amortization, through annuity payouts, of the contract's
contributions and earnings. If annuity payouts under the contract begin or are
scheduled to begin on a date past the annuitant's 85th birthday, it is possi-
ble that the tax law will not treat the contract as an annuity for Federal in-
come tax purposes. In that event, the contractowner and/or participant would
be currently taxable on the excess of the contract value over the contribu-
tions of the contract.
Tax treatment of payments
We make no guarantees regarding the tax treatment of any contract or of any
transaction involving a contract. However, the rest of this discussion assumes
that the contract will be treated as an annuity for Federal income tax pur-
poses and that the tax law will not tax any increase in the contract value un-
til there is a distribution from the contract.
Taxation of withdrawals and surrenders
A contractowner and/or participant will pay tax on withdrawals to the extent
their contract value exceeds contributions in the contract. This income (and
all other income from the contract) is considered ordinary income. A higher
rate of tax is paid on ordinary income than on capital gains. A contractowner
and/or participant will pay tax on a surrender to the extent the amount re-
ceived exceeds contributions. In certain circumstances contributions are re-
duced by amounts received from the contract that were not included in income.
Taxation of annuity payouts
The tax code imposes tax on a portion of each annuity payout (at ordinary in-
come tax rates) and treats a portion as a nontaxable return of contributions
in the contract. We will notify you annually of the taxable amount of your an-
nuity payout. Once you have recovered the total amount of the purchase payment
in the contract, you will pay tax on the full amount of your annuity payouts.
If annuity payouts end because of the annuitant's death and before the total
amount of the contributions in the contract has been received, the amount not
received generally will be deductible.
Taxation of death benefits
We may distribute amounts from the contract because of the death of a partici-
pant. The tax treatment of these amounts depends on whether the participant or
the annuitant dies before or after the annuity commencement date.
.. Death prior to the annuity commencement date--
.. If the beneficiary receives death benefits under an annuity payout option,
they are taxed in the same manner as annuity payouts.
.. If the beneficiary does not receive death benefits under an annuity payout
option, they are taxed in the same manner as a withdrawal.
.. Death after the annuity commencement date--
.. If death benefits are received in accordance with the existing annuity pay-
out option, they are excludible from income if they do not exceed the con-
tributions not yet distributed from the contract. All annuity payouts in
excess of the contributions not previously received are includible in in-
come.
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.. If death benefits are received in a lump sum, the tax law imposes tax on
the amount of death benefits which exceeds the amount of contributions not
previously received.
Penalty taxes payable on withdrawals, surrenders, or annuity payouts
The tax code may impose a 10% penalty tax on any distribution from the con-
tract which the contractowner and/or participant must include in gross income.
The 10% penalty tax does not apply if one of several exceptions exists. These
exceptions include withdrawals, surrenders, or annuity payouts that:
.. participant receives on or after they reach age 59 1/2,
.. participant receives because they became disabled (as defined in the tax
law),
.. a beneficiary receives on or after participant's death, or
.. participant receives as a series of substantially equal periodic payments
for their life (or life expectancy).
Special rules if you own more than one annuity contract
In certain circumstances, we must combine some or all of the nonqualified an-
nuity contracts a participant owns in order to determine the amount of an an-
nuity payout, a surrender, or a withdrawal that a participant must include in
income. For example, if a contractowner and/or participant purchase two or
more deferred annuity contracts from the same life insurance company (or its
affiliates) during any calendar year, the tax code treats all such contracts
as one contract. Treating two or more contracts as one contract could affect
the amount of a surrender, a withdrawal or an annuity payout that the partici-
pant must include in income and the amount that might be subject to the pen-
alty tax described above.
Loans and assignments
Except for certain qualified contracts, the tax code treats any amount re-
ceived as a loan under a contract, and any assignment or pledge (or agreement
to assign or pledge) any portion of a participant's contract value, as a with-
drawal of such amount or portion.
Gifting a contract
If the contractowner and/or participant transfer ownership of the contract to
a person other than participant's spouse (or to participant's former spouse
incident to divorce), and receive a payment less than the contract's value,
the participant will pay tax on their contract value to the extent it exceeds
the contractowner's and/or participant's contributions not previously re-
ceived. The new owner's contributions in the contract would then be increased
to reflect the amount included in the contractowner's and/or participant's in-
come.
Loss of interest deduction
After June 8, 1997 if a contract is issued to a taxpayer that is not an indi-
vidual, or if a contract is held for the benefit of an entity, the entity will
lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
contract value. Entities that are considering purchasing a contract, or enti-
ties that will benefit from someone else's ownership of a contract, should
consult a tax advisor.
Qualified retirement plans
We also designed the contracts for use in connection with certain types of re-
tirement plans that receive favorable treatment under the tax code. Contracts
issued to or in connection with a qualified retirement plan are called "quali-
fied contracts." We issue contracts for use with different types of qualified
plans. The Federal income tax rules applicable to those plans are complex and
varied. As a result, this Prospectus does not attempt to provide more than
general information about use of the contract with the various types of quali-
fied plans. Persons planning to use the contract in connection with a quali-
fied plan should obtain advice from a competent tax advisor.
Types of qualified contracts and terms of contracts
Currently, we issue contracts in connection with the following types of quali-
fied plans:
.. Individual Retirement Accounts and Annuities ("Traditional IRAs")
.. Public school system and tax-exempt organization annuity plans ("403(b)
plans")
.. Qualified employee pension and profit-sharing plans ("401(a) plans") and
qualified annuity plans ("403(a) plans")
We may issue a contract for use with other types of qualified plans in the fu-
ture.
We will amend contracts to be used with a qualified plan as generally neces-
sary to conform to tax law requirements for the type of plan. However, the
rights of a person to any qualified plan benefits may be subject to the plan's
terms and conditions, regardless of the contract's terms and conditions. In
addition, we are not bound by the terms and conditions of qualified plans to
the extent such terms and conditions contradict the contract, unless we con-
sent.
Tax treatment of qualified contracts
The Federal income tax rules applicable to qualified plans and qualified con-
tracts vary with the type of plan and contract. For example,
.. Federal tax rules limit the amount of contributions that can be made, and
the tax deduction or exclusion that may be allowed for the contributions.
These
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limits vary depending on the type of qualified plan and the plan participant's
specific circumstances, e.g., the participant's compensation.
.. Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the par-
ticipant must begin receiving payments from the contract in certain minimum
amounts by a certain age, typically age 70 1/2. However, these "minimum dis-
tribution rules" do not apply to a Roth IRA.
.. Loans are allowed under certain types of qualified plans, but Federal income
tax rules prohibit loans under other types of qualified plans. For example,
Federal income tax rules permit loans under some section 403(b) plans, but
prohibit loans under Traditional and Roth IRAs. If allowed, loans are subject
to a variety of limitations, including restrictions as to the loan amount,
the loan's duration, and the manner of repayment. Your contract or plan may
not permit loans.
Tax treatment of payments
Federal income tax rules generally include distributions from a qualified con-
tract in the participant's income as ordinary income. These taxable distribu-
tions will include contributions that were deductible or excludible from in-
come. Thus, under many qualified contracts, the total amount received is in-
cluded in income since a deduction or exclusion from income was taken for con-
tributions. There are exceptions. For example, participant does not include
amounts received from a Roth IRA in income if certain conditions are satisfied.
Failure to comply with the minimum distribution rules applicable to certain
qualified plans, such as Traditional IRAs, will result in the imposition of an
excise tax. This excise tax generally equals 50% of the amount by which a mini-
mum required distribution exceeds the actual distribution from the qualified
plan.
Federal penalty taxes payable on distributions
The tax code may impose a 10% penalty tax on the amount received from the qual-
ified contract that must be included in income. The tax code does not impose
the penalty tax if one of several exceptions applies. The exceptions vary de-
pending on the type of qualified contract purchased. For example, in the case
of an IRA, exceptions provide that the penalty tax does not apply to a with-
drawal, surrender, or annuity payout:
.. received on or after the participant reaches age 59 1/2,
.. received on or after the participant's death or because of the participant's
disability (as defined in the tax law),
.. received as a series of substantially equal periodic payments for the partic-
ipant's life (or life expectancy), or
.. received as reimbursement for certain amounts paid for medical care.
These exceptions, as well as certain others not described here, generally apply
to taxable distributions from other qualified plans. However, the specific re-
quirements of the exception may vary.
Transfers and direct rollovers
In many circumstances, money may be moved between qualified contracts and qual-
ified plans by means of a rollover or a transfer. Special rules apply to such
rollovers and transfers. If the applicable rules are not followed, participant
may suffer adverse Federal income tax consequences, including paying taxes
which might not otherwise have had to be paid. A qualified advisor should al-
ways be consulted before contractowner or participant move or attempt to move
funds between any qualified plan or contract and another qualified plan or con-
tract.
The direct rollover rules apply to certain payments (called "eligible rollover
distributions") from section 401(a) plans, section 403(a) or (b) plans, HR 10
plans, and contracts used in connection with these types of plans. (The direct
rollover rules do not apply to distributions from IRAs). The direct rollover
rules require that we withhold Federal income tax equal to 20% of the eligible
rollover distribution from the distribution amount, unless participant elects
to have the amount directly transferred to certain qualified plans or con-
tracts.
Before we send a rollover distribution, we will provide the participant with a
notice explaining these requirements and how the 20% withholding can be avoided
by electing a direct rollover.
Federal income tax withholding
We will withhold and remit to the IRS a part of the taxable portion of each
distribution made under a contract unless the participant notifies us at or be-
fore the time of the distribution that tax is not to be withheld. In certain
circumstances, Federal income tax rules may require us to withhold tax. At the
time a withdrawal, surrender, or annuity payout is requested, we will give the
participant an explanation of the withholding requirements.
Tax status of Lincoln Life
Under existing Federal income tax laws, Lincoln Life does not pay tax on in-
vestment income and realized capital gains of the VAA. Lincoln Life does not
expect that it will incur any Federal income tax liability on the income and
gains earned by the VAA. We, therefore, do not impose a charge for Federal in-
come taxes. If Federal income tax law changes and we must pay tax on some or
all of the income and gains earned by the VAA, we may impose a charge against
the VAA to pay the taxes.
Changes in the law
The above discussion is based on the tax code, IRS regulations, and interpreta-
tions existing on the date of this Prospectus. However, Congress, the IRS, and
the courts may modify these authorities, sometimes retroactively.
21
<PAGE>
Voting Rights
As required by law, we will vote the fund shares held in the VAA at meetings
of shareholders of the funds. The voting will be done according to the in-
structions of participants that have interests in any subaccounts which invest
in the funds. If the 1940 Act or any regulation under it should be amended or
if present interpretations should change, and if as a result we determine that
we are permitted to vote the fund shares in our own right, we may elect to do
so.
The number of votes which the participant has the right to cast will be deter-
mined by applying the participant's percentage interest in a subaccount to the
total number of votes attributable to the subaccount. In determining the num-
ber of votes, fractional shares will be recognized.
Shares held in a subaccount for which no timely instructions are received will
be voted by us in proportion to the voting instructions which are received for
all contracts participating in that subaccount. Voting instructions to abstain
on any item to be voted on will be applied on a pro-rata basis to reduce the
number of votes eligible to be cast.
Whenever a shareholders meeting is called, we will furnish participants with a
voting interest in a subaccount with proxy voting materials, reports, and vot-
ing instruction forms. Since the funds engage in shared funding, other persons
or entities besides Lincoln Life may vote fund shares. See Description of the
Funds--Sale of shares by the funds.
Distribution of the Contracts
Lincoln Financial Advisors Corporation (LFA), 1300 South Clinton Street, Fort
Wayne, Indiana 46802, is the distributor and principal underwriter of the con-
tracts. The contracts will be sold by properly licensed registered representa-
tives of independent broker-dealers which in turn have selling agreements with
LFA and have been licensed by state insurance departments to represent us. LFA
is registered with the SEC under the Securities Exchange Act of 1934 as a bro-
ker-dealer and is a member of the National Association of Securities Dealers
(NASD). Lincoln Life will offer contracts in all states where it is licensed
to do business.
Return Privilege
Participants under Sections 403(b), 408 and certain non-qualified plans will
receive an active life certificate. Within the free-look period (ten days) af-
ter the participant receives the active life certificate, the participant may
cancel it for any reason by giving us written notice. The postmark date of the
notice is the date of notice for these purposes. An active life certificate
canceled under this provision will be void. With respect to the fixed side of
the contract, we will return the participant's contributions less withdrawals
made on behalf of the participant. With respect to the VAA, we will return the
greater of the participant's contributions less withdrawals made on behalf of
the participant, or the participant's account balance in the VAA on the date
we receive the written notice. No surrender charge applies.
State Regulation
As a life insurance company organized and operated under Indiana law, we are
subject to provisions governing life insurers and to regulation by the Indiana
Commissioner of Insurance.
Our books and accounts are subject to review and examination by the Indiana
Department of Insurance at all times. A full examination of our operations is
conducted by that department at least every five years.
Records and Reports
As presently required by the 1940 Act and applicable regulations, we are re-
sponsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with the Delaware Management Company, 2005 Mar-
ket Street, Philadelphia, PA 19203, to provide accounting services to the VAA.
We will mail to the contractowner, at its last known address of record at our
offices, at least semiannually after the first contract year, reports contain-
ing information required by that Act or any other applicable law or
regulation.
Other Information
Contract deactivation. Under certain contracts, we may deactivate a contract
by prohibiting new contributions and/or new participants after the date of de-
activation. We will give the contractowner and participants at least ninety
days notice of the deactivation date.
Delay in payments. We may delay payments from the fixed account for up to six
months. During this period, we will continue to credit the current declared
interest rate to a participant's account in the fixed account. Contract pro-
ceeds from the VAA will be paid within seven days, except (i) when the NYSE is
closed (except weekends and holidays); (ii) times when market trading is re-
stricted or the SEC declares an emergency, and we cannot value units or the
funds cannot redeem shares; or (iii) when the SEC so orders to protect
contractowners.
IMSA. We are a member of the Insurance Marketplace Standards Association
("IMSA") and may include the
22
<PAGE>
IMSA logo and information about IMSA membership in our advertisements. Compa-
nies that belong to IMSA subscribe to a set of ethical standards covering the
various aspects of sales and services for individually sold life insurance and
annuities.
Legal proceedings. Lincoln Life is involved in various pending or threatened
legal proceedings arising from the conduct of its business. Most of those pro-
ceedings are routine and in the ordinary course of business. In some instances
they include claims for unspecified or substantial punitive damages and simi-
lar types of relief in addition to amounts for equitable relief. After consul-
tation with legal counsel and a review of available facts, it is management's
opinion that the ultimate liability, if any, under these suits will not have a
material adverse effect on the financial position of Lincoln Life.
Lincoln Life is presently defending several lawsuits in which Plaintiffs seek
to represent national classes of policyholders in connection with alleged
fraud, breach of contract and other claims relating to the sale of interest-
sensitive universal and participating whole life in surance policies. As of
the date of this prospectus, the courts have not certified a class in any of
the suits. Plaintiffs seek unspecified damages and penalties for themselves
and on behalf of the putative class. Although the relief sought in these cases
is substantial, the cases are in the preliminary stages of litigation, and it
is premature to make assessments about potential loss, if any. Management is
defending these suits vigorously. The amount of liability, if any, which may
ultimately arise as a result of these suits cannot be reasonably determined at
this time.
Group Variable Annuity Contracts I, II, & III
Statement of Additional Information
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
DEFINITIONS 2
DETERMINATION OF VARIABLE ANNUITY PAYOUTS 2
PERFORMANCE CALCULATIONS 3
DISTRIBUTION OF CONTRACTS 6
INDEPENDENT AUDITORS 6
ADVERTISING AND SALES LITERATURE 6
FINANCIAL STATEMENTS 9
</TABLE>
...........................................................................
(Please Print)
Name: ___________________________ Social Security No.: _____________
Address: _________________________________________________________________
City ____________________________ State _______
Zip __________
Mail to Lincoln National Life Insurance Co., P.O. Box 9740, Portland, Maine
04104-5001
23
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
GROUP VARIABLE ANNUITY CONTRACTS I, II, & III
FUNDED THROUGH THE SUB-ACCOUNTS OF
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L
OF
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions................................................................ 2
Determination of Variable Annuity Payments................................. 2
Performance Calculations................................................... 3
Distribution of Contracts.................................................. 6
Independent Auditors....................................................... 6
Advertising and Sales Literature........................................... 6
Financial Statements....................................................... 9
</TABLE>
This Statement of Additional Information (SAI) is not a prospectus. It
should be read in conjunction with the prospectus for the Group Variable
Annuity Contracts (the "Contracts"), dated May 1, 2000.
A copy of the prospectus to which this SAI relates is available at no charge
by writing to Lincoln Life at Lincoln National Life Insurance Company, P.O.
Box 9740, Portland, Maine 04104, by calling Lincoln Life at 1-800-341-0441or
by visiting www.LincolnLife.com.
90022
<PAGE>
DEFINITIONS
ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion Amount
in determining the dollar amount of an annuitant's annuity payments for
Guaranteed Annuities or the initial payment for Variable Annuities.
ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the first
day of a calendar month. For Variable Annuities, this is the Valuation Date
ten (10) business days prior to the first day of a calendar month.
ANNUITY UNIT: An accounting unit of measure that is used in calculating the
amounts of annuity payments to be made from a Sub-Account during the Annuity
Period.
ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in a Sub-Account on
any Valuation Date.
CODE: The Internal Revenue Code of 1986, as amended.
DETERMINATION OF VARIABLE ANNUITY PAYMENTS
As stated in the prospectus, the amount of each Variable Annuity payment will
vary depending on investment experience.
The initial payment amount of the Annuitant's Variable Annuity for each Sub-
Account is determined by dividing his Annuity Conversion Amount in each Sub-
Account as of the initial Annuity Payment Calculation Date ("APCD") by the
Applicable Annuity Conversion Factor defined as follows:
The Annuity Conversion Factors which are used to determine the initial
payments are based on the 1983 Individual Annuity Mortality Table and an
interest rate in an integral percentage ranging from zero to six percent (0 to
6.00%) as selected by the Annuitant.
The amount of the Annuitant's subsequent Variable Annuity payment for each
Sub-Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payment amount by the
Annuity Unit Value for that Sub-Account selected for his interest rate
option as described above as of his initial APCD; and
(b) Multiplying the resultant number of annuity units by the Annuity Unit
Values for the Sub-Account selected for his interest rate option for his
respective subsequent APCDs.
Each subsequent Annuity Unit Value for a Sub-Account for an interest rate
option is determined by:
Dividing the Accumulation Unit Value for the Sub-Account as of subsequent
APCD by the Accumulation Unit Value for the Sub-Account as of the
immediately preceding APCD;
Dividing the resultant factor by one (1.00) plus the interest rate option
to the n/365 power where n is the number of days from the immediately
preceding APCD to the subsequent APCD; and
Multiplying this factor times the Annuity Unit Value as of the immediately
preceding APCD.
Illustration of Calculation of Annuity Unit Value
<TABLE>
<C> <S> <C>
1. Annuity Unit Value as of immediately preceding Annuity Pay-
ment Calculation Date....................................... $11.0000
2. Accumulation Unit Value as of Annuity Payment Calculation
Date........................................................ $20.0000
3. Accumulation Unit Value as of immediately preceding Annuity
Payment Calculation Date.................................... $19.0000
4. Interest Rate............................................... 6.00%
5. Interest Rate Factor (30 days).............................. 1.0048
6. Annuity Unit Value as of Annuity Payment Calculation Date =
1 times 2 divided by 3 divided by 5......................... $11.5236
</TABLE>
2
<PAGE>
Illustration of Annuity Payments
<TABLE>
<C> <S> <C>
1. Annuity Conversion Amount as of Participant's initial Annuity
Payment Calculation Date..................................... $100,000.00
2. Assumed Annuity Conversion Factor per $1 of Monthly Income
for an individual age 65 selecting a Single Life Annuity with
Assumed Interest Rate of 6%.................................. $ 138.63
3. Participant's initial Annuity Payment = 1 divided by 2....... $ 721.34
4. Assumed Annuity Unit Value as of Participant's initial
Annuity Payment Calculation Date............................. $ 11.5236
5. Number of Annuity Units = 3 divided by 4..................... 62.5968
6. Assumed Annuity Unit Value as of Participant's second Annuity
Payment Calculation Date..................................... $ 11.9000
7. Participant's second Annuity Payment = 5 times 6............. $ 744.90
</TABLE>
CALCULATION OF INVESTMENT RESULTS
Standard investment results:
Standard performance is based on a formula to calculate performance that is
prescribed by the SEC. Under rules issued by the SEC, standard performance
must be included in any marketing material that discusses the performance of
the VAA and the subaccounts. This information represents past performance and
does not indicate or represent future performance.
Average annual return for each period is determined by finding the average
annual compounded rate of return over each period that would equate the
initial amount invested to the ending redeemable value for that period,
according to the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial purchase payment of $1,000
T = average annual total return for the period in question
N = number of years
ERV = ending redeemable value (as of the end of the period in question)
of a hypothetical $1,000 purchase payment made at the beginning of the
1-year, 5-year, or 10-year period in question (or fractional period
thereof)
The formula assumes that: (1) all recurring fees have been charged to
the contractowner accounts; (2) all applicable non-recurring charges
(including any surrender charges) are deducted at the end of the period
in question; and (3) there will be a complete redemption upon the
anniversary of the 1-year, 5-year, or 10-year period in question.
In accordance with SEC guidelines, we will report standard performance back to
the first date that the Fund became available in the VAA. Because standard
performance reporting periods of less than one year could be misleading, we
may report "N/A's" for standard performance until one year after the option
became available in the Separate Account.
3
<PAGE>
Standard performance data for GVA II the period ending December 31, 1999:
<TABLE>
<CAPTION>
Sub- 10
Account Years/Since
Inception 1 5 Inception
Subaccounts (Fund Names) Date Year Years Date
- ------------------------ --------- ----- ----- -----------
<S> <C> <C> <C> <C>
Asset Manager Account/1/ 05/01/91 3.38% 13.58% 11.08%
(Fidelity VIP II-Asset Manager)
Balanced Account/1/ 05/01/91 2.42 12.89 9.71
(American Century VP Balanced)
Equity-Income Account/1/ 05/01/94 -1.05 N/A 15.37
(Fidelity VIP Equity-Income Portfolio)
Global Growth Account/2/ 10/01/98 53.04 N/A 68.28
(Janus Aspen Series Worldwide Growth
Portfolio Institutional Shares)
Growth I Account/1/ 05/01/91 27.90 27.44 20.77
(Fidelity VIP Growth Portfolio)
Index Account/1/ 12/12/89 12.23 25.81 16.12
(Dreyfus Stock Index Fund)
International Stock Account/1/ 05/02/94 24.07 13.18 11.26
(T Rowe Price International Series)
Mid Cap Growth I Account/2/ 10/01/98 32.55 N/A 49.36
(Lincoln National Aggressive Growth Fund)
Mid Cap Value Account/2/ 10/01/98 -0.08 N/A 14.56
(Neuberger Berman AMT Partners Portfolio)
Small Cap Account/1/ 05/02/89 14.60 13.88 12.89
(Dreyfus VIF Small Cap Portfolio)
Small Cap Growth Account/2/ 10/01/98 26.41 N/A 50.80
(Baron Capital Asset Fund)
Social Awareness Account/2/ 10/01/98 7.42 N/A 28.96
(Lincoln National Social Awareness Fund)
</TABLE>
/1/ Sub-account inception dates which reflect inception dates of the sub-
accounts of the UNUM Variable Annuity-II Separate Account.
/2/ Sub-account inception dates which reflect inception dates of the sub-
accounts of the Lincoln Variable Annuity-II Separate Account.
The table provides performance information for GVA II "standard". Performance
information for GVA I and GVA III and GVA II "breakpoint" is not shown.
Non-standard investment results:
The VAA may report its results over various periods--daily, monthly, three-
month, six-month, year-to-date, yearly (fiscal year), three, five, ten years
or more and lifetime--and compare its results to indices and other variable
annuities in sales materials including advertisements, brochures and reports.
Performance information for the periods prior to the date that a Fund became
available in the VAA will be calculated based on (1) the performance of the
Fund adjusted for Contract charges (ie: mortality and expense risk fees, any
applicable administrative charges, and the management and other expenses of
the fund) and (2) the assumption that the subaccounts were in existence for
the same periods as indicated for the Fund. It may or may not reflect charges
for any Riders that were in effect during the time periods shown. This
performance is referred to as non-standardized performance data. Such results
may be computed on a cumulative and/or annualized basis. We may also report
performance assuming that you deposited $10,000 into a subaccount at inception
of the underlying fund or 10 years ago (whichever is less). This non-standard
performance may be shown as a graph illustrating how that deposit would have
increased or decreased in value over time based on the performance of the
underlying fund adjusted for Contract charges. This information represents
past performance and does not indicate or represent future performance. The
investment return and value of a Contract will fluctuate so that
contractowner's investment may be worth more or less than the original
investment.
4
<PAGE>
Cumulative quotations are arrived at by calculating the change in Accumulation
Unit Value between the first and last day of the base period being measured,
and expressing the difference as a percentage of the unit value at the
beginning of the base period. Annualized quotations are arrived at by applying
a formula which reflects the level rate of return, which if earned over the
entire base period, would produce the cumulative return.
Non-standard performance data for GVA II for the period ending December 31,
1999 (Adjusted for Contract Expense Charges):
<TABLE>
<CAPTION>
Fund
Inception 1 3 5 10 Since
Subaccounts (Fund Names) Date YTD Year Years Years Years Inception
- ------------------------ --------- ----- ----- ----- ----- ----- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Asset Manager Account 9/6/89 9.99% 9.99% 14.30% 14.33% 11.79% 11.44%
(Fidelity VIP II--
Asset Manager)
Balanced Account 5/1/91 8.96 8.96 12.64 13.64 N/A 10.17
(American Century VP
Balanced)
Equity-Income Account 10/9/86 5.27 5.27 13.77 17.28 13.16 12.45
(Fidelity VIP Equity-
Income Portfolio)
Global Growth Account 9/13/93 62.82 62.82 35.87 32.11 N/A 28.22
(Janus Aspen Series
Worldwide Growth
Portfolio
Institutional Shares)
Growth I Account 10/9/86 36.07 36.07 31.86 28.27 18.55 17.37
(Fidelity VP Growth
Portfolio)
Index Account 9/29/89 19.41 19.41 25.80 26.64 16.33 16.04
(Dreyfus Stock Index
Fund)
International Stock
Account 3/31/94 32.00 32.00 15.53 13.93 N/A 12.17
(T Rowe Price
International Series)
Mid Cap Growth I Account 2/3/94 41.02 41.02 16.78 19.63 N/A 13.67
(Lincoln National
Aggressive Growth
Fund)
Mid Cap Value Account 3/22/94 6.30 6.30 12.46 19.67 N/A 16.15
(Neuberger Berman AMT
Partners Portfolio)
Small Cap Account 8/31/90 21.93 21.93 10.37 14.63 N/A 34.08
(Dreyfus VIF Small Cap
Portfolio)
Small Cap Growth Account 10/1/98 34.48 34.48 N/A N/A N/A 58.48
(Baron Capital Asset
Fund)
Social Awareness Account 5/2/88 14.29 14.29 22.59 27.20 17.16 17.53
(Lincoln National
Social Awareness
Fund)
</TABLE>
The table provides performance information for GVA II "standard". Performance
information for GVA I and GVA III and GVA II "breakpoint" is not shown.
5
<PAGE>
DISTRIBUTION OF CONTRACTS
Lincoln Financial Advisors Corporation ("LFA"), an indirect subsidiary of
Lincoln National Corporation, is registered with the Securities and Exchange
Commission as a broker-dealer under the Securities Exchange Act of 1934 and is
a member of the National Association of Securities Dealers, Inc. LFA is the
Variable Investment Division's principal underwriter and also enters into
selling agreements with other unaffiliated broker-dealers authorizing them to
offer the Contracts.
INDEPENDENT AUDITORS
The financial statements of the Lincoln National Variable Annuity Account L
and the statutory-basis financial statements of The Lincoln National Life
Insurance Company appearing in the SAI and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports also appearing elsewhere in this document and in the Registration
Statement. The financial statements audited by Ernst & Young LLP have been
included in this document in reliance on their reports given on their
authority as experts in accounting and auditing.
ADVERTISING AND SALES LITERATURE
As set forth in the Prospectus, Lincoln Life may refer to the following
organizations (and others) in its marketing materials:
A.M. Best's Rating System is designed to evaluate the various factors
affecting the overall performance of an insurance company in order to provide
an opinion as to an insurance company's relative financial strength and
ability to meet its contractual obligations. The procedure includes both a
quantitative and qualitative review of each company. A.M. Best also provides
certain rankings, to which Lincoln Life intends to refer.
Duff & Phelps insurance company claims paying ability (CPA) service provides
purchasers of insurance company policies and contracts with analytical and
statistical information on the solvency and liquidity of major U.S. licensed
insurance companies, both mutual and stock.
EAFE Index is prepared by Morgan Stanley Capital International (MCSI). It
measures performance of equity securities in Europe, Australia and the Far
East. The index reflects the movements of world stock markets by representing
the evolution of an unmanaged portfolio. The EAFE Index offers international
diversification representing over 1,000 companies across 20 different
countries.
Lipper Variable Insurance Products Performance Analysis Service is a publisher
of statistical data covering the investment company industry in the United
States and overseas. Lipper is recognized as the leading source of data on
open-end and closed-end funds. Lipper currently tracks the performance of over
5,000 investment companies and publishes numerous specialized reports,
including reports on performance and portfolio analysis, fee and expense
analysis.
Moody's insurance financial strength rating is an opinion of an insurance
company's financial strength and ability to meet financial obligations. The
purpose of Moody's ratings is to provide investors with a simple system of
gradation by which the relative quality of insurance companies may be notes.
Morningstar is an independent financial publisher offering comprehensive
statistical and analytical coverage of open-end and closed-end funds and
variable annuities.
Standard & Poor's insurance claims-paying ability rating is an opinion of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. The likelihood of a timely flow
of funds from the insurer to the trustee for the bondholders is a key element
in the rating determination for such debt issues.
6
<PAGE>
VARDS (Variable Annuity Research Data Service) provides a comprehensive guide
to variable annuity contract features and historical fund performance. The
service also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable
contracts.
Standard & Poor's 500 Index--A broad-based measurement of U.S. stock-market
performance based on the weighted average performance of 500 common stocks of
leading company's and leading industries; commonly known as the Standard &
Poor's 500 (S&P 500). The selection of stocks, their relative weightings to
reflect differences in the number of outstanding shares, and publication of
the index itself are services of Standard & Poor's Corporation, a financial
advisory, securities rating, and publishing firm.
NASDAQ-OTC Price Index--This index is based on the National Association of
Securities Dealers Automated Quotations (NASDAQ) and represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, a total of some 3,500 stocks. It is market value-weighted
and was introduced with a base of 100.00 on February 5, 1971.
Dow Jones Industrial Average (DJIA)--Price-weighted average of 30 actively
traded blue chip stocks, primarily industrials but currently including
American Express Company and American Telephone and Telegraph Company.
Prepared and published by Dow Jones & Company, it is the oldest and most
widely quoted of all the market indicators. The average is quoted in points,
not dollars.
Russell 1000 Index--Measurers the performance of the 1,000 largest companies
in the Russell 3000 Index, which represents approximately 90% of the total
market capitalization of the Russell 3000 that measurers 3000 of the largest
US companies.
Russell 2000 Index--Measurers the performance of the 2,000 smallest companies
in the Russell 3000 Index, which represents approximately 10% of the total
market capitalization of the Russell 3000 that measurers 3000 of the largest
US companies.
Lehman Brothers Aggregate Bond Index--Composed of securities from Lehman
Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index,
and the Asset-Backed Securities Index. Indexes are rebalanced monthly by
market capitalization.
Lehman Brothers Government/Corporate Bond Index--Composed of all bonds that
are investment grade (rated Baa or higher by Moody's or BBB or higher by S&P,
if unrated by Moody's). Issues must have at least one year to maturity.
Lehman Brothers Government Intermediate Bond Index--Composed of all bonds
covered by the Lehman Brothers Government Bond Index (all publicly issued,
nonconvertible, domestic debt of the US government or any agency thereof,
quasi-federal corporations, or corporate debt guaranteed by the US government)
with maturities between one and 9.99 years.
Merrill Lynch High Yield Master Index--This is an index of high yield debt
securities. High yield securities are those below the top four quality rating
categories and are considered more risky than investment grade. Issues must be
rated by Standard & Poor's or by Moody's Investors Service as less than
investment grade (i.e., BBB or Baa) but not in default (i.e. DDD1 or less).
Issues must be in the form of publicly paced nonconvertible, coupon-bearing US
domestic debt and must carry a term to maturity of at least one year.
Morgan Stanley Emerging Markets Free Index--A market capitalization weighted
index composed of companies representative of the market structure of 22
Emerging Market countries in Europe, Latin America, and the Pacific Basin.
This index excludes closed markets and those shares in otherwise free markets,
which are not purchasable by foreigners.
Morgan Stanley World Capital International World Index--A market
capitalization weighted index composed of companies representative of the
market structure of 22 Developed Market countries in North America, Europe and
the Asia/Pacific Region.
7
<PAGE>
Morgan Stanley Pacific Basin (Ex-Japan) Index--An arithmetic, market value-
weighted average of the performance of securities listed on the stock
exchanges of the following Pacific Basin Countries: Australia, Hong Kong,
Malaysia, New Zealand and Singapore.
Nareit Equity Reit Index--All of the data is based on the last closing price
of the month for all tax-qualified REITs listed on the New York Stock
Exchange, American Stock Exchange, and the NASDAQ National Market System. The
data is market weighted.
Salomon Brothers World Government Bond (Non US) Index--A market capitalization
weighted index consisting of government bond markets of the following 13
countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany,
Italy, Japan, The Netherlands, Spain, Sweden, and The United Kingdom.
Salomon Brothers 90 Day Treasury-Bill Index--Equal dollar amounts of three-
month Treasury bills are purchased at the beginning of each of three
consecutive months. As each bill matures, all proceeds are rolled over or
reinvested in a new three-month bill.
Standard and Poor's Index (S&P 400)--Consists of 400 domestic stocks chosen
for market size, liquidity, and industry group representations.
Standard and Poor's Utilities Index--The utility index is one of several
industry groups within the broader S&P 500. Utility stocks include electric,
natural gas, and telephone companies included in the S&P 500.
Internet. An electronic communications network which may be used to provide
information regarding Lincoln Life, performance of the subaccounts and
advertisement literature.
In its advertisements and other sales literature for the VAA and the series
funds, Lincoln Life intends to illustrate the advantages of the contracts in a
number of ways:
Compound Interest Illustrations. These will emphasize several advantages of
the variable annuity contract. For example, but not by way of illustration,
the literature may emphasize the potential tax savings through tax deferral;
the potential advantage of the variable annuity account over the fixed
account; and the compounding effect when a client makes regular deposits to
his or her contract.
Dollar-cost averaging illustrations. These illustrations will generally
discuss the price-leveling effect of making regular purchases in the same
subaccounts over a period of time, to take advantage of the trends in market
price of the portfolio securities purchased for those subaccounts.
Lincoln Financial Group is the marketing name for Lincoln National Corporation
(NYSE:LNC) and its affiliates. With headquarters in Philadelphia, Lincoln
Financial Group has consolidated assets of over $103 billion and annual
consolidated revenues of $6.8 billion. Through its wealth accumulation and
protection businesses, the company provides annuities, life insurance, 401(k)
plans, life-health reinsurance, mutual funds, institutional investment
management and financial planning and advisory services.
Lincoln Life's customers. Sales literature for the VAA and the series' funds
may refer to the number of employers and the number of individual annuity
clients which Lincoln Life serves. As of the date of this SAI, Lincoln Life
was serving over 15,000 employers and more than 1.5 million individuals.
Lincoln Life's assets, size. Lincoln Life may discuss its general financial
condition (see, for example, the reference to A.M. Best Company, above); it
may refer to its assets; it may also discuss its relative size and/or ranking
among companies in the industry or among any sub-classification of those
companies, based upon recognized evaluation criteria (see reference to A.M.
Best Company above). For example, at year-end 1999 Lincoln Life had statutory
admitted assets of over $79 billion.
8
<PAGE>
Sales literature may reference the Group Variable Annuity newsletter which is
a newsletter distributed quarterly to clients of the VAA. The contents of the
newsletter will be a commentary on general economic conditions and, on some
occasions, referencing matter in connection with the Group Variable Annuity.
Sales literature and advertisements may reference theses and other similar
reports from Best's or other similar publications which report on the
insurance and financial services industries.
FINANCIAL STATEMENTS
Financial statements of the VAA and the statutory-basis financial statements
of Lincoln Life appear on the following pages.
9
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
Lincoln National Variable Annuity Account L
Statement of assets and liability
December 31, 1999
<TABLE>
<CAPTION>
American
Century VP
Dreyfus Dreyfus Capital
Stock Index Small Cap Appreciation
Combined Subaccount Subaccount Subaccount
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments at
Market--Affiliated
(Cost $35,806,953) $ 47,131,269 $ -- $ -- $ --
Investments at
Market--Unaffiliated
(Cost $638,513,904) 872,285,280 188,370,905 74,437,646 --
- ----------------------- ------------ ------------ ----------- ----------
Total Assets 919,416,549 188,370,905 74,437,646 --
- -----------------------
Liability--Payable to
The Lincoln National
Life Insurance Company 24,667 5,031 1,969 --
- ----------------------- ------------ ------------ ----------- ----------
Net Assets $919,391,882 $188,365,874 $74,435,677 $ --
- ----------------------- ============ ============ =========== ==========
Percent of net assets 100.00% 20.49% 8.10% 0.00%
- ----------------------- ============ ============ =========== ==========
Net assets are
represented by:
Standard
. Units in
accumulation period 3,814,654 3,429,814 --
---------------------
. Unit value $ 45.208 $ 20.552 $ --
--------------------- ------------ ----------- ----------
. Value in
accumulation period 172,452,253 70,489,226 --
---------------------- ------------ ----------- ----------
Breakpoint
. Units in
accumulation period 351,565 191,780 --
---------------------
. Unit value $ 45.265 $ 20.578 $ --
--------------------- ------------ ----------- ----------
. Value in
accumulation period 15,913,621 3,946,451 --
- ----------------------- ------------ ----------- ----------
Net Assets $188,365,874 $74,435,677 $ --
- ----------------------- ============ =========== ==========
</TABLE>
See accompanying notes.
L-2
<PAGE>
<TABLE>
<CAPTION>
Fidelity Fidelity
American Fidelity Fidelity VIP II Calvert T. Rowe VIP
Century VP VIP VIP Asset Social Price Money AMT
Balanced Growth Equity-Income Manager Balanced International Market Partners
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $ --
27,649,253 303,723,614 93,902,532 113,568,089 -- 36,732,047 159,909 2,164,330
- ----------- ------------ ----------- ------------ -------- ----------- -------- ----------
27,649,253 303,723,614 93,902,532 113,568,089 -- 36,732,047 159,909 2,164,330
739 8,215 2,525 3,059 -- 986 -- 56
- ----------- ------------ ----------- ------------ -------- ----------- -------- ----------
$27,648,514 $303,715,399 $93,900,007 $113,565,030 $ -- $36,731,061 $159,909 $2,164,274
=========== ============ =========== ============ ======== =========== ======== ==========
3.01% 33.02% 10.21% 12.35% 0.00% 4.00% 0.02% 0.24%
=========== ============ =========== ============ ======== =========== ======== ==========
1,099,207 5,554,246 3,855,732 4,152,440 -- 1,818,003 11,959 150,328
$ 23.168 $ 53.234 $ 23.252 $ 25.787 $ -- $ 18.931 $ 13.192 $ 12.609
- ----------- ------------ ----------- ------------ -------- ----------- -------- ----------
25,466,854 295,674,290 89,652,426 107,076,688 -- 34,416,656 157,769 1,895,472
- ----------- ------------ ----------- ------------ -------- ----------- -------- ----------
94,046 150,861 182,446 251,300 -- 122,101 162 21,291
$ 23.198 $ 53.301 $ 23.281 $ 25.819 $ -- $ 18.955 $ 13.195 $ 12.625
- ----------- ------------ ----------- ------------ -------- ----------- -------- ----------
2,181,660 8,041,110 4,247,581 6,488,342 -- 2,314,405 2,139 268,803
- ----------- ------------ ----------- ------------ -------- ----------- -------- ----------
$27,648,514 $303,715,399 $93,900,007 $113,565,030 $ -- $36,731,061 $159,909 $2,164,274
=========== ============ =========== ============ ======== =========== ======== ==========
</TABLE>
L-3
<PAGE>
Lincoln National Variable Annuity Account L
Statement of assets and liability (continued)
December 31, 1999
<TABLE>
<CAPTION>
Lincoln Lincoln
Baron Janus Aspen National National
Capital Series Social Aggressive
Asset WorldWide Awareness Growth
Subaccount Subaccount Subaccount Subaccount
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments at Market--
Affiliated (Cost
$35,806,953) $ -- $ -- $17,478,509 $29,652,760
Investments at Market--
Unaffiliated (Cost
$638,513,904) 8,586,115 22,990,840 -- --
- ------------------------- ---------- ----------- ----------- -----------
Total Assets 8,586,115 22,990,840 17,478,509 29,652,760
- -------------------------
Liability--Payable to The
Lincoln National Life
Insurance Company 231 613 467 776
- ------------------------- ---------- ----------- ----------- -----------
Net Assets $8,585,884 $22,990,227 $17,478,042 $29,651,984
- ------------------------- ========== =========== =========== ===========
Percent of net assets 0.93% 2.50% 1.90% 3.23%
- ------------------------- ========== =========== =========== ===========
Net assets are
represented by:
Standard
. Units in accumulation
period 460,448 1,053,507 1,107,455 1,486,234
-----------------------
. Unit value $ 17.775 $ 20.385 $ 14.619 $ 17.563
----------------------- ---------- ----------- ----------- -----------
. Value in accumulation
period 8,184,626 21,475,351 16,189,616 26,102,012
------------------------ ---------- ----------- ----------- -----------
Breakpoint
. Units in accumulation
period 22,543 74,221 88,023 201,878
-----------------------
. Unit value $ 17.800 $ 20.410 $ 14.637 $ 17.585
----------------------- ---------- ----------- ----------- -----------
. Value in accumulation
period 401,258 1,514,876 1,288,426 3,549,972
- ------------------------- ---------- ----------- ----------- -----------
Net Assets $8,585,884 $22,990,227 $17,478,042 $29,651,984
- ------------------------- ========== =========== =========== ===========
</TABLE>
See accompanying notes.
L-4
<PAGE>
Lincoln National Variable Annuity Account L
Statement of operations
Year Ended December 31, 1999
<TABLE>
<CAPTION>
American
Century
Dreyfus Dreyfus VP Capital
Stock Index Small Cap Appreciation
Combined Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Investment Income
(loss):
.. Dividends from
investment income $ 7,984,457 $ 1,825,497 $ 47,555 $ --
-------------------------
.. Dividends from net
realized gains on
investments 36,722,840 1,584,054 -- --
-------------------------
Mortality and expense
guarantees:
.. Standard (7,691,943) (1,604,381) (642,750) (123,070)
------------------------
.. Breakpoint (163,838) (53,932) (13,007) (2,056)
- -------------------------- ------------ ----------- ----------- ----------
Net Investment Income
(Loss) 36,851,516 1,751,238 (608,202) (125,126)
- --------------------------
Net Realized and
Unrealized Gain (Loss) on
Investments:
.. Net realized gain
(loss) on investments 11,212,200 3,241,455 602,779 659,640
-------------------------
.. Net change in
unrealized appreciation
or depreciation on
investments 122,620,849 25,154,434 13,636,771 1,339,467
- -------------------------- ------------ ----------- ----------- ----------
Net Realized and
Unrealized Gain (Loss) on
Investments 133,833,049 28,395,889 14,239,550 1,999,107
- -------------------------- ------------ ----------- ----------- ----------
Net Increase in Net Assets
Resulting from Operations $170,684,565 $30,147,127 $13,631,348 $1,873,981
- -------------------------- ============ =========== =========== ==========
</TABLE>
See accompanying notes.
L-5
<PAGE>
Lincoln National Variable Annuity Account L
Statement of operations (continued)
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Fidelity Fidelity
American Fidelity VIP VIP II
Century VIP Equity- Asset
VP Balanced Growth Income Manager
Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Investment Income
(loss):
.. Dividends from investment
income $ 518,078 $ 372,697 $1,364,477 $ 3,601,360
---------------------------
.. Dividends from net
realized gains on
investments 3,574,736 23,433,298 3,016,212 4,561,723
- ----------------------------
Mortality and expense
guarantees:
.. Standard (258,663) (2,416,711) (929,234) (1,073,217)
---------------------------
.. Breakpoint (7,951) (24,241) (15,502) (22,794)
- ---------------------------- ----------- ----------- ---------- -----------
Net Investment Income (Loss) 3,826,200 21,365,043 3,435,953 7,067,072
- ----------------------------
Net Realized and Unrealized
Gain (Loss) on Investments:
.. Net realized gain (loss)
on investments (73,599) 2,656,719 1,364,238 683,905
---------------------------
.. Net change in unrealized
appreciation or
depreciation on
investments (1,418,311) 54,827,089 (17,265) 2,796,651
- ---------------------------- ----------- ----------- ---------- -----------
Net Realized and Unrealized
Gain (Loss) on Investments (1,491,910) 57,483,808 1,346,973 3,480,556
- ---------------------------- ----------- ----------- ---------- -----------
Net Increase in Net Assets
Resulting from Operations $ 2,334,290 $78,848,851 $4,782,926 $10,547,628
- ---------------------------- =========== =========== ========== ===========
</TABLE>
See accompanying notes.
L-6
<PAGE>
<TABLE>
<CAPTION>
Fidelity Janus Lincoln Lincoln
Calvert T. Rowe VIP Baron Aspen National National
Social Price Money AMT Capital Series Social Aggressive
Balanced International Market Partners Asset WorldWide Awareness Growth
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ -- $ 132,607 $6,572 $ 4,875 $ 1,073 $ 13,800 $ 95,830 $ 36
-- 416,764 -- 8,479 41,002 -- 86,572 --
(73,022) (291,499) -- (10,428) (35,171) (80,765) (68,034) (84,998)
(686) (7,257) -- (657) (830) (3,114) (3,449) (8,362)
--------- ---------- ------ -------- ---------- ---------- ---------- ----------
(73,708) 250,615 6,572 2,269 6,074 (70,079) 110,919 (93,324)
1,137,308 650,240 -- 4,692 24,749 18,535 30,002 211,537
(976,958) 8,054,095 -- 5,884 1,335,593 6,623,735 1,993,385 9,266,279
--------- ---------- ------ -------- ---------- ---------- ---------- ----------
160,350 8,704,335 -- 10,576 1,360,342 6,642,270 2,023,387 9,477,816
--------- ---------- ------ -------- ---------- ---------- ---------- ----------
$ 86,642 $8,954,950 $6,572 $ 12,845 $1,366,416 $6,572,191 $2,134,306 $9,384,492
========= ========== ====== ======== ========== ========== ========== ==========
</TABLE>
L-7
<PAGE>
Lincoln National Variable Annuity Account L
Statements of changes in net assets
Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
American
Century
Dreyfus Dreyfus VP Capital
Stock Index Small Cap Appreciation
Combined Subaccount Subaccount Subaccount
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets at January 1,
1998 $ 545,552,683 $ 98,949,245 $ 62,131,736 $ 24,088,149
- ------------------------
Changes From Operations:
.. Net investment income
(loss) 39,174,530 734,033 616,677 952,761
- ------------------------
.. Net realized gain
(loss) on investments 3,419,297 1,482,539 (106,334) (301,838)
- ------------------------
.. Net change in
unrealized
appreciation or
depreciation on
investments 69,625,312 27,492,153 (3,589,388) (1,352,820)
- ------------------------ ------------- ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets Resulting
from Operations 112,219,139 29,708,725 (3,079,045) (701,897)
- ------------------------
Change From Unit
Transactions:
.. Contract purchases 176,888,310 42,083,567 23,847,325 4,749,580
- ------------------------
.. Terminated contracts (120,802,225) (22,590,049) (16,246,394) (7,331,376)
- ------------------------ ------------- ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets Resulting
from Unit Transactions 56,086,085 19,493,518 7,600,931 (2,581,796)
- ------------------------ ------------- ------------ ------------ ------------
Total Increase
(Decrease) in Net
Assets 168,305,224 49,202,243 4,521,886 (3,283,693)
- ------------------------ ------------- ------------ ------------ ------------
Net Assets at December
31, 1998 713,857,907 148,151,488 66,653,622 20,804,456
- ------------------------
Changes From Operations:
.. Net investment income
(loss) 36,851,516 1,751,238 (608,202) (125,126)
- ------------------------
.. Net realized gain
(loss) on investments 11,212,200 3,241,455 602,779 659,640
- ------------------------
.. Net change in
unrealized
appreciation or
depreciation on
investments 122,620,849 25,154,434 13,636,771 1,339,467
- ------------------------ ------------- ------------ ------------ ------------
Net Increase in Net
Assets Resulting from
Operations 170,684,565 30,147,127 13,631,348 1,873,981
- ------------------------
Change From Unit
Transactions:
.. Contract purchases 238,188,776 44,550,458 15,829,789 2,485,925
- ------------------------
.. Terminated contracts (203,339,366) (34,483,199) (21,679,082) (25,164,362)
- ------------------------ ------------- ------------ ------------ ------------
Net Increase (Decrease)
in Net Assets Resulting
from Unit Transactions 34,849,410 10,067,259 (5,849,293) (22,678,437)
- ------------------------ ------------- ------------ ------------ ------------
Total Increase
(Decrease) in Net
Assets 205,533,975 40,214,386 7,782,055 (20,804,456)
- ------------------------ ------------- ------------ ------------ ------------
Net Assets at December
31, 1999 $ 919,391,882 $188,365,874 $ 74,435,677 $ --
- ------------------------ ============= ============ ============ ============
</TABLE>
See accompanying notes.
L-8
<PAGE>
<TABLE>
<CAPTION>
Fidelity Fidelity
American Fidelity Fidelity VIP II Calvert T. Rowe VIP
Century VIP VIP Asset Social Price Money
VP Balanced Growth Equity-Income Manager Balanced International Market AMT Partners
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$23,879,353 $141,132,780 $ 72,107,842 $ 92,021,265 $ 7,919,230 $22,966,631 $ 356,452 $ --
2,941,595 18,238,618 3,929,867 10,794,014 760,970 195,823 10,109 (367)
184,157 1,517,383 364,660 97,882 52,997 124,560 -- 312
438,875 36,722,248 3,733,755 2,201,200 614,617 3,164,543 -- 12,992
- ----------- ------------ ------------ ------------ ------------ ----------- ----------- ----------
3,564,627 56,478,249 8,028,282 13,093,096 1,428,584 3,484,926 10,109 12,937
5,683,978 38,227,170 27,399,400 18,491,100 4,281,621 8,719,313 1,152,783 329,477
(6,140,665) (28,830,323) (15,753,535) (14,863,454) (1,777,700) (5,783,658) (1,309,612) (19,978)
- ----------- ------------ ------------ ------------ ------------ ----------- ----------- ----------
(456,687) 9,396,847 11,645,865 3,627,646 2,503,921 2,935,655 (156,829) 309,499
- ----------- ------------ ------------ ------------ ------------ ----------- ----------- ----------
3,107,940 65,875,096 19,674,147 16,720,742 3,932,505 6,420,581 (146,720) 322,436
- ----------- ------------ ------------ ------------ ------------ ----------- ----------- ----------
26,987,293 207,007,876 91,781,989 108,742,007 11,851,735 29,387,212 209,732 322,436
3,826,200 21,365,043 3,435,953 7,067,072 (73,708) 250,615 6,572 2,269
(73,599) 2,656,719 1,364,238 683,905 1,137,308 650,240 -- 4,692
(1,418,311) 54,827,089 (17,265) 2,796,651 (976,958) 8,054,095 -- 5,884
- ----------- ------------ ------------ ------------ ------------ ----------- ----------- ----------
2,334,290 78,848,851 4,782,926 10,547,628 86,642 8,954,950 6,572 12,845
5,438,764 54,860,285 20,158,465 16,372,551 2,067,729 7,854,559 1,083,892 2,408,145
(7,111,833) (37,001,613) (22,823,373) (22,097,156) (14,006,106) (9,465,660) (1,140,287) (579,152)
- ----------- ------------ ------------ ------------ ------------ ----------- ----------- ----------
(1,673,069) 17,858,672 (2,664,908) (5,724,605) (11,938,377) (1,611,101) (56,395) 1,828,993
- ----------- ------------ ------------ ------------ ------------ ----------- ----------- ----------
661,221 96,707,523 2,118,018 4,823,023 (11,851,735) 7,343,849 (49,823) 1,841,838
- ----------- ------------ ------------ ------------ ------------ ----------- ----------- ----------
$27,648,514 $303,715,399 $ 93,900,007 $113,565,030 $ -- $36,731,061 $ 159,909 $2,164,274
=========== ============ ============ ============ ============ =========== =========== ==========
</TABLE>
L-9
<PAGE>
Lincoln National Variable Annuity Account L
Statements of changes in net assets (continued)
Years Ended December 31, 1998 and 1999
<TABLE>
<CAPTION>
Lincoln Lincoln
Baron Janus Aspen National National
Capital Series Social Aggressive
Asset WorldWide Awareness Growth
Subaccount Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Assets at January 1,
1998 $ -- $ -- $ -- $ --
- ---------------------------
Changes From Operations:
.. Net investment income
(loss) (374) 247 825 (268)
- ---------------------------
.. Net realized gain (loss)
on investments 1,522 540 718 199
- ---------------------------
.. Net change in unrealized
appreciation or
depreciation on
investments 35,322 87,163 41,835 22,817
- --------------------------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in
Net Assets Resulting from
Operations 36,470 87,950 43,378 22,748
- ---------------------------
Change From Unit
Transactions:
.. Contract purchases 421,431 876,175 396,874 228,516
- ---------------------------
.. Terminated contracts (95,205) (21,684) (20,073) (18,519)
- --------------------------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in
Net Assets Resulting from
Unit Transactions 326,226 854,491 376,801 209,997
- --------------------------- ----------- ----------- ----------- -----------
Total Increase (Decrease)
in Net Assets 362,696 942,441 420,179 232,745
- --------------------------- ----------- ----------- ----------- -----------
Net Assets at December 31,
1998 362,696 942,441 420,179 232,745
- ---------------------------
Changes From Operations:
.. Net investment income
(loss) 6,074 (70,079) 110,919 (93,324)
- ---------------------------
.. Net realized gain (loss)
on investments 24,749 18,535 30,002 211,537
- ---------------------------
.. Net change in unrealized
appreciation or
depreciation on
investments 1,335,593 6,623,735 1,993,385 9,266,279
- --------------------------- ----------- ----------- ----------- -----------
Net Increase in Net Assets
Resulting from Operations 1,366,416 6,572,191 2,134,306 9,384,492
- ---------------------------
Change From Unit
Transactions:
.. Contract purchases 8,292,841 16,982,918 16,797,408 23,005,047
- ---------------------------
.. Terminated contracts (1,436,069) (1,507,323) (1,873,851) (2,970,300)
- --------------------------- ----------- ----------- ----------- -----------
Net Increase (Decrease) in
Net Assets Resulting from
Unit Transactions 6,856,772 15,475,595 14,923,557 20,034,747
- --------------------------- ----------- ----------- ----------- -----------
Total Increase (Decrease)
in Net Assets 8,223,188 22,047,786 17,057,863 29,419,239
- --------------------------- ----------- ----------- ----------- -----------
Net Assets at December 31,
1999 $ 8,585,884 $22,990,227 $17,478,042 $29,651,984
- --------------------------- =========== =========== =========== ===========
</TABLE>
See accompanying notes.
L-10
<PAGE>
Lincoln National Variable Annuity Account L
Notes to financial statements
1. Accounting Policies and Account Information
The Variable Account: Lincoln National Variable Annuity Account L (Variable
Account) is a segregated investment account of The Lincoln National Life In-
surance Company (the Company) and is registered with the Securities and Ex-
change Commission under the Investment Company Act of 1940, as amended, as a
unit investment trust. Beginning June 30, 1999, contracts are eligible for the
lower, or "Breakpoint", mortality and expense risk charge if criteria has been
satisfied that the Company realizes lower issue and administrative cost.
On October 1, 1996, UNUM Life Insurance Company of America (UNUM America) com-
pleted the sale of their tax-qualified annuity business to the Company and
Lincoln Life & Annuity Company of New York (LLANY), a wholly owned subsidiary
of the Company. The contracts of participants in the variable accounts of UNUM
America with respect to which consent is obtained from the contractholders
and/or participants have been reinsured pursuant to an assumption reinsurance
agreement. Assets attributable to such participants' contracts were trans-
ferred to the Variable Account and variable accounts of LLANY. Assets attrib-
utable to contracts of participants with respect to which such consent is not
obtained will remain in the variable accounts of UNUM America. During 1998,
the net assets of the Variable Account increased by approximately $12,045,131
from novations of assets from the variable accounts of UNUM America.
The assets of the Variable Account are owned by the Company. The portion of
the Variable Account's assets supporting the annuity contracts may not be used
to satisfy liabilities arising from any other business of the Company.
Basis of Presentation: The accompanying financial statements have been pre-
pared in accordance with accounting principles generally accepted in the
United States for unit investment trusts.
Investments: The assets of the Variable Account are divided into variable sub-
accounts each of which is invested in shares of thirteen portfolios (the
Funds) of nine diversified open-end management investment companies, each
portfolio with its own investment objective. The Funds are:
Dreyfus Variable Investment Fund:
.. Dreyfus Small Cap Portfolio
.. Dreyfus Stock Index Fund
American Century Variable Portfolios, Inc.:
.. American Century VP Balanced Portfolio
Fidelity Variable Insurance Products Fund:
.. Fidelity VIP Equity Income Portfolio
.. Fidelity VIP Growth Portfolio
.. Fidelity VIP Money Market Portfolio
Fidelity Variable Insurance Products Fund II:
.. Fidelity VIP II Asset Manager Portfolio
T. Rowe Price International Series, Inc.:
.. T. Rowe Price International Stock Portfolio
Neuberger Berman Advisors Management Trust (AMT)
.. AMT Partners Fund
Baron Capital Asset Fund Trust
Janus Aspen Series, Worldwide Growth Fund
Lincoln National:
.. Lincoln National Social Awareness Fund
.. Lincoln National Aggressive Growth Fund
The Fidelity VIP Money Market Portfolio is used only for investments of ini-
tial contributions for which the Company has not received complete order in-
structions. Upon receipt of complete order instructions, the payments trans-
ferred to the Fidelity VIP Money Market Portfolio are allocated to purchase
shares of one of the above Funds.
Investments in the Funds are stated at the closing net asset value per share
on December 31, 1999, which approximates fair value. The difference between
cost and fair value is reflected as unrealized appreciation and depreciation
of investments.
Investment transactions are accounted for on a trade date basis. The cost of
investments sold is determined by the average cost method.
Dividends: Dividends paid to the Variable Account are automatically reinvested
in shares of the Funds on the payable date with the exception of Fidelity VIP
Money Market Portfolio which is invested monthly. Dividend income is recorded
on the ex-dividend date.
Federal Income Taxes: Operations of the Variable Account form a part of and
are taxed with operations of the Company, which is taxed as a "life insurance
company" under the Internal Revenue Code. The Variable Account will not be
taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code. Using current federal income tax law, no federal income taxes
are payable with respect to the Variable Account's net investment income and
the net realized gain on investments.
2. Mortality and Expense Guarantees
Amounts are paid to the Company for mortality and expense guarantees at a per-
centage of the current value of the Variable Account each day with the excep-
tion of Fidelity VIP Money Market Portfolio. The rates are as follows:
.. Standard at a daily rate of .00273973 (1.00% on an annual basis)
.. Breakpoint at a daily rate of .00205479 (.75% on an annual basis)
Accordingly, the Company is responsible for all sales, general and administra-
tive expenses applicable to the Variable Account.
L-11
<PAGE>
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
3. Net assets
The following is a summary of net assets owned at December 31, 1999.
<TABLE>
<CAPTION>
Dreyfus Dreyfus
Stock Index Small Cap
Combined Subaccount Subaccount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $569,817,941 $113,280,752 $56,314,140
- ---------------------------------
Accumulated net investment income
(loss) 88,508,202 5,608,973 3,051,069
- ---------------------------------
Accumulated net realized gain on
investments 15,970,047 4,936,832 923,728
- ---------------------------------
Net unrealized appreciation on
investments 245,095,692 64,539,317 14,146,740
- --------------------------------- ------------ ------------ -----------
$919,391,882 $188,365,874 $74,435,677
============ ============ ===========
<CAPTION>
Fidelity
Calvert T. Rowe VIP
Social Price Money
Balanced International Market
Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit Transactions:
Accumulation units $ (2,407,392) $ 24,110,651 $ 135,993
- ---------------------------------
Accumulated net investment income
(loss) 1,178,798 750,826 23,916
- ---------------------------------
Accumulated net realized gain on
investments 1,228,594 848,121 --
- ---------------------------------
Net unrealized appreciation on
investments -- 11,021,463 --
- --------------------------------- ------------ ------------ -----------
$ -- $ 36,731,061 $ 159,909
============ ============ ===========
</TABLE>
L-12
<PAGE>
<TABLE>
<CAPTION>
American Fidelity
Century VP American Fidelity Fidelity VIP II
Capital Century VP VIP VIP Asset
Appreciation Balanced Growth Equity-Income Manager
Subaccount Subaccount Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------
<C> <C> <C> <C> <C> <S>
$(1,267,673) $19,476,079 $149,758,171 $70,774,481 $ 78,446,061
855,094 7,190,409 40,175,813 8,601,452 21,115,930
412,579 162,761 4,439,767 1,849,326 875,533
-- 819,265 109,341,648 12,674,748 13,127,506
----------- ----------- ------------ ----------- ------------
$ -- $27,648,514 $303,715,399 $93,900,007 $113,565,030
=========== =========== ============ =========== ============
<CAPTION>
Lincoln Lincoln
Baron Janus Aspen National National
AMT Capital Series Social Aggressive
Partners Asset WorldWide Awareness Growth
Subaccount Subaccount Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------
<C> <C> <C> <C> <C> <S>
$ 2,138,492 $ 7,182,998 $ 16,330,086 $15,300,358 $ 20,244,744
1,902 5,700 (69,832) 111,744 (93,592)
5,004 26,271 19,075 30,720 211,736
18,876 1,370,915 6,710,898 2,035,220 9,289,096
----------- ----------- ------------ ----------- ------------
$ 2,164,274 $ 8,585,884 $ 22,990,227 $17,478,042 $ 29,651,984
=========== =========== ============ =========== ============
</TABLE>
L-13
<PAGE>
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
4. Purchases and Sales of Investments
The aggregate cost of investments purchased and the aggregate proceeds from in-
vestments sold were as follows for 1999.
<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of Proceeds
Purchases from Sales
- -----------------------------------------------------------------------------
<S> <C> <C>
Dreyfus Stock Index Fund $ 22,549,763 $ 10,730,378
Dreyfus Small Cap Portfolio 3,781,226 10,238,526
American Century VP Capital Appreciation Portfolio 376,374 23,180,495
American Century VP Balanced Portfolio 6,355,903 4,202,805
Fidelity VIP Growth Portfolio 49,898,904 10,672,705
Fidelity VIP Equity Income Portfolio 10,433,411 9,662,357
Fidelity VIP II Asset Manager Portfolio 12,670,682 11,328,132
Calvert Social Balanced Portfolio 950,519 12,962,929
T. Rowe Price International Series 3,322,423 4,682,733
Fidelity VIP Money Market Portfolio 783,021 832,844
AMT Partners Fund 2,189,318 358,009
Baron Capital Asset Fund 7,419,973 556,906
Janus Aspen Series Worldwide Fund 15,559,101 152,997
Lincoln National Social Awareness Fund 15,883,279 848,347
Lincoln National Aggressive Growth Fund 21,517,534 1,575,341
- -------------------------------------------------- ------------ ------------
$173,691,431 $101,985,504
============ ============
</TABLE>
5. Investments
The following is a summary of investments owned at December 31, 1999.
<TABLE>
<CAPTION>
Net
Shares Asset Value of Cost of
Outstanding Value Shares Shares
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Stock Index Fund 4,899,113 $38.45 $188,370,905 $123,831,588
Dreyfus Small Cap Portfolio 1,122,063 66.34 74,437,646 60,290,906
American Century VP Balanced
Portfolio 3,549,326 7.79 27,649,253 26,829,988
Fidelity VIP Growth Portfolio 5,529,285 54.93 303,723,614 194,381,966
Fidelity VIP Equity Income
Portfolio 3,652,374 25.71 93,902,532 81,227,784
Fidelity VIP II Asset Manager
Portfolio 6,082,919 18.67 113,568,089 100,440,583
T. Rowe Price International
Series 1,929,204 19.04 36,732,047 25,710,584
Fidelity VIP Money Market
Portfolio 159,909 1.00 159,909 159,909
AMT Partners Fund 110,201 19.64 2,164,330 2,145,454
Baron Capital Asset Fund 483,181 17.77 8,586,115 7,215,200
Janus Aspen Series Worldwide Fund 481,484 47.75 22,990,840 16,279,942
Lincoln National Social Awareness
Fund 394,622 44.29 17,478,509 15,443,289
Lincoln National Aggressive
Growth Fund 1,557,498 19.04 29,652,760 20,363,664
------------ ------------
$919,416,549 $674,320,857
============ ============
</TABLE>
L-14
<PAGE>
Lincoln National Variable Annuity Account L
Notes to financial statements (continued)
6. New Investment Funds
Effective October 1, 1998, the AMT Partners Fund, Baron Capital Asset Fund, Ja-
nus Aspen Series Worldwide Fund, Lincoln National Social Awareness Fund and
Lincoln National Aggressive Growth Fund became available as investment options
for Variable Account contract owners.
7. Fund Substitution
On or about September 30, 1998, the Company and the Variable Account filed an
application with the Securities and Exchange Commission (the "SEC") seeking an
order approving the substitution of shares of the Lincoln National Social
Awareness Fund for shares of the Calvert Social Balanced Portfolio and shares
of the Lincoln National Aggressive Growth Fund for shares of the American Cen-
tury VP Capital Appreciation Portfolio. In December 1998, the SEC approved the
above application.
In August of 1999 the share substitution replaced the Calvert Social Balanced
Portfolio with the Lincoln National Social Awareness Fund, and the American
Century VP Capital Appreciation Portfolio with the Lincoln National Aggressive
Growth Fund, as investment options under the variable annuity contracts. The
substitution resulted in the involuntary reinvestment of participants cash
value in the Calvert Social Balanced Portfolio and the American Century VP Cap-
ital Appreciation Portfolio.
L-15
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
Board of Directors of The Lincoln National Life Insurance Company
and
Contract Owners of Lincoln National Variable Annuity Account L
We have audited the accompanying statement of assets and liability of Lincoln
National Variable Annuity Account L ("Variable Account") (comprised of the
Dreyfus Stock Index, Dreyfus Small Cap, American Century VP Capital Apprecia-
tion, American Century VP Balanced, Fidelity VIP Growth, Fidelity VIP Equity-
Income, Fidelity VIP II Asset Manager, Calvert Social Balanced, T. Rowe Price
International, Fidelity VIP Money Market, AMT Partners, Baron Capital Asset,
Janus Aspen Series Worldwide, Lincoln National Social Awareness and Lincoln Na-
tional Aggressive Growth subaccounts) as of December 31, 1999, and the related
statement of operations for the year then ended and the statements of changes
in net assets for each of the two years in the period then ended. These finan-
cial statements are the responsibility of the Variable Account's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test ba-
sis, evidence supporting the amounts and disclosures in the financial state-
ments. Our procedures included confirmation of investments owned as of December
31, 1999, by correspondence with the custodian. An audit also includes assess-
ing the accounting principles used and significant estimates made by manage-
ment, as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of each of the respective
subaccounts constituting the Lincoln National Variable Annuity Account L at De-
cember 31, 1999, the results of their operations for the year then ended, and
the changes in their net assets for each of the two years in the period then
ended in conformity with accounting principles generally accepted in the United
States.
Fort Wayne, Indiana
March 24, 2000
L-16
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
BALANCE SHEETS -- STATUTORY BASIS
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------- ---------
(IN MILLIONS)
---------------------
<S> <C> <C>
ADMITTED ASSETS
CASH AND INVESTMENTS:
Bonds $22,985.0 $23,830.9
- ------------------------------------------------------------
Preferred stocks 253.8 236.0
- ------------------------------------------------------------
Unaffiliated common stocks 166.9 259.3
- ------------------------------------------------------------
Affiliated common stocks 604.7 322.1
- ------------------------------------------------------------
Mortgage loans on real estate 4,211.5 3,932.9
- ------------------------------------------------------------
Real estate 254.0 473.8
- ------------------------------------------------------------
Policy loans 1,652.9 1,606.0
- ------------------------------------------------------------
Other investments 426.6 434.4
- ------------------------------------------------------------
Cash and short-term investments 1,409.2 1,725.4
- ------------------------------------------------------------ --------- ---------
Total cash and investments 31,964.6 32,820.8
- ------------------------------------------------------------
Premiums and fees in course of collection 115.8 33.3
- ------------------------------------------------------------
Accrued investment income 435.3 432.8
- ------------------------------------------------------------
Reinsurance recoverable 199.0 171.6
- ------------------------------------------------------------
Funds withheld by ceding companies 73.5 53.7
- ------------------------------------------------------------
Federal income taxes recoverable from parent company 61.6 64.7
- ------------------------------------------------------------
Goodwill 43.1 49.5
- ------------------------------------------------------------
Other admitted assets 66.7 89.3
- ------------------------------------------------------------
Separate account assets 46,105.1 36,907.0
- ------------------------------------------------------------ --------- ---------
Total admitted assets $79,064.7 $70,622.7
- ------------------------------------------------------------ ========= =========
LIABILITIES AND CAPITAL AND SURPLUS
LIABILITIES:
Future policy benefits and claims $12,184.0 $12,310.6
- ------------------------------------------------------------
Other policyholder funds 16,589.5 16,647.5
- ------------------------------------------------------------
Amounts withheld or retained by Company as agent or trustee 364.0 897.6
- ------------------------------------------------------------
Funds held under reinsurance treaties 796.9 795.8
- ------------------------------------------------------------
Asset valuation reserve 490.9 484.5
- ------------------------------------------------------------
Interest maintenance reserve 72.3 159.7
- ------------------------------------------------------------
Other liabilities 627.0 504.5
- ------------------------------------------------------------
Short-term loan payable to parent company 205.0 140.0
- ------------------------------------------------------------
Net transfers due from separate accounts (896.5) (789.0)
- ------------------------------------------------------------
Separate account liabilities 46,105.1 36,907.0
- ------------------------------------------------------------ --------- ---------
Total liabilities 76,538.2 68,058.2
- ------------------------------------------------------------
CAPITAL AND SURPLUS:
Common stock, $2.50 par value:
Authorized, issued and outstanding shares -- 10 million
(owned by Lincoln National Corporation) 25.0 25.0
- ------------------------------------------------------------
Surplus notes due to Lincoln National Corporation 1,250.0 1,250.0
- ------------------------------------------------------------
Paid-in surplus 1,942.6 1,930.1
- ------------------------------------------------------------
Unassigned surplus -- deficit (691.1) (640.6)
- ------------------------------------------------------------ --------- ---------
Total capital and surplus 2,526.5 2,564.5
- ------------------------------------------------------------ --------- ---------
Total liabilities and capital and surplus $79,064.7 $70,622.7
- ------------------------------------------------------------ ========= =========
</TABLE>
See accompanying notes. S-1
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------- --------- --------
(IN MILLIONS)
--------------------------------
<S> <C> <C> <C>
PREMIUMS AND OTHER REVENUES:
Premiums and deposits $ 7,273.6 $12,737.6 $5,589.0
- ------------------------------------------------------------
Net investment income 2,203.2 2,107.2 1,847.1
- ------------------------------------------------------------
Amortization of interest maintenance reserve 29.1 26.4 41.5
- ------------------------------------------------------------
Commissions and expense allowances on reinsurance ceded 472.3 179.9 99.7
- ------------------------------------------------------------
Expense charges on deposit funds 146.5 134.6 119.3
- ------------------------------------------------------------
Separate account investment management and administration
service fees 473.9 396.3 325.5
- ------------------------------------------------------------
Other income 88.8 31.3 21.3
- ------------------------------------------------------------ --------- --------- --------
Total revenues 10,687.4 15,613.3 8,043.4
- ------------------------------------------------------------
BENEFITS AND EXPENSES:
Benefits and settlement expenses 8,504.9 13,964.1 4,522.1
- ------------------------------------------------------------
Underwriting, acquisition, insurance and other expenses 1,618.3 2,919.4 3,053.9
- ------------------------------------------------------------ --------- --------- --------
Total benefits and expenses 10,123.2 16,883.5 7,576.0
- ------------------------------------------------------------ --------- --------- --------
Gain (loss) from operations before dividends to
policyholders, income taxes and net realized gain on
investments 564.2 (1,270.2) 467.4
- ------------------------------------------------------------
Dividends to policyholders 80.3 67.9 27.5
- ------------------------------------------------------------ --------- --------- --------
Gain (loss) from operations before federal income taxes and
net realized gain on investments 483.9 (1,338.1) 439.9
- ------------------------------------------------------------
Federal income taxes (credit) 85.4 (141.0) 78.3
- ------------------------------------------------------------ --------- --------- --------
Gain (loss) from operations before net realized gain on
investments 398.5 (1,197.1) 361.6
- ------------------------------------------------------------
Net realized gain on investments, net of income tax expense
and excluding net transfers to the interest maintenance
reserve 114.4 46.8 31.3
- ------------------------------------------------------------ --------- --------- --------
Net income (loss) $ 512.9 $(1,150.3) $ 392.9
- ------------------------------------------------------------ ========= ========= ========
</TABLE>
See accompanying notes.
S-2
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-------- -------- --------
(IN MILLIONS)
------------------------------
<S> <C> <C> <C>
Capital and surplus at beginning of year $2,564.5 $2,968.4 $1,868.0
- ------------------------------------------------------------
CAPITAL AND SURPLUS INCREASE (DECREASE):
Net income (loss) 512.9 (1,150.3) 392.9
- ------------------------------------------------------------
Difference in cost and admitted investment amounts (101.9) (304.8) (36.2)
- ------------------------------------------------------------
Nonadmitted assets (22.9) (17.1) (0.4)
- ------------------------------------------------------------
Regulatory liability for reinsurance 26.0 (35.2) (3.9)
- ------------------------------------------------------------
Gain on reinsurance of disability income business 71.8 -- --
- ------------------------------------------------------------
Life policy reserve valuation basis -- (0.4) (0.9)
- ------------------------------------------------------------
Asset valuation reserve (6.4) (34.5) (36.9)
- ------------------------------------------------------------
Proceeds from surplus notes from shareholder -- 1,250.0 --
- ------------------------------------------------------------
Paid-in surplus, including contribution of common stock of
affiliated company in 1997 12.5 108.4 938.4
- ------------------------------------------------------------
Separate account receivable due to change in valuation -- -- (2.6)
- ------------------------------------------------------------
Dividends to shareholder (530.0) (220.0) (150.0)
- ------------------------------------------------------------ -------- -------- --------
Capital and surplus at end of year $2,526.5 $2,564.5 $2,968.4
- ------------------------------------------------------------ ======== ======== ========
</TABLE>
See accompanying notes. S-3
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------- ---------- ---------
(IN MILLIONS)
----------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums, policy proceeds and other considerations received $ 7,671.1 $ 13,495.2 $ 6,364.3
- ------------------------------------------------------------
Allowances and reserve adjustments paid on reinsurance ceded (19.9) (632.4) (649.2)
- ------------------------------------------------------------
Investment income received 2,168.6 2,003.9 1,798.8
- ------------------------------------------------------------
Separate account investment management and administration
service fees 470.6 396.3 325.5
- ------------------------------------------------------------
Benefits paid (8,699.4) (7,395.8) (5,345.2)
- ------------------------------------------------------------
Insurance expenses paid (1,734.5) (2,909.7) (3,193.0)
- ------------------------------------------------------------
Proceeds related to sale of disability income business 71.8 -- --
- ------------------------------------------------------------
Federal income taxes recovered (paid) (81.2) 84.2 (87.0)
- ------------------------------------------------------------
Dividends to policyholders (82.8) (12.9) (28.4)
- ------------------------------------------------------------
Other income received and expenses paid, net 252.1 207.0 (8.7)
- ------------------------------------------------------------ --------- ---------- ---------
Net cash provided by (used in) operating activities 16.4 5,235.8 (822.9)
- ------------------------------------------------------------
INVESTING ACTIVITIES
Sale, maturity or repayment of investments 6,557.7 10,926.5 12,142.6
- ------------------------------------------------------------
Purchase of investments (5,940.8) (16,950.0) (10,345.0)
- ------------------------------------------------------------
Other sources (uses) including reinsured policy loans (497.0) (778.3) 529.1
- ------------------------------------------------------------ --------- ---------- ---------
Net cash provided by (used in) investing activities 119.9 (6,801.8) 2,326.7
- ------------------------------------------------------------
FINANCING ACTIVITIES
Surplus paid-in 12.5 108.4 --
- ------------------------------------------------------------
Proceeds from surplus notes from shareholder -- 1,250.0 --
- ------------------------------------------------------------
Proceeds from borrowings from shareholder 205.0 140.0 120.0
- ------------------------------------------------------------
Repayment of borrowings from shareholder (140.0) (120.0) (100.0)
- ------------------------------------------------------------
Dividends paid to shareholder (530.0) (220.0) (150.0)
- ------------------------------------------------------------ --------- ---------- ---------
Net cash provided by (used in) financing activities (452.5) 1,158.4 (130.0)
- ------------------------------------------------------------ --------- ---------- ---------
Net increase (decrease) in cash and short-term investments (316.2) (407.6) 1,373.8
- ------------------------------------------------------------
Cash and short-term investments at beginning of year 1,725.4 2,133.0 759.2
- ------------------------------------------------------------ --------- ---------- ---------
Cash and short-term investments at end of year $ 1,409.2 $ 1,725.4 $ 2,133.0
- ------------------------------------------------------------ ========= ========== =========
</TABLE>
See accompanying notes.
S-4
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
ORGANIZATION AND OPERATIONS
The Lincoln National Life Insurance Company (the "Company") is a wholly
owned subsidiary of Lincoln National Corporation ("LNC") and is domiciled in
Indiana. As of December 31, 1999, the Company owned 100% of the outstanding
common stock of four insurance company subsidiaries and four non-insurance
subsidiaries. The Company also owned 85% of the common stock of an Internet
distributor of variable annuities.
The Company's principal businesses consist of underwriting annuities,
deposit-type contracts and life and health insurance through multiple
distribution channels and the reinsurance of individual and group life and
health business. The Company is licensed and sells its products in 49
states, Canada and several U.S. territories.
USE OF ESTIMATES
The nature of the insurance and investment management businesses requires
management to make estimates and assumptions that affect the amounts
reported in the statutory-basis financial statements and accompanying notes.
Actual results could differ from those estimates.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Indiana Department of
Insurance ("Insurance Department"), which practices differ from accounting
principles generally accepted in the United States ("GAAP"). The more
significant variances from GAAP are as follows:
INVESTMENTS
Bonds and preferred stocks are reported at cost or amortized cost or fair
value based on their National Association of Insurance Commissioners
("NAIC") rating. For GAAP, the Company's bonds and preferred stocks are
classified as available-for-sale and, accordingly, are reported at fair
value with changes in the fair values reported directly in shareholder's
equity after adjustments for related amortization of deferred acquisition
costs, additional policyholder commitments and deferred income taxes.
Investments in real estate are reported net of related obligations rather
than on a gross basis. Real estate owned and occupied by the Company is
classified as a real estate investment rather than reported as an operating
asset, and investment income and operating expenses include rent for the
Company's occupancy of those properties. Changes between cost and admitted
asset investment amounts are credited or charged directly to unassigned
surplus rather than to a separate surplus account.
Under a formula prescribed by the NAIC, the Company defers the portion of
realized capital gains and losses on sales of fixed income investments,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates and amortizes those deferrals over the remaining
period to maturity of the individual security sold. The net deferral is
reported as the interest maintenance reserve ("IMR") in the accompanying
balance sheets. Realized capital gains and losses are reported in income net
of federal income tax and transfers to the IMR. The asset valuation reserve
("AVR") is determined by a NAIC prescribed formula and is reported as a
liability rather than unassigned surplus. Under GAAP, realized capital gains
and losses are reported in the income statement on a pre-tax basis in the
period in which the asset giving rise to the gain or loss is sold and
writedowns are provided when there has been a decline in value deemed other
than temporary, in which case, the provision for such declines are charged
to income.
SUBSIDIARIES
The accounts and operations of the Company's subsidiaries are not
consolidated with the accounts and operations of the Company as would be
required by GAAP. Under statutory accounting principles, the Company's
insurance subsidiaries are carried at their statutory-basis net equity and
the non-insurance subsidiaries are carried at their GAAP-basis net equity,
adjusted for certain items which would be non-admitted under statutory
accounting principles. Both insurance subsidiaries and non-insurance
subsidiaries are presented in the balance sheet as investments in affiliated
common stocks.
S-5
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
POLICY ACQUISITION COSTS
The costs of acquiring and renewing business are expensed when incurred.
Under GAAP, acquisition costs related to traditional life insurance, to the
extent recoverable from future policy revenues, are deferred and amortized
over the premium-paying period of the related policies using assumptions
consistent with those used in computing policy benefit reserves. For
universal life insurance, annuity and other investment-type products,
deferred policy acquisition costs, to the extent recoverable from future
gross profits, are amortized generally in proportion to the present value of
expected gross profits from surrender charges and investment, mortality and
expense margins.
NONADMITTED ASSETS
Certain assets designated as "nonadmitted," principally furniture and
equipment and certain receivables, are excluded from the accompanying
balance sheets and are charged directly to unassigned surplus.
PREMIUMS
Revenues for universal life policies consist of the entire premium received.
Under GAAP, premiums received in excess of policy charges are not recognized
as premium revenue.
Premiums and deposits with respect to annuity and other investment-type
contracts are reported as premium revenues; whereas, under GAAP, such
premiums and deposits are treated as liabilities and policy charges
represent revenues.
BENEFIT RESERVES
Certain policy reserves are calculated based on statutorily required
interest and mortality assumptions rather than on estimated expected
experience or actual account balances as would be required under GAAP.
Death benefits paid, policy and contract withdrawals, and the change in
policy reserves on universal life policies, annuity and other
investment-type contracts are reported as benefits and settlement expenses
in the accompanying statements of income; whereas, under GAAP, withdrawals
are treated as a reduction of the policy or contract liabilities and
benefits represent the excess of benefits paid over the policy account value
and interest credited to the account values.
REINSURANCE
Premiums, claims and policy benefits and contract liabilities are reported
in the accompanying financial statements net of reinsurance amounts. For
GAAP, all assets and liabilities related to reinsurance ceded contracts are
reported on a gross basis.
A liability for reinsurance balances has been provided for unsecured policy
and contract liabilities and unearned premiums ceded to reinsurers not
authorized by the Insurance Department to assume such business. Changes to
those amounts are credited or charged directly to unassigned surplus. Under
GAAP, an allowance for amounts deemed uncollectible is established through a
charge to income.
Commissions on business ceded are reported as income when received rather
than deferred and amortized with deferred policy acquisition costs. Business
assumed under 100% indemnity reinsurance agreements is accounted for as a
purchase for GAAP reporting purposes and the ceding commission represents
the purchase price. Under purchase accounting, assets acquired and
liabilities assumed are reported at fair value at the date of the
transaction and the excess of the purchase price over the sum of the amounts
assigned to assets acquired less liabilities assumed is recorded as
goodwill. On a statutory-basis, the ceding commission is expensed when paid
and reinsurance premiums and benefits are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms
of the reinsurance contracts.
Certain reinsurance contracts meeting risk transfer requirements under
statutory-basis accounting practices have been accounted for using
traditional reinsurance accounting; whereas, such contracts are accounted
for using deposit accounting under GAAP.
S-6
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
INCOME TAXES
Deferred income taxes are not provided for differences between financial
statement amounts and tax bases of assets and liabilities.
POLICYHOLDER DIVIDENDS
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
SURPLUS NOTES DUE TO LNC
Surplus notes due to LNC are reported as surplus rather than as liabilities.
On a statutory-basis, interest on surplus notes is not accrued until
approval is received from the Indiana Insurance Commissioner; whereas, under
GAAP, interest would be accrued periodically based on the outstanding
principal and the interest rate.
STATEMENTS OF CASH FLOWS
Cash and short-term investments in the statements of cash flows represent
cash balances and investments with initial maturities of one year or less.
Under GAAP, the corresponding captions of cash and cash equivalents include
cash balances and investments with initial maturities of three months or
less.
A reconciliation of the Company's net income (loss) and capital and surplus
determined on a statutory-basis with amounts determined in accordance with
GAAP is as follows:
<TABLE>
<CAPTION>
CAPITAL AND SURPLUS NET INCOME (LOSS)
----------------------------------------------------------------------
DECEMBER 31 YEAR ENDED DECEMBER 31
1999 1998 1999 1998 1997
----------------------------------------------------------------------
(IN MILLIONS)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts reported on a statutory-basis $ 2,526.5 $ 2,564.5 $ 512.9 $(1,150.3) $392.9
-----------------------------------------
GAAP adjustments:
Deferred policy acquisition costs,
present value of future profits and
non-admitted goodwill 3,628.2 3,085.2 135.0 48.5 (98.9)
--------------------------------------
Policy and contract reserves (1,943.1) (2,299.9) (97.9) 1,743.4 (48.6)
--------------------------------------
Interest maintenance reserve 72.3 159.7 (86.6) 24.4 58.7
--------------------------------------
Deferred income taxes 244.5 181.6 (117.4) (218.6) 70.3
--------------------------------------
Policyholders' share of earnings and
surplus on participating business (122.7) (132.8) (1.8) 3.2 5.3
--------------------------------------
Asset valuation reserve 490.9 484.5 -- -- --
--------------------------------------
Net realized gain (loss) on investments (186.4) (174.1) (32.4) (116.7) (20.4)
--------------------------------------
Unrealized gain (loss) on investments (555.2) 1,335.1 -- -- --
--------------------------------------
Nonadmitted assets, including
nonadmitted investments 139.6 119.1 -- -- --
--------------------------------------
Investments in subsidiary companies 460.9 490.4 39.1 41.3 (80.5)
--------------------------------------
Surplus notes and related interest (1,250.0) (1,251.5) 1.5 (1.5) --
--------------------------------------
Other, net (61.0) (120.1) 129.8 103.6 (35.0)
-------------------------------------- --------- --------- --------- --------- ------
Net increase (decrease) 918.0 1,877.2 (30.7) 1,627.6 (149.1)
----------------------------------------- --------- --------- --------- --------- ------
Amounts on a GAAP basis $ 3,444.5 $ 4,441.7 $ 482.2 $ 477.3 $243.8
----------------------------------------- ========= ========= ========= ========= ======
</TABLE>
S-7
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Other significant accounting practices are as follows:
INVESTMENTS
Bonds not backed by loans are principally stated at amortized cost and the
discount or premium is amortized using the interest method.
Mortgage-backed bonds are valued at amortized cost and income is recognized
using a constant effective yield based on anticipated prepayments and the
estimated economic life of the securities. When actual prepayments differ
significantly from anticipated prepayments, the effective yield is
recalculated to reflect actual payments to date and anticipated future
payments. The net investment in the securities is adjusted to the amount
that would have existed had the new effective yield been applied since the
acquisition of the securities.
Short-term investments include investments with maturities of less than one
year at the date of acquisition. The carrying amounts for these investments
approximate their fair values.
Preferred stocks are reported at cost or amortized cost.
Unaffiliated common stocks are reported at fair value as determined by the
Securities Valuation Office of the NAIC and the related unrealized gains
(losses) are reported in unassigned surplus without adjustment for federal
income taxes.
Policy loans are reported at unpaid balances.
The Company uses various derivative instruments as part of its overall
liability-asset management program for certain investments and life
insurance and annuity products. The Company values all derivative
instruments on a basis consistent with that of the hedged item. Upon
termination, gains and losses on those instruments are included in the
carrying values of the underlying hedged items or deferred in IMR, where
applicable, and are amortized over the remaining lives of the hedged items
as adjustments to investment income. Any unamortized gains or losses are
recognized when the underlying hedged items are sold. The premiums paid for
interest rate caps and swaptions are deferred and amortized to net
investment income on a straight-line basis over the term of the respective
derivative.
Hedge accounting is applied as indicated above after the Company determines
that the items to be hedged expose the Company to interest rate
fluctuations, the widening of bond yield spreads over comparable maturity
U.S. government obligations and foreign exchange risk. Moreover, the
derivatives used are designated as a hedge and reduce the indicated risk by
having a high correlation between changes in the value of the derivatives
and the items being hedged at both the inception of the hedge and throughout
the hedge period. Should such criteria not be met or if the hedged items are
sold, terminated or matured, the change in value of the derivatives is
included in net income.
Mortgage loans on real estate are reported at unpaid balances, less
allowances for impairments. Real estate is reported at depreciated cost.
Realized investment gains and losses on investments sold are determined
using the specific identification method. Changes in admitted asset carrying
amounts of bonds, mortgage loans and common and preferred stocks are
credited or charged directly in unassigned surplus.
LOANED SECURITIES
Securities loaned are treated as collateralized financing transactions and a
liability is recorded equal to the cash collateral received which is
typically greater than the market value of the related securities loaned. In
other instances, the Company will hold as collateral securities with a
market value at least equal to the securities loaned. Securities held as
collateral are not recorded in the Company's balance sheet in accordance
with accounting guidance for secured borrowings and collateral. The
Company's agreements with third parties generally contain contractual
provisions to allow for additional collateral to be obtained when necessary.
The Company values collateral daily and obtains additional collateral when
deemed appropriate.
GOODWILL
Goodwill, which represents the excess, subject to certain limitations, of
the ceding commission over statutory-basis net assets of business purchased
S-8
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
under an assumption reinsurance agreement, is amortized on a straight-line
basis over ten years.
PREMIUMS
Life insurance and annuity premiums are recognized as revenue when due.
Accident and health premiums are earned pro rata over the contract term of
the policies.
BENEFITS
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables using
statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
Insurance Department. The Company waives deduction of deferred fractional
premiums on the death of life and annuity policy insureds and returns any
premium beyond the date of death, except for policies issued prior to March
1977. Surrender values on policies do not exceed the corresponding benefit
reserves. Additional reserves are established when the results of cash flow
testing under various interest rate scenerios indicate the need for such
reserves. If net premiums exceed the gross premiums on any insurance
in-force, additional reserves are established. Benefit reserves for policies
underwritten on a substandard basis are determined using the multiple table
reserve method.
The tabular interest, tabular less actual reserves released and tabular cost
have been determined by formula or from the basic data for such items.
Tabular interest funds not involving life contingencies were determined
using the actual interest credited to the funds plus the change in accrued
interest.
Liabilities related to guaranteed investment contracts and policyholder
funds left on deposit with the Company generally are equal to fund balances
less applicable surrender charges.
CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Unpaid claims and claim adjustment expenses on accident and health policies
represent the estimated ultimate net cost of all reported and unreported
claims incurred during the year. The Company does not discount claims and
claim adjustment expense reserves. The reserves for unpaid claims and claim
adjustment expenses are estimated using individual case-basis valuations and
statistical analyses. Those estimates are subject to the effects of trends
in claim severity and frequency. Although considerable variability is
inherent in such estimates, management believes that the reserves for claims
and claim adjustment expenses are adequate. The estimates are continually
reviewed and adjusted as necessary as experience develops or new information
becomes known; such adjustments are included in current operations.
REINSURANCE CEDED AND ASSUMED
Reinsurance premiums, benefits and claims and claim adjustment expenses are
accounted for on bases consistent with those used in accounting for the
original policies issued and the terms of the reinsurance contracts. Certain
business is transacted on a funds withheld basis and investment income on
investments managed by the Company are reported in net investment income.
PENSION BENEFITS
Costs associated with the Company's defined benefit pension plans are
systematically accrued during the expected period of active service of the
covered employees.
INCOME TAXES
The Company and eligible subsidiaries have elected to file consolidated
federal and state income tax returns with LNC and certain LNC subsidiaries.
Pursuant to an intercompany tax sharing agreement with LNC, the Company
provides for income taxes on a separate return filing basis. The tax sharing
agreement also provides that the Company will receive benefit for net
operating losses, capital losses and tax credits which are not usable on a
separate return basis to the extent such items may be utilized in the
consolidated income tax returns of LNC.
STOCK OPTIONS
The Company recognizes compensation expense for its stock option incentive
plans using the intrinsic value method of accounting. Under the terms of the
intrinsic value method, compensation cost is the excess, if any, of the
quoted market price of
S-9
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
LNC's common stock at the grant date, or other measurement date, over the
amount an employee or agent must pay to acquire the stock.
ASSETS HELD IN SEPARATE ACCOUNTS AND LIABILITIES RELATED TO SEPARATE
ACCOUNTS
Separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for variable life
and variable annuity contracts and for which the contractholder, rather than
the Company, bears the investment risk. Separate account assets are reported
at fair value. The operations of the separate accounts are not included in
the accompanying financial statements. Policy administration and investment
management fees charged on separate account policyholder deposits are
included in income from separate account investment management and
administration service fees. Mortality charges on variable universal life
contracts are included in income from expense charges on deposit funds. Fees
charged relative to variable annuity and variable universal life
administration agreements for separate account products sold by other
insurance companies and not recorded on the Company's financial statements
are included in income from separate account investment management and
administration service fees.
2. PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company's statutory-basis financial statements are prepared in
accordance with accounting practices prescribed or permitted by the
Insurance Department. "Prescribed" statutory accounting practices are
interspersed throughout state insurance laws and regulations, the NAIC's
ACCOUNTING PRACTICES AND PROCEDURES MANUAL and a variety of other NAIC
publications. "Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state and may
change in the future.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification") effective January 1, 2001. Codification will likely change,
to some extent, prescribed statutory accounting practices and may result in
changes to the accounting practices that the Company uses to prepare its
statutory-basis financial statements. Codification will require adoption by
the various states before it becomes the prescribed statutory-basis of
accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for the Company, the
state of Indiana must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis
results to the Insurance Department. At this time, it is anticipated that
Indiana will adopt Codification, however, based on current guidance,
management believes that the impact of Codification will not be material to
the Company's statutory-basis financial statements.
S-10
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
The major categories of net investment income are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------------------------------------
(IN MILLIONS)
--------------------------------------
<S> <C> <C> <C>
Income:
Bonds $1,840.6 $1,714.3 $1,524.4
------------------------------------------------------------
Preferred stocks 20.3 19.7 23.5
------------------------------------------------------------
Unaffiliated common stocks 6.3 10.6 8.3
------------------------------------------------------------
Affiliated common stocks 7.8 5.2 15.0
------------------------------------------------------------
Mortgage loans on real estate 321.0 323.6 257.2
------------------------------------------------------------
Real estate 57.8 81.4 92.2
------------------------------------------------------------
Policy loans 101.7 86.5 37.5
------------------------------------------------------------
Other investments 50.6 26.5 28.2
------------------------------------------------------------
Cash and short-term investments 95.9 104.7 70.3
------------------------------------------------------------ -------- -------- --------
Total investment income 2,502.0 2,372.5 2,056.6
------------------------------------------------------------
Expenses:
Depreciation 14.4 19.3 21.0
------------------------------------------------------------
Other 284.4 246.0 188.5
------------------------------------------------------------ -------- -------- --------
Total investment expenses 298.8 265.3 209.5
------------------------------------------------------------ -------- -------- --------
Net investment income $2,203.2 $2,107.2 $1,847.1
------------------------------------------------------------ ======== ======== ========
</TABLE>
S-11
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
The cost or amortized cost, gross unrealized gains and
losses and the fair value of investments in bonds are
summarized as follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------------------------
(IN MILLIONS)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1999:
Corporate $17,758.4 $ 229.6 $763.0 $17,225.0
------------------------------------------------
U.S. government 316.8 29.6 21.5 324.9
------------------------------------------------
Foreign government 984.5 49.8 39.9 994.4
------------------------------------------------
Mortgage-backed 3,913.7 46.2 139.0 3,820.9
------------------------------------------------
State and municipal 11.6 -- .5 11.1
------------------------------------------------ --------- -------- ------ ---------
$22,985.0 $ 355.2 $963.9 $22,376.3
========= ======== ====== =========
At December 31, 1998:
Corporate $17,658.4 $1,159.8 $148.2 $18,670.0
------------------------------------------------
U.S. government 900.7 88.8 3.4 986.1
------------------------------------------------
Foreign government 947.8 59.9 61.2 946.5
------------------------------------------------
Mortgage-backed 4,312.1 171.6 33.4 4,450.3
------------------------------------------------
State and municipal 11.9 .7 -- 12.6
------------------------------------------------ --------- -------- ------ ---------
$23,830.9 $1,480.8 $246.2 $25,065.5
========= ======== ====== =========
</TABLE>
The carrying amounts of bonds in the balance sheets at
December 31, 1999 and 1998 reflect adjustments of
$38,900,000 and $11,800,000, respectively, to decrease
amortized cost as a result of the Securities Valuation
Office of the NAIC ("SVO") designating certain investments
as in or near default.
A summary of the cost or amortized cost and fair value of
investments in bonds at December 31, 1999, by contractual
maturity, is as follows:
<TABLE>
<CAPTION>
COST OR
AMORTIZED FAIR
COST VALUE
-------------------------
(IN MILLIONS)
-------------------------
<S> <C> <C>
Maturity:
In 2000 $ 598.0 $ 599.2
------------------------------------------------------------
In 2001-2004 4,359.8 4,313.4
------------------------------------------------------------
In 2005-2009 6,636.0 6,392.9
------------------------------------------------------------
After 2009 7,477.5 7,249.9
------------------------------------------------------------
Mortgage-backed securities 3,913.7 3,820.9
------------------------------------------------------------ --------- ---------
Total $22,985.0 $22,376.3
------------------------------------------------------------ ========= =========
</TABLE>
S-12
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
The expected maturities may differ from the contractual
maturities in the foregoing table because certain borrowers
may have the right to call or prepay obligations with or
without call or prepayment penalties.
Proceeds from sales of investments in bonds during 1999,
1998 and 1997 were $5,351,400,000, $9,395,000,000 and
$9,715,000,000, respectively. Gross gains during 1999, 1998
and 1997 of $95,400,000, $186,300,000 and $218,100,000,
respectively, and gross losses of $195,500,000, $138,000,000
and $78,000,000, respectively, were realized on those sales.
At December 31, 1999 and 1998, investments in bonds, with an
admitted asset value of $116,500,000 and $97,800,000,
respectively, were on deposit with state insurance
departments to satisfy regulatory requirements.
Unrealized gains and losses on investments in unaffiliated
common stocks are reported directly in unassigned surplus
and are not reported in the statutory-basis Statements of
Operations. The cost or amortized cost, gross unrealized
gains and losses and the fair value of investments in
unaffiliated common stocks and preferred stocks are as
follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------
(IN MILLIONS)
-----------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1999:
Preferred stocks $253.8 $ 1.3 $31.5 $223.6
----------------------------------------
Unaffiliated common stocks 150.4 34.2 17.7 166.9
----------------------------------------
At December 31, 1998:
Preferred stocks $236.0 $ 8.9 $ 2.4 $242.5
----------------------------------------
Unaffiliated common stocks 223.3 62.0 26.0 259.3
----------------------------------------
</TABLE>
The carrying amount of preferred stocks in the balance
sheets at December 31, 1999 and 1998 reflects adjustments of
$4,100,000 and $5,800,000, respectively, to decrease
amortized cost as a result of the SVO designating certain
investments as low or lower quality.
During 1999, the minimum and maximum lending rates for
mortgage loans were 6.5% and 11.5%, respectively. At the
issuance of a loan, the percentage of loan to value on any
one loan does not exceed 75%. All properties covered by
mortgage loans have fire insurance at least equal to the
excess of the loan over the maximum loan that would be
allowed on the land without the building.
S-13
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
Components of the Company's investments in real estate are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------------
(IN MILLIONS)
-------------------
<S> <C> <C>
Occupied by the Company:
Land $ 2.5 $ 2.5
------------------------------------------------------------
Buildings 11.1 9.0
------------------------------------------------------------
Less accumulated depreciation (2.2) (1.7)
------------------------------------------------------------ ------ ------
Net real estate occupied by the Company 11.4 9.8
------------------------------------------------------------
Other:
Land 46.2 93.2
------------------------------------------------------------
Buildings 226.8 413.0
------------------------------------------------------------
Other 4.7 7.9
------------------------------------------------------------
Less accumulated depreciation (35.1) (50.1)
------------------------------------------------------------ ------ ------
Net other real estate 242.6 464.0
------------------------------------------------------------ ------ ------
Net real estate $254.0 $473.8
------------------------------------------------------------ ====== ======
</TABLE>
Net realized capital gains are reported net of federal
income taxes and amounts transferred to the IMR as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------
(IN MILLIONS)
--------------------------------
<S> <C> <C> <C>
Net realized capital gains $ 20.8 $179.7 $209.3
------------------------------------------------------------
Less amount transferred to IMR (net of related taxes
(credits) of ($31.4), $27.3 and $54.0 in 1999, 1998 and
1997, respectively) (58.3) 50.8 100.2
------------------------------------------------------------ ------ ------ ------
79.1 128.9 109.1
Less federal income taxes (credits) on realized gains (35.3) 82.1 77.8
------------------------------------------------------------ ------ ------ ------
Net realized capital gains after transfer to IMR and taxes
(credits) $114.4 $ 46.8 $ 31.3
------------------------------------------------------------ ====== ====== ======
</TABLE>
4. SUBSIDIARIES
The Company owns 100% of the outstanding common stock of
four insurance company subsidiaries: First Penn-Pacific Life
Insurance Company ("First Penn"), Lincoln National Health &
Casualty Insurance Company ("LNH&C"), Lincoln National
Reassurance Company ("LNRAC") and Lincoln Life & Annuity
Company of New York ("LNY"). The Company also owns 100% of
the outstanding common stock of four non-insurance company
subsidiaries: Lincoln National Insurance Associates
("LNIA"), Sagemark Consulting, Inc. ("Sagemark"), Wakefield
Tower Alpha Limited ("Wakefield"), and Lincoln Realty
Capital
S-14
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
4. SUBSIDIARIES (CONTINUED)
Corporation ("LRCC"). The Company also owns 85% of one
non-insurance company subsidiary, AnnuityNet, Inc.
(AnnuityNet). Statutory-basis financial information related
to the insurance subsidiaries is summarized as follows (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
FIRST
PENN LNH&C LNRAC LNY
----------------------------------
<S> <C> <C> <C> <C>
Cash and invested assets $1,318.7 $434.6 $443.6 $1,888.6
---------------------------------------------------------
Other assets 40.6 55.5 492.6 403.1
--------------------------------------------------------- -------- ------ ------ --------
Total admitted assets $1,359.3 $490.1 $936.2 $2,291.7
--------------------------------------------------------- ======== ====== ====== ========
Insurance reserves $1,242.2 $394.4 $261.4 $1,802.4
---------------------------------------------------------
Other liabilities 44.3 27.9 614.4 25.6
---------------------------------------------------------
Liabilities related to separate accounts -- -- -- 328.8
---------------------------------------------------------
Capital and surplus 72.8 67.8 60.4 134.9
--------------------------------------------------------- -------- ------ ------ --------
Total liabilities and capital and surplus $1,359.3 $490.1 $936.2 $2,291.7
--------------------------------------------------------- ======== ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------
FIRST
PENN LNH&C LNRAC LNY
-----------------------------------------------
<S> <C> <C> <C> <C>
Revenues $332.7 $263.3 $ 88.4 $ 313.3
-----------------------------------------------------------
Expenses 329.0 346.9 75.4 291.4
-----------------------------------------------------------
Net realized gains (losses) -- -- .2 (2.0)
----------------------------------------------------------- ------ ------ ------ --------
Net income (loss) $ 3.7 $(83.6) $ 13.2 $ 19.9
----------------------------------------------------------- ====== ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------
FIRST
PENN LNH&C LNRAC LNY
----------------------------------
<S> <C> <C> <C> <C>
Cash and invested assets $1,221.1 $333.9 $403.6 $1,938.0
----------------------------------------------------------
Other assets 40.3 31.3 490.0 270.2
---------------------------------------------------------- -------- ------ ------ --------
Total admitted assets $1,261.4 $365.2 $893.6 $2,208.2
---------------------------------------------------------- ======== ====== ====== ========
Insurance reserves $1,149.8 $266.3 $281.8 $1,814.5
----------------------------------------------------------
Other liabilities 42.0 24.0 553.7 45.1
----------------------------------------------------------
Liabilities related to separate accounts -- -- -- 236.9
----------------------------------------------------------
Capital and surplus 69.6 74.9 58.1 111.7
---------------------------------------------------------- -------- ------ ------ --------
Total liabilities and capital and surplus $1,261.4 $365.2 $893.6 $2,208.2
---------------------------------------------------------- ======== ====== ====== ========
</TABLE>
S-15
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
4. SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------
FIRST
PENN LNH&C LNRAC LNY
---------------------------------
<S> <C> <C> <C> <C>
Revenues $310.4 $ 165.0 $150.3 $1,402.6
-----------------------------------------------------------
Expenses 310.6 164.4 139.5 1,656.1
-----------------------------------------------------------
Net realized gains (losses) (0.3) 0.9 (0.1) (0.7)
----------------------------------------------------------- ------ ------- ------ --------
Net income (loss) $ (0.5) $ 1.5 $10.7 $ (254.2)
----------------------------------------------------------- ====== ======= ====== ========
</TABLE>
AnnuityNet was formed in 1998 for the distribution of
variable annuities over the Internet and is valued on the
equity method (at 85% of GAAP equity) with an admitted asset
value of $2,400,000 at December 31, 1999. LNIA was purchased
in 1998 for $600,000 and is valued on the equity method with
an admitted asset value of $800,000 at December 31, 1999.
Sagemark is a broker dealer and was acquired in connection
with a reinsurance transaction completed in 1998. Sagemark
is valued on the equity method with an admitted asset value
of $6,400,000 at December 31, 1999. Wakefield was formed in
1999 to engage in the ownership and management of
investments and is valued on the equity method with an
admitted asset value of $248,300,000. Wakefield's assets as
of December 31, 1999 consist entirely of investments in
bonds. LRCC was formed in 1999 to engage in the management
of certain real estate investments. It was capitalized with
cash and three real estate investments of $12,700,000 and is
valued on the equity method with an admitted asset value of
$10,900,000.
The carrying value of all affiliated common stocks, was
$604,700,000 and $322,100,000 at December 31, 1999 and 1998,
respectively. The insurance affiliates are carried at
statutory-basis net equity while other affiliates are
recorded at GAAP-basis net equity, adjusted for certain
items which would be non-admitted under statutory accounting
principles. The cost basis of investments in subsidiaries as
of December 31, 1999 and 1998 was $970,700,000 and
$631,100,000, respectively.
During 1999, 1998 and 1997 the Company's insurance
subsidiaries paid dividends of $5,200,000, $5,200,000 and
$15,000,000, respectively.
5. FEDERAL INCOME TAXES
The effective federal income tax rate in the accompanying
Statements of Operations differs from the prevailing
statutory tax rate principally due to tax-exempt investment
income, dividends received tax deductions and differences
between statutory accounting and tax return recognition
relative to policy acquisition costs, policy and contract
liabilities and reinsurance ceding commissions.
In 1999, 1998 and 1997, federal income tax expense (benefit)
incurred totaled $85,400,000, ($141,000,000) and
$78,300,000, respectively. In 1999, capital losses of
$151,700,000 were incurred, and carried back to recover
taxes paid in prior years.
The Company paid $45,300,000, $2,300,000 and $164,500,000 to
LNC in 1999, 1998 and 1997, respectively, in federal income
taxes.
Under prior income tax law, one-half of the excess of a life
insurance company's income from operations over its taxable
investment income was not taxed, but was set aside in a
special tax account designated as "Policyholders' Surplus."
The Company has approximately $187,000,000 of untaxed
"Policyholders' Surplus" on which no payment of federal
S-16
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
5. FEDERAL INCOME TAXES (CONTINUED)
income taxes will be required unless it is distributed as a
dividend, or under other specified conditions. Barring the
passage of unfavorable legislation, the Company does not
believe that any significant portion of the account will be
taxed in the foreseeable future and no related tax liability
has been recognized. If the entire balance of the account
became taxable under the current federal income tax rate,
the tax would be approximately $65,500,000.
6. SUPPLEMENTAL FINANCIAL DATA
The balance sheet caption "Reinsurance recoverable" includes
amounts recoverable from other insurers for claims paid by
the Company. The balance sheet caption, "Future policy
benefits and claims," and the balance sheet caption "Other
policyholder funds" have been reduced for insurance ceded as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-----------------------
(IN MILLIONS)
-----------------------
<S> <C> <C>
Insurance ceded $5,340.0 $4,081.8
------------------------------------------------------------
Amounts recoverable from other insurers 81.2 79.9
------------------------------------------------------------
</TABLE>
Reinsurance transactions, excluding assumption reinsurance,
included in the income statement caption, "Premiums and
deposits," are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------
(IN MILLIONS)
------------------------------------
<S> <C> <C> <C>
Insurance assumed $2,606.5 $9,018.9 $727.2
------------------------------------------------------------
Insurance ceded 1,675.1 877.1 302.9
------------------------------------------------------------ -------- -------- ------
Net amount included in premiums $ 931.4 $8,141.8 $424.3
------------------------------------------------------------ ======== ======== ======
</TABLE>
The income statement caption, "Benefits and settlement
expenses," is net of reinsurance recoveries of
$2,609,000,000, $2,098,800,000 and $1,240,500,000 for 1999,
1998 and 1997, respectively.
Details underlying the balance sheet caption "Other
policyholder funds" are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------------------
(IN MILLIONS)
-------------------------
<S> <C> <C>
Premium deposit funds $16,208.3 $16,285.2
------------------------------------------------------------
Undistributed earnings on participating business 346.9 348.4
------------------------------------------------------------
Other 34.3 13.9
------------------------------------------------------------ --------- ---------
$16,589.5 $16,647.5
========= =========
</TABLE>
S-17
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
6. SUPPLEMENTAL FINANCIAL DATA (CONTINUED)
Deferred and uncollected life insurance premiums and annuity
considerations included in the balance sheet caption,
"Premiums and fees in course of collection," are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------
NET OF
GROSS LOADING LOADING
---------------------------------
(IN MILLIONS)
---------------------------------
<S> <C> <C> <C>
Ordinary new business $10.8 $ 7.3 $ 3.5
------------------------------------------------------------
Ordinary renewal 54.2 6.8 47.4
------------------------------------------------------------
Group life 13.7 .1 13.6
------------------------------------------------------------ ----- ----- -----
$78.7 $14.2 $64.5
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------
NET OF
GROSS LOADING LOADING
---------------------------------
(IN MILLIONS)
---------------------------------
<S> <C> <C> <C>
Ordinary new business $ 9.5 $ 3.4 $ 6.1
------------------------------------------------------------
Ordinary renewal (13.7) 11.3 (25.0)
------------------------------------------------------------
Group life 14.2 .2 14.0
------------------------------------------------------------ ----- ----- -----
$10.0 $14.9 $(4.9)
===== ===== =====
</TABLE>
7. ANNUITY RESERVES
At December 31, 1999, the Company's annuity reserves and
deposit fund liabilities, including separate accounts, that
are subject to discretionary withdrawal with adjustment,
subject to discretionary withdrawal without adjustment and
not subject to discretionary withdrawal provisions are
summarized as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
-----------------------
(IN MILLIONS)
-----------------------
<S> <C> <C>
Subject to discretionary withdrawal with adjustment:
With market value adjustment $ 2,427.7 4%
------------------------------------------------------------
At book value, less surrender charge 2,237.3 3
------------------------------------------------------------
At market value 44,076.2 68
------------------------------------------------------------ --------- ---
48,741.2 75
Subject to discretionary withdrawal without adjustment at
book value with minimal or no charge or adjustment 13,486.5 21
------------------------------------------------------------
Not subject to discretionary withdrawal 2,622.4 4
------------------------------------------------------------ --------- ---
Total annuity reserves and deposit fund 64,850.1 100%
------------------------------------------------------------ ===
Less reinsurance 1,548.0
------------------------------------------------------------ ---------
Net annuity reserves and deposit fund liabilities, including
separate accounts $63,302.1
------------------------------------------------------------ =========
</TABLE>
S-18
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL AND SURPLUS
In 1998, the Company issued two surplus notes to LNC in return for cash of
$1,250,000,000. The first note for $500,000,000 was issued to LNC in
connection with the CIGNA Corporation ("CIGNA")indemnity reinsurance
transaction on January 5, 1998. This note calls for the Company to pay the
principal amount of the notes on or before March 31, 2028 and interest to be
paid quarterly at an annual rate of 6.56%. Subject to approval by the
Indiana Insurance Commissioner, LNC also has a right to redeem the note for
immediate repayment in total or in part once per year on the anniversary
date of the note, but not before January 5, 2003. Any payment of interest or
repayment of principal may be paid only out of the Company's earnings, only
if the Company's surplus exceeds specified levels ($2,315,700,000 at
December 31, 1999), and subject to approval by the Indiana Insurance
Commissioner.
The second note for $750,000,000 was issued on December 18, 1998 to LNC in
connection with the Aetna, Inc. ("Aetna") indemnity reinsurance transaction.
This note calls for the Company to pay the principal amount of the notes on
or before December 31, 2028 and interest to be paid quarterly at an annual
rate of 6.03%. Subject to approval by the Indiana Insurance Commissioner,
LNC also has a right to redeem the note for immediate repayment in total or
in part once per year on the anniversary date of the note, but not before
December 18, 2003. Any payment of interest or repayment of principal may be
paid only out of the Company's earnings, only if the Company's surplus
exceeds specified levels ($2,379,600,000 at December 31, 1999), and subject
to approval by the Indiana Insurance Commissioner.
A summary of the terms of these surplus notes follows (in millions):
<TABLE>
<CAPTION>
PRINCIPAL INCEPTION ACCRUED
OUTSTANDING AT TO DATE INTEREST AT
PRINCIPAL DECEMBER 31, CURRENT YEAR INTEREST DECEMBER 31,
DATE ISSUED AMOUNT OF NOTE 1999 INTEREST PAID PAID 1999
----------- -------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
January 5, 1998 $ 500.0 $ 500.0 $ 32.8 $ 65.1 $ --
-------------------------------
December 18, 1998 750.0 750.0 46.7 46.7 --
-------------------------------
</TABLE>
Life insurance companies are subject to certain Risk-Based Capital ("RBC")
requirements as specified by the NAIC. Under those requirements, the amount
of capital and surplus maintained by a life insurance company is to be
determined based on the various risk factors related to it. At December 31,
1999, the Company exceeds the RBC requirements.
The payment of dividends by the Company is limited and cannot be made except
from earned profits. The maximum amount of dividends that may be paid by
life insurance companies without prior approval of the Indiana Insurance
Commissioner is subject to restrictions relating to statutory surplus and
net gain from operations. In January 1998, the Company assumed a block of
individual life insurance and annuity business from CIGNA and in
October 1998, the Company assumed a block of individual life insurance
business from Aetna (SEE NOTE 10). The statutory accounting regulations do
not allow goodwill to be recognized on indemnity reinsurance transactions
and therefore, the related ceding commission was expensed in the
accompanying Statement of Operations and resulted in the reduction of
unassigned surplus. As a result of these transactions, the Company's
statutory-basis unassigned surplus is negative as of December 31, 1999 and
it will be necessary for the Company to obtain prior approval of the Indiana
Insurance Commissioner before paying any dividends to LNC until such time as
statutory-basis unassigned surplus is positive. The time frame for
unassigned surplus to return to a positive position is dependent upon future
statutory earnings and dividends paid to LNC. Although no assurance can be
given, management believes that the approvals for the payment of such
dividends in amounts consistent with those paid in the past can be obtained.
S-19
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFIT PLANS
LNC maintains defined benefit pension plans for its employees (including
Company employees) and a defined contribution plan for the Company's agents.
LNC also maintains 401(k) plans, deferred compensation plans and
postretirement medical and life insurance plans for its employees and agents
(including the Company's employees and agents). Effective July 1, 1999, the
agents' postretirement plan was changed to require agents retiring on or
after that date to pay the full premium costs. This change to the plan
resulted in a one-time curtailment gain of $1,400,000 in 1999. The aggregate
expenses and accumulated obligations for the Company's portion of these
plans are not material to the Company's statutory-basis financial Statements
of Operations or financial position for any of the periods shown.
LNC has various incentive plans for key employees, agents and directors of
LNC and its subsidiaries that provide for the issuance of stock options,
stock appreciation rights, restricted stock awards and stock incentive
awards. These plans are comprised primarily of stock option incentive plans.
Stock options granted under the stock option incentive plans are at the
market value at the date of grants and, subject to termination of
employment, expire ten years from the date of grant. Such options are
transferable only upon death and are exercisable one year from the date of
grant for options issued prior to 1992. Options issued subsequent to 1991
are exercisable in 25% increments on the option issuance anniversary in the
four years following issuance.
As of December 31, 1999, there were 2,072,087 and 1,397,005 shares of LNC
common stock subject to options granted to Company employees and agents,
respectively, under the stock option incentive plans of which 919,749 and
241,097, respectively, were exercisable on that date. The exercise prices of
the outstanding options range from $12.50 to $56.75. During 1999, 1998 and
1997, there were 318,421, 136,469 and 170,789 options exercised,
respectively, and 82,024, 18,288 and 1,846 options forfeited, respectively.
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES
DISABILITY INCOME CLAIMS
The liability for disability income claims net of the related asset for
amounts recoverable from reinsurers at December 31, 1999 and 1998 is
$221,600,000 and $670,100,000, respectively. This liability is based on the
assumption that the recent experience will continue in the future. If
incidence levels and/or claim termination rates fluctuate significantly from
the assumptions underlying reserves, adjustments to reserves could be
required in the future. Accordingly, this liability may prove to be
deficient or excessive. The Company reviews reserve levels on an ongoing
basis. However, it is management's opinion that such future development will
not materially affect the financial position of the Company.
During 1997, the Company conducted an in-depth review of loss experience on
its disability income business. As a result of this study, the reserve level
was deemed to be inadequate to meet future obligations if current incident
levels were to continue in the future. In order to address this situation,
the Company strengthened its disability income reserves by $80,000,000 in
1997.
PERSONAL ACCIDENT PROGRAMS
In the past, the Company and its wholly owned subsidiary, LNH&C, accepted
personal accident reinsurance programs from other insurance companies. Most
of these programs were presented by independent brokers who represented the
ceding companies. Certain excess-of-loss personal accident reinsurance
programs created in the London market during 1993 through 1996 have produced
and have potential to produce significant losses. The liabilities for these
programs, net of related assets recoverable from reinsurers, were
$174,700,000 and $177,400,000 at December 31, 1999 and 1998, respectively.
Settlement activities relating to the Company's participation in workers'
compensation carve-out (i.e., life and health risks associated with workers'
compensation coverage) programs managed by Unicover Managers, Inc. have
allowed the Company to evaluate the possibility of settlements and to
estimate its potential costs to settle Unicover-related exposures. As of
December 31, 1999, a liability of $62,200,000 has been established for the
S-20
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
settlement of the Company's exposure to the Unicover programs.
These amounts are based on various estimates that are subject to
considerable uncertainty. Accordingly, the liabilities may prove to be
deficient or excessive. However, it is management's opinion that future
developments in these programs will not materially affect the financial
position of the Company.
HMO EXCESS-OF-LOSS REINSURANCE PROGRAMS
In light of the continued volatility in the HMO excess-of-loss line of
business, LNH&C discontinued writing new HMO excess-of-loss reinsurance
programs in the third quarter of 1999. The liability for HMO claims, net of
the related assets for amounts recoverable from reinsurers, was $101,900,000
and $55,900,000 at December 31, 1999 and 1998, respectively. LNH&C reviews
reserve levels on an ongoing basis. The liability is based on the assumption
that recent experience will continue in the future. If claims and loss
ratios fluctuate significantly from the assumptions underlying the reserves,
adjustments to reserves could be required in the future. Accordingly, the
liability may prove to be deficient or excessive. However, it is
management's opinion that such future developments will not materially
affect the financial position of the Company.
MARKETING AND COMPLIANCE MATTERS
Regulators continue to focus on market conduct and compliance issues. Under
certain circumstances, companies operating in the insurance and financial
services markets have been held responsible for providing incomplete or
misleading sales materials and for replacing existing policies with policies
that were less advantageous to the policyholder. The Company's management
continues to monitor the Company's sales materials and compliance procedures
and is making an extensive effort to minimize any potential liability. Due
to the uncertainty surrounding such matters, it is not possible to provide a
meaningful estimate of the range of potential outcomes at this time;
however, it is management's opinion that such future development will not
materially affect the financial position of the Company.
GROUP PENSION ANNUITIES
The liabilities for guaranteed interest and group pension annuity contracts,
which are no longer being sold by the Company, are supported by a single
portfolio of assets that attempts to match the duration of these
liabilities. Due to the long-term nature of group pension annuities and the
resulting inability to exactly match cash flows, a risk exists that future
cash flows from investments will not be reinvested at rates as high as
currently earned by the portfolio. Accordingly, these liabilities may prove
to be deficient or excessive. However, it is management's opinion that such
future development will not materially affect the financial position of the
Company.
LEASES
The Company leases its home office properties through sale-leaseback
agreements. The agreements provide for a 25 year lease period with options
to renew for six additional terms of five years each. The agreements also
provide the Company with the right of first refusal to purchase the
properties during the term of the lease, including renewal periods, at a
price as defined in the agreements. The Company also has the option to
purchase the leased properties at fair market value as defined in the
agreements on the last day of the initial 25-year lease ending in 2009 or on
the last day of any of the renewal periods.
Total rental expense on operating leases in 1999, 1998 and 1997 was
$38,900,000, $34,000,000 and $29,300,000, respectively. Future minimum
rental commitments are as follows (in millions):
<TABLE>
<S> <C>
2000 $ 28.7
--------------------------------
2001 28.8
--------------------------------
2002 27.5
--------------------------------
2003 26.2
--------------------------------
2004 26.5
--------------------------------
Thereafter 123.5
-------------------------------- ------
$261.2
======
</TABLE>
INFORMATION TECHNOLOGY COMMITMENT
In February 1998, the Company signed a seven-year contract with IBM Global
Services for information technology services for the Fort Wayne
S-21
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
operations. Total costs incurred in 1999 and 1998 were $67,400,000 and
$54,800,000, respectively. Future minimum annual costs range from
$33,600,000 to $56,800,000, however future costs are dependent on usage and
could exceed these amounts.
INSURANCE CEDED AND ASSUMED
The Company cedes insurance to other companies, including certain
affiliates. The portion of risks exceeding the Company's retention limit is
reinsured with other insurers. The Company limits its maximum coverage that
it retains on an individual to $10,000,000. Portions of the Company's
deferred annuity business have also been coinsured with other companies to
limit its exposure to interest rate risks. At December 31, 1999, the
reserves associated with these reinsurance arrangements totaled
$1,422,800,000. To cover products other than life insurance, the Company
acquires other insurance coverages with retentions and limits that
management believes are appropriate for the circumstances. The Company
remains liable if its reinsurers are unable to meet their contractual
obligations under the applicable reinsurance agreements.
Proceeds from the sale of common stock of American States Financial
Corporation ("American States") and proceeds from the January 5, 1998
surplus note, were used to finance an indemnity reinsurance transaction
whereby the Company and LNY reinsured 100% of a block of individual life
insurance and annuity business from CIGNA. The Company paid $1,264,400,000
to CIGNA on January 2, 1998 under the terms of the reinsurance agreement and
recognized a ceding commission expense of $1,127,700,000 in 1998, which is
included in the Statement of Operations line item "Underwriting,
acquisition, insurance and other expenses." At the time of closing, this
block of business had statutory liabilities of $4,780,300,000 that became
the Company's obligation. The Company also received assets, measured on a
historical statutory-basis, equal to the liabilities.
In connection with the completion of the CIGNA reinsurance transaction, the
Company recorded a charge of $31,000,000 to cover certain costs of
integrating the existing operations with the new block of business.
In 1999, the Company and CIGNA reached an agreement through arbitration on
the final statutory-basis values of the assets and liabilities reinsured. As
a result, the Company's ceding commission for this transaction was reduced
by $58.6 million.
Subsequent to this transaction, the Company and LNY announced that they had
reached an agreement to sell the administration rights to a variable annuity
portfolio that had been acquired as part of the block of business assumed on
January 2, 1998. This sale closed on October 12, 1998 with an effective date
of September 1, 1998.
On October 1, 1998, the Company and LNY entered into an indemnity
reinsurance transaction whereby the Company and LNY reinsured 100% of a
block of individual life insurance business from Aetna. The Company paid
$856,300,000 to Aetna on October 1, 1998 under the terms of the reinsurance
agreement and recognized a ceding commission expense of $815,300,000 in
1998, which is included in the Statement of Operations line item
"Underwriting, acquisition, insurance and other expenses." At the time of
closing, this block of business had statutory liabilities of $2,813,800,000
that became the Company's obligation. The Company also received assets,
measured on a historical statutory-basis, equal to the liabilities. The
Company financed this reinsurance transaction with proceeds from short-term
debt borrowings from LNC until the December 18, 1998 surplus note was
approved by the Insurance Department. Subsequent to the Aetna transaction,
the Company and LNY announced that they had reached an agreement to
retrocede the sponsored life business assumed for $87,600,000. The
retrocession agreement closed on October 14, 1998 with an effective date of
October 1, 1998.
On November 1, 1999, the Company closed its previously announced agreement
to transfer a block of disability income business to MetLife. Under this
indemnity reinsurance agreement, the Company transferred $490,800,000 of
cash to MetLife representing the statutory reserves transferred on this
business less $17,800,000 of purchase price consideration. A gain on the
reinsurance transaction of $71,800,000 was recorded directly in unassigned
S-22
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
surplus and will be recognized in statutory earnings over the life of the
business.
The Company assumes insurance from other companies, including certain
affiliates. At December 31, 1999, the Company provided $270,000,000 of
statutory-basis surplus relief to other insurance companies under
reinsurance transactions. The Company retroceded 100% of this accepted
surplus relief to its off-shore reinsurance affiliates. Generally, such
amounts are offset by corresponding receivables from the ceding company,
which are secured by future profits on the reinsured business. However, the
Company is subject to the risk that the ceding company may become insolvent
and the right of offset would not be permitted.
The regulatory required liability for unsecured reserves ceded to
unauthorized reinsurers was $17,300,000 and $43,400,000 at December 31, 1999
and 1998, respectively.
VULNERABILITY FROM CONCENTRATIONS
At December 31, 1999, the Company did not have a material concentration of
financial instruments in a single investee or industry. The Company's
investments in mortgage loans principally involve commercial real estate. At
December 31, 1999, 29% of such mortgages ($1,212,700,000) involved
properties located in Texas and California. Such investments consist of
first mortgage liens on completed income-producing properties and the
mortgage outstanding on any individual property does not exceed $70,000,000.
At December 31, 1999, the Company did not have a concentration of:
1) business transactions with a particular customer, lender or distributor;
2) revenues from a particular product or service; 3) sources of supply of
labor or services used in the business; or 4) a market or geographic area in
which business is conducted that makes it vulnerable to an event that is at
least reasonably possible to occur in the near term and which could cause a
severe impact to the Company's financial condition.
OTHER CONTINGENCY MATTERS
The Company is involved in various pending or threatened legal proceedings
arising from the conduct of business. Most of these proceedings are routine
in the ordinary course of business. The Company maintains professional
liability insurance coverage for certain claims in excess of $5,000,000. The
degree of applicability of this coverage will depend on the specific facts
of each proceeding. In some instances, these proceedings include claims for
compensatory and punitive damages and similar types of relief in addition to
amounts for alleged contractual liability or requests for equitable relief.
After consultation with legal counsel and a review of available facts, it is
management's opinion that the ultimate liability, if any, under these
proceedings will not have a material adverse affect on the financial
position of the Company.
With the recent filing of a lawsuit alleging fraud in the sale of interest
sensitive universal and whole life insurance policies, the Company now has
several such actions pending. While each of these lawsuits seeks class
action status, the court has not certified a class in any of them. In each
of these lawsuits, plaintiffs seek unspecified damages and penalties for
themselves and on behalf of the putative class. While relief sought in these
lawsuits is substantial, they are in the discovery stages of litigation, and
it is premature to make assessments about potential loss, if any. Management
intends to defend these lawsuits vigorously. The amount of liability, if
any, which may arise as a result of these lawsuits cannot be reasonably
estimated at this time. In another lawsuit, a settlement has been
preliminarily approved by the court, and a class has been conditionally
certified for settlement purposes. Two other similar lawsuits previously
have been resolved and dismissed.
The number of insurance companies that are under regulatory supervision has
resulted, and is expected to continue to result, in assessments by state
guaranty funds to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments may be partially recovered
through a reduction in future premium taxes in some states. The Company has
accrued for expected assessments net of estimated future premium tax
deductions.
GUARANTEES
The Company has guarantees with off-balance-sheet risks whose contractual
amounts represent
S-23
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
credit exposure. Outstanding guarantees with off-balance-sheet risks at
December 31, 1999 relate to mortgage loan pass-through certificates. The
Company has sold commercial mortgage loans through grantor trusts that
issued pass-through certificates. The Company has agreed to repurchase any
mortgage loans which remain delinquent for 90 days at a repurchase price
substantially equal to the outstanding principal balance plus accrued
interest thereon to the date of repurchase. The outstanding guarantees as of
December 31, 1999 and 1998 were $25,900,000 and $30,900,000, respectively.
It is management's opinion that the value of the properties underlying these
commitments is sufficient that in the event of default the impact would not
be material to the Company. Accordingly, both the carrying value and fair
value of these guarantees is zero at December 31, 1999 and 1998.
DERIVATIVES
The Company has derivatives with off-balance-sheet risks whose notional or
contract amounts exceed the credit exposure. The Company has entered into
derivative transactions to reduce its exposure to fluctuations in interest
rates, the widening of bond yield spreads over comparable maturity U.S.
government obligations, commodity risk, credit risk and foreign exchange
risks. In addition, the Company is subject to the risks associated with
changes in the value of its derivatives; however, such changes in value
generally are offset by changes in the value of the items being hedged by
such contracts.
Outstanding derivatives with off-balance-sheet risks, shown in notional or
contract amounts along with their carrying value and estimated fair values,
are as follows:
<TABLE>
<CAPTION>
ASSETS (LIABILITIES)
---------------------------------
NOTIONAL OR CARRYING FAIR CARRYING FAIR
CONTRACT AMOUNTS VALUE VALUE VALUE VALUE
-----------------------------------------------------
DECEMBER 31 DECEMBER 31 DECEMBER 31
1999 1998 1999 1999 1998 1998
-----------------------------------------------------
(IN MILLIONS)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate derivatives:
Interest rate cap agreements $2,508.8 $4,108.8 $ 5.2 $ 3.2 $ 9.3 $ .9
---------------------------------
Swaptions 1,837.5 1,899.5 12.2 10.8 16.2 2.5
---------------------------------
Interest rate swaps 630.9 258.3 -- (19.5) -- 9.9
---------------------------------
Put options 21.3 21.3 -- 1.9 -- 2.2
--------------------------------- -------- -------- ----- ------ ----- -----
4,998.5 6,287.9 17.4 (3.6) 25.5 15.5
Foreign currency derivatives:
Forward contracts -- 1.5 -- -- -- --
---------------------------------
Foreign currency swaps 44.2 47.2 -- (.4) -- .3
--------------------------------- -------- -------- ----- ------ ----- -----
44.2 48.7 -- (.4) -- .3
Commodity derivatives:
Commodity swaps -- 8.1 -- -- -- 2.4
--------------------------------- -------- -------- ----- ------ ----- -----
$5,042.7 $6,344.7 $17.4 $ (4.0) $25.5 $18.2
======== ======== ===== ====== ===== =====
</TABLE>
S-24
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
A reconciliation of the notional or contract amounts for the significant
programs using derivative agreements and contracts at December 31 is as
follows:
<TABLE>
<CAPTION>
INTEREST RATE CAPS SWAPTIONS
-----------------------------------------------------
1999 1998 1999 1998
-----------------------------------------------------
(IN MILLIONS)
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of year $4,108.8 $4,900.0 $1,899.5 $1,752.0
-------------------------------------------------------
New contracts -- 708.8 -- 218.3
-------------------------------------------------------
Terminations and maturities (1,600.0) (1,500.0) (62.0) (70.8)
------------------------------------------------------- -------- -------- -------- --------
Balance at end of year $2,508.8 $4,108.8 $1,837.5 $1,899.5
------------------------------------------------------- ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
INTEREST RATE SWAPS
-----------------------
1999 1998
-----------------------
<S> <C> <C>
Balance at beginning of year $ 258.3 $ 10.0
------------------------------------------------------------
New contracts 482.4 2,226.6
------------------------------------------------------------
Terminations and maturities (109.8) (1,978.3)
------------------------------------------------------------ ------- ---------
Balance at end of year $ 630.9 $ 258.3
------------------------------------------------------------ ======= =========
</TABLE>
<TABLE>
<CAPTION>
COMMODITY
PUT OPTIONS SWAPS
----------------------------------------
1999 1998 1999 1998
----------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of year $21.3 $ -- $ 8.1 $ --
------------------------------------------------------------
New contracts -- 21.3 -- 8.1
------------------------------------------------------------
Terminations and maturities -- -- (8.1) --
------------------------------------------------------------ ----- ----- ----- ----
Balance at end of year $21.3 $21.3 $ -- $8.1
------------------------------------------------------------ ===== ===== ===== ====
</TABLE>
<TABLE>
<CAPTION>
FOREIGN CURRENCY DERIVATIVES
(FOREIGN INVESTMENTS)
-------------------------------------------
FOREIGN CURRENCY
SWAPS
FOREIGN EXCHANGE
-------------------------------------------
FORWARD CONTRACTS
1999 1998 1999 1998
-------------------------------------------
(IN MILLIONS)
-------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of year $ 1.5 $ 163.1 $47.2 $15.0
------------------------------------------------------------
New contracts 2.7 419.8 -- 39.2
------------------------------------------------------------
Terminations and maturities (4.2) (581.4) (3.0) (7.0)
------------------------------------------------------------ ----- ------- ----- -----
Balance at end of year $ -- $ 1.5 $44.2 $47.2
------------------------------------------------------------ ===== ======= ===== =====
</TABLE>
INTEREST RATE CAP AGREEMENTS
The interest rate cap agreements, which expire in 2000 through 2006, entitle
the Company to receive quarterly payments from the counterparties on
specified future reset dates, contingent on future interest rates. For each
cap, the amount of such payments, if any, is determined by the excess of a
market interest rate over a specified cap rate multiplied by the notional
amount divided by four. The purpose of the Company's interest rate cap
agreement program is to protect its annuity line of business from the effect
of rising interest rates. The
S-25
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
premium paid for the interest rate caps is included in other investments
(amortized costs of $5.2 million as of December 31, 1999) and is being
amortized over the terms of the agreements. This amortization is included in
net investment income.
SWAPTIONS
Swaptions, which expire in 2000 through 2003, entitle the Company to receive
settlement payments from the counterparties on specified expiration dates,
contingent on future interest rates. For each swaption, the amount of such
settlement payments, if any, is determined by the present value of the
difference between the fixed rate on a market rate swap and the strike rate
multiplied by the notional amount. The purpose of the Company's swaption
program is to protect its annuity line of business from the effect of rising
interest rates. The premium paid for the swaptions is included in other
investments (amortized cost of $12.2 million as of December 31, 1999) and is
being amortized over the terms of the agreements. This amortization is
included in net investment income.
SPREAD LOCK AGREEMENTS
Spread-lock agreements provide for a lump sum payment to or by the Company,
depending on whether the spread between the swap rate and a specified
government security is larger or smaller than a contractually specified
spread. Cash payments are based on the product of the notional amount, the
spread between the swap rate and the yield of an equivalent maturity
government security and the price sensitivity of the swap at that time. The
purpose of the Company's spread-lock program is to protect a portion of its
fixed maturity securities against widening of spreads. While spreadlocks are
used periodically, there are no spreadlock agreements outstanding at
December 31, 1999.
INTEREST RATE SWAP AGREEMENTS
The Company uses interest rate swap agreements to hedge its exposure to
floating rate bond coupon payments, replicating a fixed rate bond. An
interest rate swap is a contractual agreement to exchange payments at one or
more times based on the actual or expected price, level, performance or
value of one or more underlying interest rates. The Company is required to
pay the counterparty to the agreement the stream of variable interest
payments based on the coupon payments hedged bonds, and in turn, receives a
fixed payment from the counterparty at a predetermined interest rate. The
net receipts/payments from interest rate swaps are recorded in net
investment income. The Company also uses interest rate swap agreements to
hedge its exposure to interest rate fluctuations related to the anticipated
purchase of assets to support newly acquired blocks of business or to extend
the duration of certain portfolios of assets. Once the assets are purchased
the gains (losses) resulting from the termination of the swap agreements
will be applied to the basis of the assets. The gains (losses) will be
recognized in earnings over the life of the assets. The anticipated purchase
of assets related to extending the duration of certain portfolios of assets
is expected to be completed in 2000.
PUT OPTIONS
The Company uses put options, combined with various perpetual fixed income
securities, and interest rate swaps to replicate fixed income, fixed
maturity investments. The risk being hedged is a drop in bond prices due to
credit concerns with international bond issuers. The put options allow the
Company to put the bonds back to the counterparties at original par.
FOREIGN CURRENCY DERIVATIVES
The Company uses a combination of foreign exchange forward contracts and
foreign currency swaps, which are traded over-the-counter, to hedge some of
the foreign exchange risk of investments in fixed maturity securities
denominated in foreign currencies. The foreign currency forward contracts
obligate the Company to deliver a specified amount of currency at a future
date at a specified exchange rate. A foreign currency swap is a contractual
agreement to exchange the currencies of two different countries at a fixed
rate of exchange in the future.
COMMODITY SWAPS
The Company used a commodity swap to hedge its exposure to fluctuations in
the price of gold. A commodity swap is a contractual agreement to exchange a
certain amount of a particular commodity for a fixed amount of cash. The
Company owned a fixed income security that met its coupon
S-26
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
payment obligations in gold bullion. The Company is obligated to pay to the
counterparty the gold bullion, and in return, receives from the counterparty
a stream of fixed income payments. The fixed income payments were the
product of the swap notional multiplied by the fixed rate stated in the swap
agreement. The net receipts or payments from commodity swaps were recorded
in net investment income. The fixed income security was called in the third
quarter of 1999 and the commodity swap expired.
ADDITIONAL DERIVATIVE INFORMATION
Expenses for the agreements and contracts described above amounted to
$6,200,000, $10,000,000 and $7,000,000 in 1999, 1998 and 1997, respectively.
Deferred gains of $100,000 as of December 31, 1999, were the result of
terminated interest rate swaps. These gains are included with the related
fixed maturity securities to which the hedge applied or as deferred
liabilities and are being amortized over the life of such securities.
The Company is exposed to credit loss in the event of nonperformance by
counterparties on various derivative contracts. However, the Company does
not anticipate nonperformance by any of the counterparties. The credit risk
associated with such agreements is minimized by purchasing such agreements
from financial institutions with long-standing, superior performance
records. The amount of such exposure is essentially the net replacement cost
or market value less collateral held for such agreements with each
counterparty if the net market value is in the Company's favor. At
December 31, 1999, the exposure was $8,500,000.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discussion outlines the methodologies and
assumptions used to determine the estimated fair values of
the Company's financial instruments. Considerable judgment
is required to develop these fair values. Accordingly, the
estimates shown are not necessarily indicative of the
amounts that would be realized in a one-time, current market
exchange of all of the Company's financial instruments.
BONDS AND UNAFFILIATED COMMON STOCK
Fair values of bonds are based on quoted market prices,
where available. For bonds not actively traded, fair values
are estimated using values obtained from independent pricing
services. In the case of private placements, fair values are
estimated by discounting expected future cash flows using a
current market rate applicable to the coupon rate, credit
quality and maturity of the investments. The fair values of
unaffiliated common stocks are based on quoted market
prices.
PREFERRED STOCK
Fair values of preferred stock are based on quoted market
prices, where available. For preferred stock not actively
traded, fair values are based on values of issues of
comparable yield and quality.
MORTGAGE LOANS ON REAL ESTATE
The estimated fair value of mortgage loans on real estate
was established using a discounted cash flow method based on
credit rating, maturity and future income. The ratings for
mortgages in good standing are based on property type,
location, market conditions, occupancy, debt service
coverage, loan to value, caliber of tenancy, borrower and
payment record. Fair values for impaired mortgage loans are
based on: 1) the present value of expected future cash flows
discounted at the loan's effective interest rate; 2) the
loan's market price; or 3) the fair value of the collateral
if the loan is collateral dependent.
POLICY LOANS
The estimated fair values of investments in policy loans are
calculated on a composite discounted cash flow basis using
Treasury interest rates consistent with the maturity
durations assumed. These durations are based on historical
experience.
OTHER INVESTMENTS AND CASH AND SHORT-TERM INVESTMENTS
The carrying values for assets classified as other
investments and cash and short-term investments in the
accompanying statutory-basis balance sheets approximate
their fair value.
INVESTMENT-TYPE INSURANCE CONTRACTS
The balance sheet captions, "Future policy benefits and
claims" and "Other policyholder funds," include investment
type insurance contracts (i.e.,
S-27
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
deposit contracts and guaranteed interest contracts). The
fair values for the deposit contracts and certain guaranteed
interest contracts are based on their approximate surrender
values. The fair values for the remaining guaranteed
interest and similar contracts are estimated using
discounted cash flow calculations. These calculations are
based on interest rates currently offered on similar
contracts with maturities that are consistent with those
remaining for the contracts being valued.
The remainder of the balance sheet captions "Future policy
benefits and claims" and "Other policyholder funds," that do
not fit the definition of "investment-type insurance
contracts" are considered insurance contracts. Fair value
disclosures are not required for these insurance contracts
and have not been determined by the Company. It is the
Company's position that the disclosure of the fair value of
these insurance contracts is important because readers of
these financial statements could draw inappropriate
conclusions about the Company's capital and surplus
determined on a fair value basis. It could be misleading if
only the fair value of assets and liabilities defined as
financial instruments are disclosed.
SHORT-TERM DEBT
For short-term debt, the carrying value approximates fair
value.
SURPLUS NOTES DUE TO LNC
Fair values for surplus notes are estimated using discounted
cash flow analysis based on the Company's current
incremental borrowing rate for similar types of borrowing
arrangements.
GUARANTEES
The Company's guarantees include guarantees related to
mortgage loan pass-through certificates. Based on historical
performance where repurchases have been negligible and the
current status, which indicates none of the loans are
delinquent, the fair value liability for the guarantees
related to the mortgage loan pass-through certificates is
zero.
DERIVATIVES
The Company employs several different methods for
determining the fair value of its derivative instruments.
Fair values for these contracts are based on current
settlement values. These values are based on quoted market
prices for the foreign currency exchange contracts and
industry standard models that are commercially available for
interest rate cap agreements, swaptions, spread lock
agreements, interest rate swaps, commodity swaps and put
options.
INVESTMENT COMMITMENTS
Fair values for commitments to make investment in fixed
maturity securities (primarily private placements), mortgage
loans on real estate and real estate are based on the
difference between the value of the committed investments as
of the date of the accompanying balance sheets and the
commitment date. These estimates would take into account
changes in interest rates, the counterparties' credit
standing and the remaining terms of the commitments.
SEPARATE ACCOUNTS
Assets held in separate accounts are reported in the
accompanying statutory-basis balance sheets at fair value.
The related liabilities are also reported at fair value in
amounts equal to the separate account assets.
S-28
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and estimated fair values of the
Company's financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------
1999 1998
-------------------------------------------------------------
CARRYING CARRYING
ASSETS (LIABILITIES) VALUE FAIR VALUE VALUE FAIR VALUE
--------------------------------------------------------------------------------------------------------------
(IN MILLIONS)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds $ 22,985.0 $ 22,376.3 $ 23,830.9 $ 25,065.5
-----------------------------------------------
Preferred stocks 253.8 223.6 236.0 242.5
-----------------------------------------------
Unaffiliated common stocks 166.9 166.9 259.3 259.3
-----------------------------------------------
Mortgage loans on real estate 4,211.5 4,104.0 3,932.9 4,100.1
-----------------------------------------------
Policy loans 1,652.9 1,770.5 1,606.0 1,685.9
-----------------------------------------------
Other investments 426.6 426.6 434.4 434.4
-----------------------------------------------
Cash and short-term investments 1,409.2 1,409.2 1,725.4 1,725.4
-----------------------------------------------
Investment-type insurance contracts:
Deposit contracts and certain guaranteed
interest contracts (17,730.4) (17,364.3) (17,845.8) (17,486.4)
--------------------------------------------
Remaining guaranteed interest and similar
contracts (454.7) (465.1) (714.4) (738.2)
--------------------------------------------
Short-term debt (205.0) (205.0) (140.0) (140.0)
-----------------------------------------------
Surplus notes due to LNC (1,250.0) (1,022.1) (1,250.0) (1,335.1)
-----------------------------------------------
Derivatives 17.4 (4.0) 25.5 18.2
-----------------------------------------------
Investment commitments -- (0.8) -- (.6)
-----------------------------------------------
Separate account assets 46,105.1 46,105.1 36,907.0 36,907.0
-----------------------------------------------
Separate account liabilities (46,105.1) (46,105.1) (36,907.0) (36,907.0)
-----------------------------------------------
</TABLE>
12. ACQUISITIONS AND SALES OF SUBSIDIARIES
In 1997, LNC contributed 25,000,000 shares of common stock of American
States to the Company. American States is a property casualty insurance
holding company of which LNC owned 83.3%. The contributed common stock was
accounted for as a capital contribution equal to the fair value of the
common stock received by the Company. Subsequently, the American States
common stock owned by the Company, along with all other American States
common stock owned by LNC and its affiliates, was sold. The Company received
proceeds from the sale in the amount of $1,175,000,000. The Company
recognized no gain or loss on the sale of its portion of the common stock
due to the receipt of the stock at fair value. The proceeds from this sale
of stock were used to partially finance the CIGNA indemnity reinsurance
transaction.
13. TRANSACTIONS WITH AFFILIATES
A wholly owned subsidiary of LNC, Lincoln Life and Annuity
Distributors, Inc. ("LLAD"), has a nearly exclusive general agent's contract
with the Company under which it sells the Company's products and provides
the service that otherwise would be provided by a home office marketing
department and regional offices. For providing these selling and marketing
services, the Company paid LLAD override commissions of $60,400,000 and
$76,700,000 in 1999 and 1998, respectively, and override commissions and
operating expense allowances of $61,600,000 in 1997. LLAD incurred expenses
of $113,400,000, $102,400,000 and
S-29
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
13. TRANSACTIONS WITH AFFILIATES (CONTINUED)
$5,500,000 in 1999, 1998 and 1997, respectively, in excess of the override
commissions and operating expense allowances received from the Company,
which the Company is not required to reimburse. Effective in January 1998,
the Company and LLAD agreed to increase the override commission expense and
eliminate the operating expense allowance.
Cash and short-term investments at December 31, 1999 and 1998 include the
Company's participation in a short-term investment pool with LNC of
$390,300,000 and $383,600,000, respectively. Related investment income
amounted to $16,700,000, $16,800,000 and $15,500,000 in 1999, 1998 and 1997,
respectively. Short-term loan payable to parent company at December 31, 1999
and 1998 represent notes payable to LNC.
The Company provides services to and receives services from affiliated
companies which resulted in a net payment of $49,400,000, $92,100,000 and
$48,500,000 in 1999, 1998 and 1997, respectively.
The Company cedes and accepts reinsurance from affiliated companies.
Premiums in the accompanying statements of income include premiums on
insurance business accepted under reinsurance contracts and exclude premiums
ceded to other affiliated companies, as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------
(IN MILLIONS)
------------------------
<S> <C> <C> <C>
Insurance assumed $ 19.7 $ 13.7 $ 11.9
----------------------
Insurance ceded 777.6 290.1 100.3
</TABLE>
The balance sheets include reinsurance balances with affiliated companies as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-----------------------
(IN MILLIONS)
-----------------------
<S> <C> <C>
Future policy benefits
and claims assumed
$ 413.7 $ 197.3
------------------------
Future policy benefits
and claims ceded 1,680.4 1,125.0
------------------------
Amounts recoverable on
paid and unpaid losses 146.4 84.2
------------------------
Reinsurance payable on
paid losses 8.8 6.0
------------------------
Funds held under
reinsurance treaties --
net liability 2,106.4 1,375.4
------------------------
</TABLE>
Substantially all reinsurance ceded to affiliated companies is with
unauthorized companies. To take a reserve credit for such reinsurance, the
Company holds assets from the reinsurer, including funds held under
reinsurance treaties, and is the beneficiary on letters of credit
aggregating $917,300,000 and $318,300,000 at December 31, 1999 and 1998,
respectively. The letters of credit are issued by banks and represent
guarantees of performance under the reinsurance agreement. At December 31,
1999 and 1998, LNC had guaranteed $818,900,000 and $237,000,000,
respectively, of these letters of credit. At December 31, 1999 and 1998, the
Company has a receivable (included in the foregoing amounts) from affiliated
insurance companies in the amount of $118,800,000 and $122,400,000,
respectively, for statutory surplus relief received under financial
reinsurance ceded agreements.
14. SEPARATE ACCOUNTS
Separate account assets held by the Company consist primarily of long-term
bonds, common stocks, short-term investments and mutual funds and are
carried at market value. Substantially none of the separate accounts have
any minimum guarantees and the investment risks associated with market
S-30
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
14. SEPARATE ACCOUNTS (CONTINUED)
value changes are borne entirely by the policyholder.
Separate account premiums, deposits and other considerations amounted to
$4,572,600,000, $3,953,300,000 and $4,821,800,000 in 1999, 1998 and 1997,
respectively. Reserves for separate accounts with assets at fair value were
$45,198,900,000 and $36,145,900,000 at December 31, 1999 and 1998,
respectively. All reserves are subject to discretionary withdrawal at market
value.
A reconciliation of transfers to (from) separate accounts is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------
(IN MILLIONS)
-----------------------------------
<S> <C> <C> <C>
Transfers as reported in the Summary of Operations of the
various separate accounts:
Transfers to separate accounts $ 4,573.2 $ 3,954.9 $ 4,824.0
------------------------------------------------------------
Transfers from separate accounts (4,933.8) (4,069.8) (2,943.8)
------------------------------------------------------------ --------- --------- ---------
Net transfers to (from) separate accounts as reported in the
Summary of Operations $ (360.6) $ (114.9) $ 1,880.2
------------------------------------------------------------ ========= ========= =========
</TABLE>
15. CENTURY COMPLIANCE (UNAUDITED)
The Year 2000 issue was complex and affected many aspects of the Company's
business. The Company was particularly concerned with Year 2000 issues that
related to the Company's computer systems and interfaces with the computer
systems of vendors, suppliers, customers and business partners. From 1996
through 1999 the Company and its operating subsidiaries redirected a large
portion of internal Information Technology ("IT") efforts and contracted
with outside consultants to update systems to address Year 2000 issues.
Experts were engaged to assist in developing work plans and cost estimates
and to complete remediation activities.
For the year ended December 31, 1999, the Company identified expenditures of
$39,500,000 to address this issue. This brings the expenditures for 1996
through 1999 to $75,300,000. Because updating systems and procedures is an
integral part of the Company's on-going operations, most of the expenditures
shown above are expected to continue after all Year 2000 issues have been
resolved. All Year 2000 expenditures have been funded from operating cash
flows.
The scope of the overall Year 2000 program included the following four major
project areas: 1) addressing the readiness of business applications,
operating systems and hardware on mainframe, personal computer and local
area network platforms (IT); 2) addressing the readiness of non-IT embedded
software and equipment (non-IT); 3) addressing the readiness of key business
partners and 4) establishing Year 2000 contingency plans. The Company
completed these projects prior to year-end.
The Company's businesses have not identified any major problems in their
business processing. Minor problems have been resolved quickly. The
Company's businesses have not experienced any significant interruption in
service to clients or business partners or in reporting to regulators.
S-31
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
The Lincoln National Life Insurance Company
We have audited the accompanying statutory-basis balance sheets
of The Lincoln National Life Insurance Company (the "Company"),
a wholly owned subsidiary of Lincoln National Corporation, as of
December 31, 1999 and 1998, and the related statutory-basis
statements of operations, changes in capital and surplus and
cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company
presents its financial statements in conformity with accounting
practices prescribed or permitted by the Indiana Department of
Insurance, which practices differ from accounting principles
generally accepted in the United States. The variances between
such practices and accounting principles generally accepted in
the United States and the effects on the accompanying financial
statements are also described in Note 1.
In our opinion, because of the effects of the matter described
in the preceding paragraph, the financial statements referred to
above do not present fairly, in conformity with accounting
principles generally accepted in the United States, the
financial position of The Lincoln National Life Insurance
Company at December 31, 1999 and 1998, or the results of its
operations or its cash flows for each of the three years in the
period ended December 31, 1999.
However, in our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of The Lincoln National Life Insurance Company at
December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting practices
prescribed or permitted by the Indiana Department of Insurance.
January 31, 2000
S-32
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) List of Financial Statements
1. Part A. The Table of Condensed Financial Information is
included in Part A of this Registration Statement.
2. Part B. The following financial statements for the Variable
Account are included in Part B of this Registration
Statement:
Statement of Assets and Liability - December 31, 1999
Statement of Operations - Year ended December 31, 1999
Statements of Changes in Net Assets - Years ended December
31, 1999 and 1998
Notes to Financial Statements - December 31, 1999
Report of Ernst & Young LLP, Independent Auditors
3. Part B. The following statutory-basis financial statements
of The Lincoln National Life Insurance Company are included
in Part B of this Registration Statement:
Balance Sheets - Statutory-Basis - Years ended December 31,
1999 and 1998
Statements of Operations - Statutory Basis - Years ended
December 31, 1999, 1998, and 1997
Statements of Changes in Capital and Surplus - Statutory
Basis - Years ended December 31, 1999, 1998 and 1997
Statements of Cash Flows - Statutory Basis - Years ended
December 31, 1999, 1998 and 1997
Notes to Statutory-basis Financial Statements - December 31,
1999
Report of Ernst & Young LLP, Independent Auditors
(b) Exhibits
1(a). Resolution adopted by the Board of Directors of The Lincoln
National Life Insurance Company on April 29, 1996
establishing the Lincoln National Variable Annuity Account L
("Account L")./1/
1(b). Amendment dated December 2, 1996 adopted by the Board of
Directors to resolution establishing Account L./2/
2. Not applicable.
3(a). Principal Underwriting Contract./1/
3(b). Broker-dealer sales agreement./1/
4(a). Group Variable Annuity I Contract for The Lincoln National
Life Insurance Company.
4(b). Group Variable Annuity II Contract for The Lincoln National
Life Insurance Company.
4(c). Group Variable Annuity III Contract for The Lincoln National
Life Insurance Company.
4(d). Endorsement to Group Annuity Contracts.
4(e). Group Annuity Amendment to the contract.
4(f). Endorsement to Certificate.
5(a). Application for Group Annuity Contract.
5(b). Participant Enrollment Form
6(a). Articles of Incorporation of The Lincoln National Life
Insurance Company./5/
6(b). Bylaws of The Lincoln National Life Insurance Company./6/
7. Not applicable.
8(a). Services Agreement between Delaware Management Holdings,
Inc., Delaware Service Company, Inc., and Lincoln National
Life Insurance Company./7/
8(b). Fund Participation Agreement/Amendments for American
Century.
8(c). Fund Participation Agreement/Amendments for Baron.
8(d). Participation Agreement between The Lincoln National Life
Insurance Company and Dreyfus Life & Annuity Index Fund,
Inc. and Dreyfus Variable Investment Fund./1/
8(e). Fund Participation Agreement/Amendments for Fidelity.
C-1
<PAGE>
8(f). Fund Participation Agreement/Amendments for Janus.
8(g). Fund Participation Agreement/Amendments for The Lincoln
National Aggressive Growth Fund, Inc.
8(h). Fund Participation Agreement/Amendments for The Lincoln
National Social Awareness Fund, Inc.
8(i). Fund Participation Agreement/Amendments for Neuberger
Berman.
8(j). Participation Agreement between The Lincoln National Life
Insurance Company and T. Rowe Price International Services,
Inc. and T. Rowe Price Investment Services, Inc./1/
9. Consent and opinion of Jeremy Sachs, Senior Counsel, The
Lincoln National Life Insurance Company, as to the legality
of the securities being registered./1/
10(a). Consent of Ernst & Young LLP, Independent Auditors
11. Not applicable.
12. Not applicable.
13.(a) Schedule for Computation of Performance Quotations./3/
13.(b) Supplement to Schedule for Computation of Performance
Quotations./4/
14. Not applicable.
15(a). Organizational Chart of Lincoln National Life Insurance
Holding Company System.
15(b). Memorandum Concerning Books and Records.
16(a). Powers of Attorney-Todd R. Stephenson.
16(b). Powers of Attorney-Lawrence T. Rowland./8/
16(c). Powers of Attorney-Keith J. Ryan.
16(d). Powers of Attorney-H. Thomas McMeekin./8/
16(e). Powers of Attorney-Richard C. Vaughan./8/
16(f). Powers of Attorney-Jon A. Boscia.
/1/ Incorporated herein by reference to Pre-effective Amendment
No. 1 on Form N-4 filed by the Lincoln National Variable
Annuity Account L of The Lincoln National Life Insurance
Company with The Securities and Exchange Commission on
September 26, 1996 (File No. 333-05827).
/2/ Incorporated herein by reference to Post-effective Amendment
No. 2 on Form N-4 filed by the Lincoln National Variable
Annuity Account L of The Lincoln National Life Insurance
Company on April 30, 1998 (File No. 333-04999).
/3/ Incorporated herein by reference to Post-effective Amendment
No. 1 on Form N-4 filed by the Lincoln National Variable
Annuity Account L of The Lincoln National Life Insurance
Company on April 30, 1997 (File No. 333-05827).
/4/ Incorporated herein by reference to Post-effective Amendment
No. 2 on Form N-4 filed by the Lincoln National Variable
Annuity Account L of The Lincoln National Life Insurance
Company on May 1, 1998 (File No. 333-5827).
/5/ Incorporated by reference to the Registration Statement on
Form S-6 (333-40745) filed November 21, 1997.
/6/ Incorporated by reference to Post-effective Amendment No. 1
to the Registration Statement on Form N-4 (333-40937)
filed on November 9, 1998.
/7/ Incorporated herein by reference to the Registration
Statement on Form N-1A (2-80741), Amendment No. 21 filed on
April 10, 2000.
/8/ Incorporated herein by reference to Post-effective Amendment
No. 4 on Form N-4 filed by the Lincoln National Variable
Annuity Account L of The Lincoln National Life Insurance
Company on April 16, 1999 (File No. 333-5827).
Item 25. Directors and Officers of the Depositor
The following list contains the officers and directors of The Lincoln National
Life Insurance Company who are engaged directly or indirectly in activities
relating to Lincoln National Variable Annuity Account L as well as the
Contracts. The list also shows The Lincoln National Life Insurance Company's
executive officers.
<TABLE>
<CAPTION>
Name Positions and Offices
- ---- ---------------------------------------
<S> <C>
Jon A. Boscia** President and Director
John H. Gotta**** Chief Executive Officer of Life Insurance,
Senior Vice President, and Director
Stephen H. Lewis* Interim Chief Executive Officer of
Annuities, Senior Vice President, and
Director
H. Thomas McMeekin***** Director
Cynthia A. Rose* Secretary and Assistant Vice President
Lawrence T. Rowland*** Executive Vice President and Director
Keith J. Ryan* Vice President, Controller and Chief
Accounting Officer
Todd R. Stephenson* Senior Vice President, Chief Financial
Officer and Assistant Treasurer
Eldon J. Summers* Second Vice President and Treasurer
Richard C. Vaughan** Director
Roy V. Washington* Vice President and Chief Compliance Officer
</TABLE>
* Principal business address is 1300 South Clinton Street, Fort Wayne, IN
46802-3506
** Principal business address is Center Square West Tower, 1500 Market Street
- Suite 3900, Philadelphia, PA 19102-2112
*** Principal business address is One Reinsurance Place, 1700 Magnavox Way,
Fort Wayne, IN 46804-1538
**** Principal business address is 350 Church Street, Hartford, CT 06103
*****Principal business address is One Commerce Square, 2005 Market Street
39/th/ floor, Philadelphia, PA 19103
C-2
<PAGE>
Item 26. Persons Controlled by or Under Common Control with The Lincoln
National Life Insurance Company ("Lincoln Life") or Lincoln
National Variable Annuity Account L
Lincoln National Variable Annuity Account L is a separate account of Lincoln
Life and may be deemed to be controlled by Lincoln Life although Lincoln Life
will follow voting instructions of Contractholders with respect to voting on
certain important matters requiring a vote of Contractholders.
See Exhibit 15(a): The Organizational Chart of Lincoln National Life Insurance
Holding Company System is hereby incorporated herein by this reference.
C-3
<PAGE>
Item 27. Number of Contractholders
As of March 31, 2000, Registrant had 484 Contractholders.
Item 28. Indemnification
Under the Participation Agreements entered into between Lincoln Life and the
Dreyfus Life & Annuity Index Fund, Inc., Dreyfus Variable Investment Fund and
Dreyfus Corporation, Variable Insurance Products Funds I and II and Fidelity
Distributors Corporation, Twentieth Century Management Company, and T. Rowe
Price (the "Funds"), Lincoln Life and its directors, officers, employees, agents
and control persons have been indemnified by the Funds against any losses,
claims or liabilities that arise out of any untrue statement or alleged untrue
statement or omission of a material fact in the Funds' registration statements,
prospectuses or sales literature. In addition, the Funds will indemnify Lincoln
Life against any liability, loss, damages, costs or expenses which Lincoln Life
may incur as a result of the Funds' incorrect calculations, incorrect reporting
and/or untimely reporting of the Funds' net asset values, dividend rates or
capital gain distribution rates.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to
C-4
<PAGE>
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
Item 29. Principal Underwriter
(a) Lincoln Financial Advisors Corporation also acts as the principal
underwriter for Lincoln Life & Annuity Variable Annuity Account
L, the VA-I Separate Account of UNUM Life Insurance Company of
America, and the VA-1 Separate Account of First UNUM Life
Insurance Company.
(b)(1) The following table sets forth certain information regarding the
officers and directors of Lincoln Financial Advisors Corporation:
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITIONS AND OFFICES
- ----------------
WITH LINCOLN FINANCIAL ADVISORS CORPORATION
-------------------------------------------
<S> <C>
J. Michael Hemp***** President and Director
John M. Behrendt** Vice President
Jeffrey C. Carleton***** Vice President
Lucy D. Case** Vice President and Assistant Secretary
Matthew Lynch***** Vice President, Chief Financial Officer,
Administrative Officer, and Director
C. Gary Shimmin***** Vice President
Gary D. Giller**** Director
Michael E. McMath***** Senior Vice President and Director
Janet C. Chrzan*** Vice President and Treasurer
Cynthia A. Rose* Secretary
</TABLE>
* Principal business address of each person is 1300 S. Clinton Street, Fort
Wayne, Indiana 46802.
** Principal business address of each person is 200 East Berry Street, Fort
Wayne, Indiana 46802-2706.
*** Principal business address is Center Square West Tower, 1500 Market Street
- Suite 3900, Philadelphia, PA 19102-2118
**** 7650 Rivers Edge Dr., Suite 250, Columbus, OH 43235.
*****350 Church Street, Hartford, CT 06103
c)
<TABLE>
<CAPTION>
Name of Net Underwriting
Principal Discounts and Compensation Brokerage
Underwriter Commissions on Redemption Commissions Compensation
- ----------- ---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Lincoln Financial Advisors Corporation None None None 7,855,781
</TABLE>
C-5
<PAGE>
Item 30. Location of Accounts and Records
Exhibit 15(b) is hereby expressly incorporated herein by this reference (to be
updated).
Item 31. Management Services
None
Item 32. Undertakings and Representations
The Registrant hereby undertakes:
(a) to file a post-effective amendment to this registration statement as
frequently as is necessary to ensure that the audited financial statements
in this registration statement are never more than 16 months old for so
long as payments under the variable annuity contracts may be accepted,
unless otherwise permitted.
(b) to include either (1) as part of any application to purchase a contract
offered by the prospectus, a space that an applicant can check to request a
Statement of Additional Information, or (2) a post card or similar written
communication affixed to or included in the prospectus that the applicant
can remove to send for a Statement of Additional Information.
(c) To deliver any Statement of Additional Information and any financial
statements required to be made available under this Form promptly upon
written or oral request.
403(b) ANNUITIES
----------------
The Registrant intends to rely on the no-action response dated November 28,
1988, from Ms. Angela C. Goelzer of the Commission staff to the American Council
of Life Insurance concerning the redeemability of Section 403(b) annuity
contracts and the Registrant has complied with the provisions of paragraphs (1)-
(4) thereof.
TEXAS ORP
---------
The Registrant intends to offer Contracts to Participants in the Texas
Optional Retirement Program. In connection with that offering, Rule 6c-7 of the
Investment Company Act of 1940 is being relied upon and paragraphs (a)-(d) of
that Section will be complied with.
FEES AND CHARGES
----------------
The Lincoln National Life Insurance Company hereby represents that the fees
and charges deducted under the Contract, in the aggregate, are reasonable in
relation to the services rendered, the expenses expected to be incurred, and the
risks assumed by The Lincoln National Life Insurance Company.
C-6
<PAGE>
SIGNATURES
(a) As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Amendment and has caused this Amendment to
the Registration Statement to be signed on its behalf, in the City of Fort
Wayne, and the State of Indiana of this 26th day of April, 2000.
LINCOLN NATIONAL VARIABLE ANNUITY
Account L - Group Variable Annuity
(Registrant)
/s/ Kelly D. Clevenger
By:_____________________________
Kelly D. Clevenger
Vice President, LNL
By: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(Depositor)
/s/ Stephen H. Lewis
By:_____________________________
Stephen H. Lewis
(Signature-Officer of Depositor)
Interim Chief Executive Officer & Senior
Vice President, LNL
(Title)
(b) As required by the Securities Act of 1993, this Amendment to the
Registration Statement has been signed for the Depositors by the following
persons in the capacities and on dates indicated.
Signature Title Date
- --------- ----- ----
** President and Director April 26, 2000
- ------------------------ (Principal Executive Officer)
Jon A. Boscia
* Executive Vice President April 26, 2000
- ------------------------ and Director
Lawrence T. Rowland
** Vice President, and Controller April 26, 2000
- ------------------------ (Principal Accounting Officer)
Keith J. Ryan
** Senior Vice President, Chief April 26, 2000
- ------------------------ Financial Officer and Assistant
Todd R. Stephenson Treasurer
(Principal Financial Officer)
Chief Executive Officer of April , 2000
________________________ Life Insurance, Senior Vice
John H. Gotta President and Director
/s/ Stephen H. Lewis Interim Chief Executive Officer April 26, 2000
________________________ of Annuities, Senior Vice
Stephen H. Lewis President and Director
* Director April 26, 2000
- ------------------------
H. Thomas McMeekin
* Director April 26, 2000
- -----------------------
Richard C. Vaughan
/s/ Steven M. Kluever Pursuant to a Power of Attorney filed with
*By____________________ Post-Effective Amendment No. 4 to the
Steven M. Kluever Registration Statement
/s/ Steven M. Kluever Pursuant to a Power of Attorney filed with
**By ___________________ this Registration Statement
Steven M. Kluever
<PAGE>
[LETTERHEAD OF LINCOLN
NATIONAL LIFE INSURANCE CO.]
Servicing Office: P.O. Box 9740, Portland, ME 04104-5001
GROUP VARIABLE
ANNUITY CONTRACT NO.: EFFECTIVE DATE:
CONTRACTHOLDER:
(Herein referred to as "You" or "Your")
THIS CONTRACT WAS DELIVERED IN THE State/Commonwealth of and is subject to the
laws of that jurisdiction.
Lincoln Life by this Contract agrees to provide benefits for Participants in
accordance with the terms and conditions of the Contract. The entire Contract
consists of the provisions on the following pages, and the Application,
including any amendments, schedules, or endorsements.
IN WITNESS HEREOF, Lincoln Life has executed this Contract at Fort Wayne,
Indiana on this day of , 20 ,
and caused this Contract to be in full force as of its Effective Date as set
forth above.
/s/ Jon A. Boscia /s/ Kelly D. Clevenger
- ----------------------- ----------------------------------
Jon A Boscia, President Kelly D. Clevenger, Vice President
Non-Participating
PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
I. CONTRACT SPECIFICATIONS
II. DEFINITIONS
III. CONTRIBUTIONS
IV. GUARANTEED INTEREST DIVISION
V. VARIABLE INVESTMENT DIVISION
VI. TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
VII. WITHDRAWALS AND DISTRIBUTIONS
VIII. DEATH BENEFITS
IX. PAYOUT ANNUITIES
X. LOANS
XI. DISCONTINUANCE AND TERMINATION OF CONTRACT
XII. GENERAL PROVISIONS
</TABLE>
2
<PAGE>
ARTICLE I - CONTRACT SPECIFICATIONS
1.1 MINIMUM CONTRIBUTION AMOUNT: Your minimum annual Contribution on behalf of
all Participants under this Contract shall be twenty thousand dollars
($20,000). This minimum figure is for aggregate annual Contributions, not
for each Participant.
1.2 SEPARATE ACCOUNT: Lincoln National Variable Annuity Account L
1.3 DIVISIONS AVAILABLE UNDER THIS CONTRACT:
A. Guaranteed Interest Division
B. Variable Investment Division
1.4 LIMITATIONS ON TRANSFERS AND WITHDRAWALS DURING THE ACCUMULATION PERIOD:
Unlimited transfer requests may be made by a Participant each calendar
year.
1.5 ANNUAL ADMINISTRATION CHARGE:
Twenty-five dollars ($25) per Participant.
Twenty-five dollars ($25) per Participant who allocates a contribution,
during the year ending on a Participation Anniversary, to any one (1) or
more of the Sub-Accounts established in the Variable Investment Division.
1.6 ANNUAL MORTALITY AND EXPENSE RISK CHARGE APPLICABLE TO VARIABLE INVESTMENT
DIVISION SUB-ACCOUNTS: Annual rate of one percent (1.00%).
1.7 LOAN SET-UP CHARGE: Fifty dollars ($50) per loan
1.8 PLAN NAME:
1.9 EMPLOYER:
1.10 SYSTEMATIC WITHDRAWAL SET-UP CHARGE: Thirty dollars ($30.00). If the
total Account balance is twenty-five thousand dollars ($25,000), or
greater, such amount will be waived.
3
<PAGE>
ARTICLE II - DEFINITIONS
2.1 ACCUMULATION UNIT: An accounting unit of measure used to record amounts of
increases to, decreases from and accumulations in each Sub-Account during
the Accumulation Period.
2.2 ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each
Sub-Account on any Valuation Date.
2.3 ACCUMULATION PERIOD: The period commencing on a Participant's
Participation Date and terminating when the Participant's Account balance
is reduced to zero, either through withdrawal(s), conversion to an annuity,
imposition of charges, payment of a Death Benefit or a combination thereof.
2.4 ANNUITANT: The person receiving annuity payments under the terms of this
Contract.
2.5 ANNUITY COMMENCEMENT DATE: The date on which Lincoln Life makes the first
annuity payment to the Annuitant as required by the Retired Life
Certificate. This date, as well as the date each subsequent annuity
payment is made, will be the first day of a calendar month.
2.6 ANNUITY CONVERSION AMOUNT: The amount of a Participant's Account applied
toward the purchase of an Annuity.
2.7 ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion
Amount in determining the dollar amount of an annuitant's annuity payments
for Guaranteed Annuities or the initial payment for Variable Annuities.
2.8 ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the
first day of a calendar month. For Variable Annuities, this is the
Valuation Date ten (10) business days prior to the first day of a calendar
month.
2.9 ANNUITY PERIOD: The period concurrent with or following the Accumulation
Period, during which an Annuitant's annuity payments are made.
2.10 ANNUITY UNIT: An accounting unit of measure that is used in calculating
the amounts of annuity payments to be made from each Sub-Account during the
Annuity Period.
2.11 ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in each Sub-
Account on any Valuation Date.
4
<PAGE>
2.12 BENEFICIARY: The person(s) designated to receive a Participant's Account
balance in the event of the Participant's death during the Accumulation
Period or the person(s) designated to receive any applicable remainder of
an annuity in the event of the Annuitant's death during the Annuity Period.
2.13 BUSINESS DAY: A day on which Lincoln Life and the New York Stock Exchange
are customarily open for business.
2.14 CERTIFICATE: An Active Life Certificate is issued to each Participant
outlining the basic provisions of the Contract. A Retired Life Certificate
is issued to each Annuitant outlining the basic provisions of his Annuity.
2.15 CONTRIBUTIONS: All amounts deposited by You or the Participant under this
Contract including any amount transferred from another contract.
2.16 DIVISION(S): The Guaranteed Interest Division and/or the Variable
Investment Division named in Section 1.3.
2.17 GENERAL ACCOUNT: All assets of Lincoln Life other than those in the
Separate Account specified in Section 1.2 or any other separate account.
2.18 GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is
reduced when a withdrawal occurs, including any applicable Contingent
Deferred Sales Charge and Annual Administration Charge.
2.19 GUARANTEED ANNUITY: An annuity for which Lincoln Life guarantees the
amount of each payment as long as the annuity is payable.
2.20 GUARANTEED INTEREST DIVISION: The Division maintained by Lincoln Life for
these and other contracts for which Lincoln Life guarantees the principal
amount and interest credited thereto, subject to any fees and charges as
set forth in this Contract. Amounts allocated to the Guaranteed Interest
Division are part of the General Account.
2.21 LINCOLN LIFE: Lincoln National Life Insurance Company, at its home office
in Fort Wayne, Indiana. All correspondence and inquiries should be
submitted to Lincoln Life's Servicing Office: P.O. Box 9740, Portland ME
04101-5001.
2.22 NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant
Account less any net Withdrawal Amounts, outstanding loan (including
principal and due and accrued interest) and amounts converted to a Payout
Annuity.
2.23 NET WITHDRAWAL AMOUNT: The amount paid to a Participant when a withdrawal
occurs.
5
<PAGE>
2.24 PARTICIPANT: A person who has enrolled under this Contract and maintains a
Participant's Account.
2.25 PARTICIPANT'S ACCOUNT: An account maintained for a Participant during the
Accumulation Period, the total balance of which equals the Participant's
Account balance in the Variable Investment Division plus the Participant's
Account balance in the Guaranteed Interest Division.
2.26 PARTICIPATION ANNIVERSARY: For each Participant, a date at one year
intervals from that Participant's Participation Date. If an anniversary
occurs on a non-Business Day, it is treated as occurring on the next
Business Day.
2.27 PARTICIPATION DATE: A date assigned to each Participant corresponding to
the date on which the first Contribution on behalf of that Participant
under this Contract is received by Lincoln Life. A Participant will receive
a new Participation Date if such Participant makes a Total Withdrawal as
defined in Section 7.2 and Contributions on behalf of the Participant are
resumed under any Contract.
2.28 PARTICIPATION YEAR: A period beginning with one Participation Anniversary
and ending the day before the next Participation Anniversary, except for
the first Participation Year that begins with the Participation Date.
2.29 PAYOUT ANNUITY: A series of payments paid under the terms of this Contract
to a person. A Payout Annuity may be either a Guaranteed Annuity or a
Variable Annuity.
2.30 PENDING ALLOCATION ACCOUNT: An account established under the Variable
Investment Division that invests unallocated contributions in shares of a
money market mutual fund. Lincoln Life does not guarantee the principal
amount or investment results.
2.31 PLAN: The Plan named in Section 1.8 that qualifies for federal tax
benefits under Section 403(b) of the Internal Revenue Code of 1986 and
under which this Contract is authorized.
2.32 SEPARATE ACCOUNT: The Lincoln National Variable Annuity Account L is a
group of assets segregated from Lincoln Life's General Account whose
income, gains and losses, realized or unrealized, are credited to or
charged against the Separate Account without regard to other income, gains
or losses of Lincoln Life. Additional information is provided in Section
12.15.
2.33 SUB-ACCOUNT(S): An account established in the Variable Investment Division
that invests in shares of a corresponding mutual fund.
6
<PAGE>
2.34 VALUATION DATE: A Business Day. Accumulation and Annuity Units are computed
on each Valuation Date as of the close of trading on the New York Stock
Exchange.
2.35 VALUATION PERIOD: A period used in measuring the investment experience of
each Sub-Account. The Valuation Period begins at the close of trading on
the New York Stock Exchange on one Valuation Date and ends at the
corresponding time on the next Valuation Date.
2.36 VARIABLE ANNUITY: An annuity with payments that increase or decrease in
accordance with the investment results of the selected Sub-Account(s).
2.37 VARIABLE INVESTMENT DIVISION: The Division specified in Section 1.3 that is
maintained by Lincoln Life for this and other Section 403(b) Lincoln Life
contracts for which Lincoln Life does not guarantee the principal amount or
investment results. Amounts allocated to the Variable Investment Division
are part of the Separate Account.
2.38 YOU or YOUR: The Contractholder named on the face page of this Contract.
7
<PAGE>
ARTICLE III - CONTRIBUTIONS
3.1 INITIAL CONTRIBUTION: The initial Contribution for a Participant will be
credited to the Participant's Account no later than two (2) Business Days
after it is received by Lincoln Life if it is preceded or accompanied by a
completed enrollment form containing all the information necessary for
processing the Participant's Contribution.
3.2 ALLOCATION OF CONTRIBUTIONS: Participant Contributions will be allocated to
the Divisions and Sub-Accounts according to the percentages requested by
the Participant. The allocation percentage can be any whole percent and may
be changed on an unlimited basis per year. You or the Participant shall
notify Lincoln Life in writing in a form acceptable to Lincoln Life or by
telephone in accordance with procedures published by Lincoln Life of such
changes.
3.3 PAYMENT OF SUBSEQUENT CONTRIBUTIONS: You shall forward Contributions to
Lincoln Life specifying the amount being contributed on behalf of each
Participant. You shall forward such Contributions and provide such
allocation information in accordance with procedures established by Lincoln
Life. The Contributions shall be allocated among the Guaranteed Interest
Division and each Sub-Account in accordance with the percentage information
provided by the Participant subject to the terms of the Plan.
3.4 CHARACTERIZATION OF TRANSFER CONTRIBUTIONS: For all Contributions
transferred from another Contract, Lincoln Life must be provided with the
following information in a form acceptable to Lincoln Life:
(a) The source of the Contributions transferred (e.g., salary reduction,
employer match or post-tax Contributions). Lincoln Life will record
all such transferred amounts where no source information is provided
as salary reduction Contributions.
(b) Identification of Contributions transferred as Contributions made or
earnings credited:
(i) prior to January 1, 1987;
(ii) during 1987 and 1988; or
(iii) subsequent to December 31, 1988.
Amounts not so identified will be treated as attributable to period
(iii) for purposes of Sections 7.4 and 7.5.
8
<PAGE>
3.5 MAXIMUM CONTRIBUTION: Total and overall limitations on Contributions in a
calendar year for a Participant are subject to the limits imposed under
Sections 402(g), 403(b) and 415 of the Internal Revenue Code of 1986 (the
Code), as it may be amended from time to time. Lincoln Life assumes no
responsibility for monitoring these limits for a Participant.
Elective deferrals made under the terms of a salary reduction agreement
must not exceed the annual limits on elective deferrals as provided in IRC
Section 402(g). Contributions in excess of such amounts may be distributed
upon request of the Contractholder and Participant by Lincoln Life as
permitted by law.
3.6 VALUATION: A Guaranteed Interest Division Contribution will be allocated as
of the Business Day that Lincoln Life receives the Contribution and Lincoln
Life will credit interest beginning with the next calendar day following
the Business Day that Lincoln Life receives the Contribution.
For a Variable Investment Division Sub-Account Contribution, Lincoln Life
will credit a Participant's Account with the number of Accumulation Units
for each Sub-Account selected by the Participant with the number of
Accumulation Units equal to the Contribution Amount divided by the
Accumulation Unit Value which is next computed following Lincoln Life's
receipt of the Contribution.
3.7 ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated in
Section 1.5 from each Participant's Account each year on the last Business
Day of the month in which his Participation Anniversary occurs unless the
Contractholder pays the charge in a single payment. If the Participant's
Account balance is less than this amount on that day, Lincoln Life will
deduct the entire balance from his Account.
When a Total Withdrawal of a Participant's Account, as defined in Section
7.2, occurs on a date other than the last Business Day of the month in
which his Participation Anniversary occurs, Lincoln Life will first deduct
the amount stated in Section 1.5 from his Participant's Account.
ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated in
Section 1.5 on a pro-rata basis from the Participant's Variable Investment
Division Account balance each year on the last Business Day of the month in
which his Participation Anniversary occurs unless the Contractholder pays
the charge in a single payment. If the Participant's Variable Investment
Division Account balance is less than this amount on that day, Lincoln Life
will deduct the entire balance from his Variable Investment Division
Account.
When a Participant requests, on a date other than the last Business Day of
the month in which his Participation Anniversary occurs,
9
<PAGE>
(a) a withdrawal, or
(b) a transfer,
from the Variable Investment Division, which would leave a remaining
balance of less than the Annual Administration Charge defined in Section
1.5, Lincoln Life will first deduct the amount stated in Section 1.5 from
the Participant's Variable Investment Division Account balance prior to the
Withdrawal or Transfer.
3.8 UNALLOCATED CONTRIBUTION: If a properly completed enrollment form has not
been received for a Participant, Lincoln Life will deposit such
Contributions to the Pending Allocation Account as described in ARTICLE II-
DEFINITIONS, unless such Contributions are designated to another Account in
accordance with the Plan.
Lincoln Life will follow up with the Contractholder monthly for a period of
ninety (90) days for enrollment information for Participants with deposits
in the Pending Allocation Account.
Within two (2) business days of receipt of a completed enrollment form, the
Participant's Account balance in the Pending Allocation Account will be
transferred to the Divisions and/or Sub-Accounts according to the
percentages requested by the Participant. When the completed enrollment
form is received, the Participation Date will be the date on which the
first Contribution on behalf of the Participant was deposited into the
Pending Allocation Account.
If an enrollment form is not received after the ninety (90) day notice, a
Participant's Account balance in the Pending Allocation Account will be
refunded to the Contractholder within one hundred five (105) days of the
date of the initial Contribution. Contributions received after a refund
while there is still no allocation information, will be deposited to the
Pending Allocation Account.
The Pending Allocation Account will only be used for the purpose mentioned
above; Participants may not direct a portion of their Contributions to this
Account. Contributions deposited in the Pending Allocation Account will not
be afforded the same rights as Contributions under this Contract. The
following Articles and/or Sections under this Contract will not be
applicable: (i) Section 3.7 ANNUAL ADMINISTRATION CHARGE, (ii) ARTICLE VI -
TRANSFERS BETWEEN DIVISION AND SUB-ACCOUNTS, (iii) ARTICLE VII -WITHDRAWALS
AND DISTRIBUTIONS, (iv) ARTICLE IX - PAYOUT ANNUITIES, and (v) ARTICLE X -
LOANS.
10
<PAGE>
ARTICLE IV - GUARANTEED INTEREST DIVISION
4.1 PARTICIPANT'S ACCOUNT BALANCE IN GUARANTEED INTEREST DIVISION: The dollar
value of a Participant's Account balance in the Guaranteed Interest
Division as of a date will be equal to the sum of:
(a) Contributions allocated, on behalf of the Participant, to the
Guaranteed Interest Division on or prior to that date, and
(b) Amounts transferred, on behalf of the Participant, to the Guaranteed
Interest Division from the Variable Investment Division on or prior to
that date, less any;
(c) Gross Withdrawal Amounts from the Guaranteed Interest Division, on
behalf of the Participant, on or prior to that date; and
(d) Amounts transferred, on behalf of the Participant, to the Variable
Investment Division on or prior to that date; and
(e) Applicable charges to the Participant's Account on or prior to that
date; and
(f) Annuity Conversion Amounts, on behalf of the Participant, on or prior
to that date, plus any;
(g) Interest credited to the Participant's Account balance in the
Guaranteed Interest Division on or prior to that date.
4.2 INTEREST: Lincoln Life will credit interest each day to the portion of the
Participant's Account balance in the Guaranteed Interest Division, using
the previous day's ending balance. The rate of interest credited each day,
if compounded for three hundred sixty-five (365) days, yields the annual
interest rate in effect for the day.
Lincoln Life will declare in advance a guaranteed interest rate which will
be effective for all amounts in the Participant's Account balance in the
Guaranteed Interest Division during the designated year. This rate will
never be less than three percent (3%). However, this minimum rate will not
be considered for purposes of Section 10.6 (EFFECT OF LOAN ON PARTICIPANT'S
ACCOUNT) under this Contract.
Lincoln Life may also declare in advance separate interest rate guarantees
which are in excess of the guaranteed interest rate for some or all of the
Participant's Account balance in the Guaranteed Interest Division for
specific period(s) during the designated year.
11
<PAGE>
ARTICLE V - VARIABLE INVESTMENT DIVISION
5.1 PARTICIPANT'S ACCOUNT BALANCE IN THE VARIABLE INVESTMENT DIVISION: The
Participant's Account balance in the Variable Investment Division is equal
to the sum of the dollar value of a Participant's Account balance in each
Sub-Account as of the end of a Valuation Period which will be equal to the
product of:
(a) The Participant's number of Accumulation Units as of the end of that
Valuation Period; times
(b) The Accumulation Unit Value as of the end of that Valuation Period.
5.2 ACCUMULATION UNITS: The number of Accumulation Units a Participant has in
a Sub-Account as of the end of any Valuation Period is the number of
Accumulation Units the Participant had in that Sub-Account as of the end of
the preceding Valuation Period; plus
(a) The number of Accumulation Units attributable to amounts deposited to
or transferred to that Sub-Account during the current Valuation
Period; minus
(b) The number of Accumulation Units attributable to amounts transferred
from, converted to an annuity, removed as a charge, paid as a death
benefit, or withdrawn from that Sub-Account during the current
Valuation Period.
5.3 ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Sub-Account
was set initially at ten dollars ($10), except for the Index Account which
was set at nine and nine hundred six one thousands ($9.9060) of a dollar.
Subsequent Accumulation Unit Values are determined by multiplying;
(a) The Net Investment Factor for the current Valuation Period by;
(b) The Accumulation Unit Value as of the end of the immediately preceding
Valuation Period.
5.4 NET INVESTMENT FACTOR: The Net Investment Factor is used to measure the
investment experience of a Sub-Account net of the Mortality and Expense
Risk Charge as defined in Section 5.5. The Net Investment Factor for a
Valuation Period is equal to (a) divided by (b) with the result multiplied
by (c) and adjusted by the amount per share of any taxes which are incurred
by Lincoln Life because of the existence of the Sub-Account;
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<PAGE>
where (a) is;
the net asset value per share of the underlying mutual fund held by
the Sub-Account as of the end of the Valuation Period, plus;
the amount per share of any dividend or capital gain distribution from
the underlying mutual fund held by the Sub-Account during the
Valuation Period,
where (b) is;
the net asset value per share of the underlying mutual fund held by
the Sub-Account as of the end of the immediately preceding Valuation
Period,
where (c) is;
one (1.00) minus the Annual Mortality and Expense Risk Charge shown in
Section 1.6 to the n/365th power where n equals the number of calendar
days since the immediately preceding Valuation Date.
5.5 MORTALITY AND EXPENSE RISK CHARGE: This charge is imposed to compensate
Lincoln Life for its assumption of mortality and expense risks under this
Contract. This charge is shown on an annualized basis in Section 1.6 and
is deducted on a daily basis as described in Section 5.4. This charge may
not be increased without the approval of a majority of all affected Lincoln
Life contractholders.
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ARTICLE VI - TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
6.1 TRANSFERS DURING ACCUMULATION PERIOD: Subject to the limitations stated in
Section 1.4, Participants may transfer all or part of their Account balance
in any Division or Sub-Account to another Division or Sub-Account.
You or the Participant may make a transfer request by notifying Lincoln
Life in writing in a form acceptable to Lincoln Life or by telephone in
accordance with procedures published by Lincoln Life.
6.2 TRANSFERS DURING ANNUITY PERIOD: An Annuitant may not transfer any part of
the Annuitant's Annuity Conversion Amount.
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ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS
7.1 WITHDRAWALS DURING THE ACCUMULATION PERIOD: During the Accumulation
Period, a Participant may withdraw from any or all Divisions, subject to
the restrictions stated in Section 7.4, all or part of the Participant's
Account balance in the Division or Sub-Accounts remaining after reductions
for any applicable Annual Administration Charge (imposed on Total
Withdrawals), Contingent Deferred Sales Charge (CDSC), premium taxes and
outstanding loan, including the loan security thereon. Annuity Conversion
Amounts are not considered withdrawals.
All withdrawal requests must be submitted in a form acceptable to Lincoln
Life and must indicate the amount and the Division(s) from which the
withdrawal is to be made.
Lincoln Life reserves the right to delay payment of Guaranteed Interest
Division withdrawal amounts per Section 12.8.
7.2 TOTAL WITHDRAWALS: A Total Withdrawal of a Participant's Account will
occur when a Participant who has no outstanding loans
(a) requests the liquidation of his entire Account balance, or
(b) requests an amount such that the amount requested plus any CDSC as
defined in Section 7.6 results in a remaining Participant's Account
balance being less than the applicable Annual Administration Charge as
defined in Section 1.5, in which case, the request is treated as if it
were a request for liquidation of the Participant's entire Account
balance.
The Participant's Active Life Certificate must be surrendered to Lincoln
Life when a Total Withdrawal of a Participant's Account occurs.
A Participant refund under the Free-look provisions of Section 12.17 is not
considered a Total Withdrawal under this Article.
7.3 PARTIAL WITHDRAWALS: A Partial Withdrawal of a Participant's Account will
occur when:
(a) A Participant who has an outstanding loan makes a withdrawal; or
(b) A Participant who has no outstanding loans, requests an amount less
than a total withdrawal.
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<PAGE>
7.4 WITHDRAWAL REQUIREMENTS FOR SECTION 403(b) PLANS: Withdrawals are subject
to the requirements set forth in Section 403(b) of the Code and regulations
thereof.
(a) Withdrawal Requests for Participants under Section 403(b) Plans
Subject to Title I of ERISA: You must make withdrawal requests on
behalf of Participants. All withdrawal requests will require Your
written authorization and written documentation specifying the portion
of the Participant's Account balance which is available for
distribution to the Participant.
(b) Withdrawal Requests for Participants under Section 403(b) Plans not
---
Subject to Title I of ERISA: Any portion of the Participant's Account
balance that has been recorded by Lincoln Life as a salary reduction
contribution made and/or earnings credited prior to January 1, 1989,
(including transferred amounts recorded as such pursuant to Section
3.4), may be withdrawn for any reason. Any portion of the
Participant's Account balance that has been recorded by Lincoln Life
as a salary reduction Contribution made and/or earnings credited after
December 31, 1988, (including transferred amounts recorded as such
pursuant to Section 3.4), are subject to the withdrawal restrictions
stated in Section 403(b) of the Code. Participants must certify to
Lincoln Life (and provide supporting information, if requested), that
an event permitting withdrawal has occurred and that Lincoln Life may
rely on such representation in granting the withdrawal request.
7.5 MINIMUM DISTRIBUTION REQUIREMENTS FOR SECTION 403(b) PLANS: Section
403(b)(10) of the Code and regulations thereunder require that
distributions be made from this Contract in a manner which satisfies
requirements similar to the requirements of Section 401(a)(9) including
the incidental death benefit requirements of Section 401(a)(9)(G).
(1) Section 401(a)(9) requires that:
(a) the Participant's Account be distributed not later than the
required beginning date; or
(b) the Participant's Account be distributed not later than the
required beginning date, over the life of the Participant or over
the lives of the Participant and a designated Beneficiary.
(2) A Participant may choose to have the Participant's Account distributed
in one of the following manners:
(a) As a lump sum payment;
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(b) As an annuity meeting the requirements of Section 401(a)(9) of
the Code;
(c) As an annual distribution where the amount distributed each
calendar year is at least an amount equal to the quotient
obtained by dividing: (a) the amount of the Participant's
Account required to be distributed as of December 31 of the
calendar year immediately preceding the calendar year for which
the distribution is being made; by (b) the life expectancy of the
Participant, or the life expectancy of the Participant and the
Beneficiary; or
(d) A combination of the above.
With respect to (c) and (d) above, the life expectancy of the Participant
and a surviving spouse Beneficiary may be recalculated, but not more
frequently than annually. A non-spouse Beneficiary's life expectancy may
not be recalculated.
7.6 CONTINGENT DEFERRED SALES CHARGE (CDSC): The following schedule of CDSC
shall apply to all Withdrawal Amounts.
<TABLE>
<S> <C>
(a) WHEN A WITHDRAWAL IS REQUESTED AND ONE OR THE CDSC WILL EQUAL:
MORE OF THE FOLLOWING CONDITIONS IS MET:
The Participant has died 0%
The Participant has incurred a disability for 0%
which he is receiving Social Security payments
The Participant has attained age fifty-nine 0%
and one-half (59 1/2)
The Participant has separated from service 0%
with the Contractholder and is age fifty-five
(55)
The Participant has separated from service 0%
with the Contractholder
The Participant has demonstrated a financial 0%
hardship need
</TABLE>
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<TABLE>
<S> <C>
The Participant has requested a withdrawal 0%
which will not exceed twenty percent (20%) of
his Participant's Account Balance and no
other withdrawal has been made in that
calendar year
</TABLE>
(b) For all other amounts subject to a CDSC, the CDSC will be in
accordance with the schedule below.
<TABLE>
<CAPTION>
During Participation Year CDSC Percent
<S> <C>
1-6 5%
7 4%
8 3%
9 2%
10 1%
11 and later 0%
</TABLE>
Lincoln Life requires reasonable proof necessary to verify that the
withdrawal meets the conditions described above in Section 7.6(a) and such
proof must be submitted with the withdrawal request. If You or the
Participant do not furnish the proof requested by Lincoln Life, the CDSC
stated in Section 7.6(b) shall apply.
The CDSC on any withdrawal may be reduced or eliminated but only to the
extent that Lincoln Life anticipates that it will incur lower sales
expenses or perform fewer sales services due to economies arising from (i)
the size of the particular group, (ii) an existing relationship with the
Contractholder, (iii) the utilization of mass enrollment procedures, or
(iv) the performance of sales functions by the Contractholder or an
employee organization which Lincoln Life would otherwise be required to
perform.
In no event will the CDSC, when added to any CDSC previously imposed due to
a Participant withdrawal, exceed eight and one-half percent (8.5%) of the
cumulative Contributions to a Participant's Account.
7.7 SYSTEMATIC WITHDRAWAL OPTION: Any Participant who: (a) is at least age
fifty-nine and one-half (59 1/2), or (b) is disabled and receiving Social
Security disability benefits, or (c) is separated from service with the
Contractholder may elect this option. A Participant must also have a
vested Participant Account balance of at least ten thousand dollars
$10,000) of pre-tax Contributions under this Contract at the date of the
election.
Amounts held for a spousal payee under a Qualified Domestic Relations Order
(QDRO) shall be recognized as eligible for the Systematic Withdrawal
Option.
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Any spousal payee who wishes to elect this distribution option must also
meet the minimum ten thousand dollars ($10,000). Account balance
requirement and either the age or disability requirement as discussed
above.
A Participant may elect to receive monthly, quarterly, semi-annual, or
annual payments in a flat amount or payments on a monthly basis for an
interest equivalency amount. An interest equivalency amount is an
approximation of the interest earned between each payment period based upon
the interest rate in effect at the beginning of each respective payment
period. This amount will be determined by Lincoln Life. (See Attachment I
for illustration.) A Participant may change the frequency, payment type,
or payment amount of his Systematic Withdrawal Option by submitting a
request in writing on a form acceptable to Lincoln Life. A Participant may
make such a change only once during each calendar year.
A Participant may at any time direct Lincoln Life to cease payments under
this option provided the request is made in writing. A Participant who
chooses to stop receiving systematic withdrawals may not request that any
systematic withdrawal payments begin again until the next calendar year.
Systematic withdrawals shall be withdrawn from amounts allocated to the
Guaranteed Interest Division of the Participant's Account balance. If the
balance of the Guaranteed Interest Division is not sufficient to meet the
payment amount requested, the Participant, in writing, may direct Lincoln
Life on a form acceptable to Lincoln Life to transfer the appropriate
amount to the Guaranteed Interest Division; otherwise, such payment will
cease.
Lincoln Life will deduct the Systematic Withdrawal Set-Up Charge indicated
in Section 1.10 from the Participant's Account balance each time a
Systematic Withdrawal Option is established. The applicable CDSC, if any,
will be assessed on each systematic withdrawal payment.
Payments under this option shall stop upon the earliest of the following
events:
(a) On the date of the Participant's death. A Beneficiary who is a spouse
may elect this option by requesting it in writing on a form acceptable
to Lincoln Life, unless election of this form of benefit would violate
any other requirements of this contract. The spousal Beneficiary must
meet the ten thousand dollar ($10,000) minimum Account balance
requirement prior to electing the Systematic Withdrawal Option; or
(b) When there is an insufficient Participant Account balance after
deducting the applicable CDSC and Annual Administration Charge, if
any, to pay the amount requested; or
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<PAGE>
(c) The Participant fails to meet the requirements of the Systematic
Withdrawal Option as outlined above in the first (1st) paragraph of
this Section.
If a disabled or terminated Participant, who is currently receiving a
Systematic Withdrawal Option payment, returns to service with the
Contractholder, the Contractholder or Participant must notify Lincoln Life
in writing within thirty (30) days from the date of return to service.
Lincoln Life reserves the right to discontinue the Systematic Withdrawal
Option payment under these circumstances.
If a Participant wishes to exercise this option under another Lincoln Life
Annuity Contract, such request shall be considered separate from this
Contract and shall follow the Systematic Withdrawal Option rules under that
Annuity Contract, if permitted.
Lincoln Life may, at its option, discontinue the Systematic Withdrawal
Option under this Contract at any time provided You are given at least
thirty (30) days advance written notice.
7.8 DIRECT ROLLOVER OPTION: Beginning January 1, 1993, a Participant or
Beneficiary may elect this option for any distribution that qualifies as an
Eligible Rollover Distribution as defined by Section 402(c) of the Internal
Revenue Code and that meets all the following requirements:
(1) The distribution must be paid directly to either a single Individual
Retirement Account or to a single Tax Deferred Annuity. The check,
wire, or other form of remittance shall be made payable to the
trustee, custodian, or financial institution sponsoring the Individual
Retirement Account or Tax Deferred Annuity. The form of remittance
will not be an instrument that can be negotiated by the Participant.
(2) The Participant must provide, in a form acceptable to Lincoln Life,
all information necessary to make the payment to an Individual
Retirement Account or Tax Deferred Annuity.
(3) The Participant or Beneficiary may not revoke a request for payment
under this option for any payment after Lincoln Life has received a
written request for a direct rollover.
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ARTICLE VIII - DEATH BENEFITS
8.1 DEATH BENEFIT DURING THE ACCUMULATION PERIOD: If death of the Participant
occurs during the Accumulation Period, Lincoln Life will pay the
Beneficiary, if one is living, the greater of the following amounts:
(a) The Net Contributions, or
(b) The Participant's Account balance less any outstanding loan (including
principal and due and accrued interest).
Lincoln Life will calculate the Death Benefit as of the end of the
Valuation Period during which it receives both satisfactory notification of
the Participant's death, pursuant to Section 8.2, and the election of a
form of benefit pursuant to Section 8.3. If no election is made pursuant
to Section 8.3 within sixty (60) days following Lincoln Life's receipt of
satisfactory notice of death, the Death Benefit will be calculated as of
the end of the Valuation Period during which that sixtieth (60th) day
occurs.
If Lincoln Life makes a withdrawal payment pursuant to a Participant
request prior to receiving notice that the Participant has died, but
subsequent to the Participant's death, Lincoln Life will deduct that
payment from each of (a) and (b) above in calculating the Death Benefit.
8.2 NOTIFICATION OF DEATH: Lincoln Life must be notified of a Participant's
death no later than six (6) months from the Participant's date of death in
order for the Beneficiary to receive the Death Benefit amount described in
Section 8.1(a) above. Such notification must be in a form satisfactory to
Lincoln Life. Beneficiaries for whom notification of a Participant's death
is received more than six (6) months after the Participant's date of death
shall receive the Death Benefit amount described in Section 8.1(b) above.
8.3 PAYMENT OF DEATH BENEFIT: Within sixty (60) calendar days after Lincoln
Life receives satisfactory notification of the Participant's death, the
Beneficiary must make an election to have the Death Benefit applied in one
of the following ways:
(a) As a lump sum payment to the Beneficiary; or
(b) Towards an annuity to be distributed in substantially equal
installments over the life expectancy of the Beneficiary or a period
certain not exceeding the life expectancy of the Beneficiary; or
(c) A combination of the above.
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<PAGE>
A Beneficiary who does not make an election pursuant to this section within
sixty (60) days after Lincoln Life receives notification of the
Participant's death will receive a lump sum payment calculated in
accordance with Section 8.1(b) above.
If the Beneficiary is someone other than the spouse of the deceased
Participant, the Code provides that the Beneficiary may not elect an
annuity which would commence later than December 31 of the calendar year
following the calendar year of the Participant's death. If a non-spousal
Beneficiary elects to receive payment in a single lump sum, such payment
must be received no later than December 31 of the fourth (4th) calendar
year following the calendar year of the Participant's death.
If the Beneficiary is the surviving spouse of the deceased Participant,
under the Code, distributions are not required to begin earlier than
December 31 of the calendar year in which the Participant would have
attained age seventy and one-half (70-1/2). If the surviving spouse dies
before the date on which annuity distributions commence, then, for purposes
of the Death Benefit, the surviving spouse shall be deemed to be the
Participant.
If there is no living named Beneficiary on file with Lincoln Life at the
time of a Participant's death, Lincoln Life will pay the Death Benefit to
the Participant's estate in a single lump sum upon receipt of satisfactory
proof of the Participant's death, but not later than December 31 of the
fourth (4th) calendar year following the calendar year of the Participant's
death. Valuation of the Death Benefit shall occur as of the end of the
Valuation Period during which due proof of the Participant's death is
received by Lincoln Life.
8.4 DEATH DURING THE ANNUITY PERIOD: If the Annuitant dies during the Annuity
Period, the Beneficiary, if any, or the Annuitant's estate will receive the
amount payable, if any, according to the in-force annuity options. Any
remaining Participant's Account balance will be paid in accordance with the
provisions of this Article.
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<PAGE>
ARTICLE IX - PAYOUT ANNUITIES
9.1 ELECTION OF PAYOUT ANNUITY OPTION: A Participant eligible to receive a
distribution under the Code or a Beneficiary of a deceased Participant may
notify Lincoln Life in writing in a form acceptable to Lincoln Life that
the Participant or the Beneficiary is electing to convert all or part of
the Participant's Account balance or Death Benefit to a Payout Annuity
option available under this Contract. Upon being notified of such an
election, Lincoln Life shall calculate the amount to be converted to a
Payout Annuity as either the Participant's Account balance, or a portion
thereof, or the Death Benefit as of the initial Annuity Payment Calculation
Date, as appropriate, less the charge for premium taxes, if any.
If the Participant's Account balance or the Beneficiary's Death Benefit is
less than two thousand dollars ($2,000) or if the amount of the first
scheduled payment is less than twenty dollars ($20), Lincoln Life may, at
its option, cancel the Payout Annuity and pay the Participant or
Beneficiary his entire Account balance or Death Benefit in a lump sum.
9.2 GUARANTEED ANNUITY: The payment amount is determined by dividing the
Annuitant's Annuity Conversion Amount in the Guaranteed Interest Division
as of the initial Annuity Payment Calculation Date by the applicable
Annuity Conversion Factor as defined in Section 9.4.
9.3 VARIABLE ANNUITY: The initial payment amount of the Annuitant's Variable
Annuity for each Sub-Account is determined by dividing his Annuity
Conversion Amount in each Sub-Account as of the initial Annuity Payment
Calculation Date by the applicable Annuity Conversion Factor as defined in
Section 9.4.
The amount of the Annuitant's subsequent Variable Annuity payment for each
Sub-Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payment amount by
the Annuity Unit Value for that Sub-Account selected for his interest
rate option as described in Section 9.4 as of his initial Annuity
Payment Calculation Date; and
(b) Multiplying the resultant number of annuity units by the Annuity Unit
Values for the Sub-Account selected for his interest rate option for
his respective subsequent Annuity Payment Calculation Dates.
The Annuity Unit Value for all Sub-Accounts for all interest rate options
will initially be set at ten dollars ($10). Each subsequent Annuity Unit
Value for a Sub-Account for an interest rate option is determined by:
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<PAGE>
Dividing the Accumulation Unit Value for the Sub-Account as of the
subsequent Annuity Payment Calculation Date (APCD) by the Accumulation
Unit Value for the Sub-Account as of the immediately preceding APCD,
Dividing the resultant factor by one (1.00) plus the interest rate
option to the n/365 power where n is the number of days from the
immediately preceding APCD to the subsequent APCD, and
Multiplying this factor times the Annuity Unit Value as of the
immediately preceding APCD.
9.4 BASIS OF ANNUITY CONVERSION FACTORS:
(a) Guaranteed Annuities - The maximum Annuity Conversion Factors that may
be used by Lincoln Life under this Contract are based on the 1983
Individual Annuity Mortality Table, set back four (4) years, and an
interest rate of three percent (3.0%). From time to time, lower
conversion factors may be used by Lincoln Life. (Lowering the
conversion factor will increase the amount of the annuity payment.)
(b) Variable Annuities - The Annuity Conversion Factors which are used to
determine the initial payments are based on the 1983 Individual
Annuity Mortality Table, set back four (4) years, and an interest rate
in an integral percentage ranging from zero to six percent (0 to
6.00%) as selected by the Annuitant.
9.5 PAYOUT ANNUITY OPTIONS: The following Payout Annuity options are
available:
(a) Life
(b) Life with payments guaranteed for ten (10), fifteen (15) or twenty
(20) years
(c) Joint and Survivor
(d) Payments guaranteed for ten (10), fifteen (15) or twenty (20) years
(e) Other offered by Lincoln Life.
To the extent option (d) is elected for a Variable Annuity, the Annuitant
may request at any time during the payment period that the present value of
any remaining installments be paid in one lump sum. However, any lump sum
so elected will be treated as a withdrawal during the Accumulation Period
subject to the applicable CDSC stated in Section 7.6.
9.6 RETIRED LIFE CERTIFICATE: Once an annuity option is selected by a
Participant, or the Beneficiary of a deceased Participant, Lincoln Life
will issue to the Annuitant an appropriate Certificate evidencing Lincoln
Life's obligations.
24
<PAGE>
ARTICLE X - LOANS
10.1 GENERAL: During a Participant's Accumulation Period, the Participant, if
permitted by the applicable Section 403(b) Plan, may apply for a loan under
this Contract by completing a loan application available from Lincoln Life.
Loans are secured by the Participant's Account balance in the Guaranteed
Interest Division.
10.2 RESTRICTIONS ON LOAN AMOUNT: The amount and terms of a loan are subject to
the restrictions imposed under Section 72(p) of the Code, as it may be
amended from time to time.
Additionally, the initial amount of a Participant's loan may not exceed
ninety percent (90%) of the Participant's Account balance in the Guaranteed
Interest Division.
10.3 MINIMUM LOAN AMOUNT: The initial amount of a loan must be at least one
thousand dollars ($1,000).
10.4 NUMBER OF LOANS OUTSTANDING: A Participant may have only one loan
outstanding at any time and may not establish more than one loan in any six
(6) month period. However, a Participant may renegotiate an outstanding
loan balance once during the term of the loan.
10.5 LOAN INTEREST RATE: The initial interest rate on a loan will be the lesser
of (a) the rate being credited in the Guaranteed Interest Division as of
the date of the loan and (b) the Moody's Corporate Bond Yield Average,
rounded to the nearest five basis points (0.05%) for the first month in
the calendar quarter which precedes the date of the loan. The loan
interest rate will remain fixed for the term of the loan, unless the
initial interest rate on a hypothetical new loan to the Participant would
be lower than the Participant's actual loan rate by more than fifty basis
points (0.50%). In such case, the loan interest rate will be reduced to
such lower rate as of the first day that such lower rate would
hypothetically be effective.
10.6 EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT: When a Participant takes a loan,
Lincoln Life will subdivide his Participant's Account balance in the
Guaranteed Interest Division by establishing a loan reserve account in an
amount initially equal to the initial loan amount. Funds held in the loan
reserve account are held as security for the loan and will accrue interest
at a rate which is three percent (3.0%) below the loan interest rate. To
the extent that the loan interest rate is subsequently reduced, the rate
credited to funds in the loan reserve account will also be reduced in order
to maintain the three percent (3.0%) differential.
As the Participant makes repayments to Lincoln Life on the loan, an amount
equal to the principal component of the repayment, plus the interest
accrued in the loan
25
<PAGE>
reserve account, will be transferred from his loan reserve account back to
his Participant's Account balance in the Guaranteed Interest Division.
In addition, an amount equal to ten percent (10%) of the principal of the
loan will be held as security to cover the interest and the CDSC, should
the Participant fail to make the required quarterly payments of principal
and interest. This amount will earn interest at the interest rate in
effect in the Guaranteed Interest Division but will not be available for
withdrawals. As the principal is reduced, the amount held as security will
also be reduced.
10.7 DEFAULT IN LOAN REPAYMENT: If a Participant fails to make any quarterly
principal and interest payment within thirty (30) days of the payment due
date, his loan will be in default and Lincoln Life will deduct from his
loan reserve account and from his Participant's Account balance in the
Guaranteed Interest Division the principal, due and accrued interest, and a
loan default charge of 5% and any CDSC thereon, as of the default date.
Lincoln Life will also recharacterize the principal and due and accrued
interest as a withdrawal.
10.8 RESERVATION OF RIGHTS BY LINCOLN LIFE: Lincoln Life reserves the right to:
(a) Delay making a loan for up to six (6) months from the date the loan
application is received; or
(b) With ninety (90) days written notice to You, amend any portion of the
loan specifications with regard to applications for new loans; or
(c) With ninety (90) days written notice to You, discontinue making new
loans under this Contract.
10.9 LOAN SET-UP CHARGE: Lincoln Life will charge a Participant the amount
specified in Section 1.7 each time a loan is established. The amount will
be withdrawn from the Participant's Account balance.
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<PAGE>
ARTICLE XI - DISCONTINUANCE AND TERMINATION OF CONTRACT
11.1 CONTRACT DISCONTINUANCE BY CONTRACTHOLDER: You may discontinue this
Contract by written notice to Lincoln Life. This contract will be deemed
discontinued on the later of the date You specify or the date the written
notice is received by Lincoln Life.
11.2 CONTRACT DISCONTINUANCE BY LINCOLN LIFE: Lincoln Life may, at its option,
discontinue this Contract in whole or in part if (a) You fail to meet the
Minimum Contribution Amount specified in Section 1.1 or (b) a modification
in this Contract is necessary in order to comply with Federal or State
requirements, including the Employee Retirement Income Security Act of
1974, and You refuse to accept a substantially similar contract offered by
Lincoln Life that incorporates such modification. Discontinuance pursuant
to this Section shall be effective as of a date specified by Lincoln Life,
provided You are given at least fifteen (15) days advance written notice in
which to cure any remediable defaults. Discontinuance by Lincoln Life
supersedes any date established under Section 11.1.
11.3 EFFECT OF DISCONTINUANCE: As of the date this Contract is discontinued
under either 11.1 or 11.2 above:
(a) No further Contributions will be accepted by Lincoln Life.
(b) Participants will be allowed to request withdrawals subject to the
restrictions set forth in Section 403(b) of the Code and regulations
thereof.
(c) Participants will be allowed to request transfers from each Sub-
Account of the Variable Investment Division to the Guaranteed Interest
Division. Transfers from the Guaranteed Interest Division to the
Variable Investment Division are not allowed. Transfers among the
Sub-Accounts of the Variable Investment Division are not allowed.
(d) Participants will not be allowed to request loans.
(e) Lincoln Life will send written notice to each Participant's last known
address stating that the Contract is discontinued and that the
Participant's remaining Account balance may be distributed in either
(i) a lump sum payment, (ii) a Payout Annuity conversion amount, or
(iii) some combination of (i) and (ii).
Such form of payment will be distributed at the earlier of:
(1) the Participant's attainment of age fifty-nine and one-half (59
1/2), or
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<PAGE>
(2) the Participant's separation from service, or
(3) the Participant has died, or
(4) the Participant has incurred a disability for which he is
receiving Social Security payments, or
(5) the date the Participant directs Lincoln Life to transfer the
entire value of the Participant's Account to another 403(b)
funding vehicle.
The Participant's remaining Account balance shall be the balance
remaining after (i) the repayment of any, if applicable, outstanding
loans including principal, due and accrued interest, and (ii) any
applicable CDSC or Annual Administration Charge that applies to the
Participant's Account.
11.4 CONTRACT TERMINATION: This Contract will terminate when there are no
participant Account balances under this Contract.
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<PAGE>
ARTICLE XII - GENERAL PROVISIONS
12.1 CONTRACT: This Contract, together with Your attached Application and any
riders, constitutes the entire Contract between You and Lincoln Life.
Lincoln Life is not a party to any Plan document, and is not responsible
for the validity of any Plan or actions taken by You under that Plan. The
terms of this Contract shall govern with respect to the rights and
obligations of Lincoln Life, notwithstanding any contrary provisions or
conditions of any trust or plan.
Lincoln Life may rely on any action or information provided by You under
the terms of this Contract and shall be relieved and discharged from any
further liability to any party in acting at the direction and upon the
authority of You. All statements made by You shall be deemed
representations and not warranties.
Lincoln Life may deactivate this Contract by prohibiting new Contributions
and/or new Participants after the date of deactivation. Lincoln Life will
give You not less than ninety (90) days notice of the date of deactivation.
12.2 CONTRACT AMENDMENTS: Lincoln Life may amend this Contract at any time by
amendment or replacement. Such amendments will not, without Your consent,
adversely alter (a) the minimum interest rate set forth in Section 4.2, (b)
the maximum annuity conversion factors under Section 9.4, or (c) the amount
or terms of any annuity benefit already selected under Section 9.1 prior to
the effective date of the change. No change in this Contract will
adversely affect the rights of a Participant with respect to Contributions
received or annuities purchased before the effective date of the change
unless:
(a) Such amendments are made in order to comply with rulings, regulations
and laws applicable to the program provided by this Contract; or
(b) Your consent to the Amendment is obtained.
Lincoln Life will give You not less than ninety (90) days notice prior to
the effective date of any change made in accordance with this Section.
12.3 CONTRACT INTERPRETATION: Whenever the context so requires, the plural
includes the singular, the singular the plural and the masculine the
feminine.
12.4 INFORMATION, REPORTS AND DETERMINATIONS: You shall furnish Lincoln Life
with such facts and information as Lincoln Life may require for the
administration of this Contract, including, upon request, the original or
photocopy of any pertinent records You keep. All information that You
furnish to Lincoln Life pursuant to this Contract, including the
information pertaining to Contributions described in Article III, shall be
legible, accurate and satisfactory in
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form to Lincoln Life. Such information shall be sent to a location
designated by Lincoln Life.
You shall make any determination required under this Contract pursuant to
the terms of the Contract or required under ERISA and shall report that
determination in writing to Lincoln Life. Such determination shall be
conclusive for the purpose of this Contract. Lincoln Life shall be fully
protected in relying on the reports and other information furnished by You
and need not inquire as to the accuracy or completeness of such reports
and information.
12.5 MISSTATEMENTS: If Lincoln Life provides a benefit under this Contract
based upon misstated or omitted information, including but not limited to
misstatement of age, Lincoln Life will make adjustments to the benefit to
reflect the correct information. Lincoln Life is relieved and discharged
from any liability and responsibility with respect to benefits provided in
reliance upon information You furnish.
12.6 ASSIGNMENT: You may not assign this Contract without Lincoln Life's prior
written consent. A Participant or Beneficiary under this Contract may not,
unless permitted by law, assign or encumber any payment due under this
Contract.
12.7 MARKET EMERGENCIES: If transactions are to be made to or from the
Variable Investment Division, Lincoln Life may not suspend the right of
redemption or delay payment for more than seven (7) calendar days after
tender for redemption, except for (1) any period when the New York Stock
Exchange is closed (other than customary weekend and holiday closings);
(2) any period when trading in the markets normally utilized is
restricted, or an emergency exists as determined by the Securities and
Exchange Commission, so that disposal of investments or determination of
the Accumulation Unit Value is not reasonably practicable; or (3) for such
other periods as the Securities and Exchange Commission by order may
permit for the protection of the Participants.
12.8 DEFERRAL PERIODS: If a withdrawal is to be made from the Guaranteed
Interest Division, Lincoln Life may defer the payment for the period
permitted by the law of the state in which this Contract was delivered but
not more than six (6) months after a written election is received by
Lincoln Life. During the period of deferral, interest at the then current
interest rate(s) will continue to be credited to a Participant's Account
in the Guaranteed Interest Division.
12.9 DEDUCTIONS FOR PREMIUM TAXES: Lincoln Life will deduct from Participant
Account balances any premium tax levied as a result of the existence of
Participant Accounts by any state or other governmental entity.
12.10 FACILITY OF PAYMENT: If any person is, in the judgment of Lincoln Life,
physically or mentally incapable of personally receiving and giving a
valid receipt for any payment due him under this Contract, Lincoln Life
may, unless and until
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claim shall have been made by a duly appointed legal guardian or
conservator of the person and property of such person, make such payment
or any part thereof to such other person or institution which, in the
judgment of Lincoln Life, is then contributing toward or providing for the
care and maintenance of such person. In no event will any such payment
exceed the maximum allowed under the applicable law of the state in which
this Contract is delivered. Such payment shall fully discharge Lincoln
Life of its obligations to the extent of the payment.
Lincoln Life will make any payment which has become due to a Participant
or an Annuitant and has not been paid prior to his death, to the
Participant's Beneficiary or Beneficiaries, his executors or
administrators. If no Beneficiary or personal representative has been
named, Lincoln Life may make payment to any one or more of the surviving
members of the following classes of relatives; spouse, children,
grandchildren, brothers, sisters, and parents. Such payment shall fully
discharge Lincoln Life for all liability to the extent of the payment.
12.11 EVIDENCE OF SURVIVAL: When a benefit payment is contingent upon the
survival of any person, evidence of such person's survival must be
furnished to Lincoln Life, either by such person's endorsement of the
check drawn for such payment, or by other satisfactory means.
12.12 NON-WAIVER: The failure on Lincoln Life's part to perform or insist upon
the strict performance of any provision or condition of this Contract
shall neither constitute a waiver of Lincoln Life's rights to perform or
require performance of such provision or condition, nor stop Lincoln Life
from exercising any other rights it may have in such provision, condition,
or otherwise in this Contract or any Plan.
12.13 RECEIPT OF NOTICE: Whenever Lincoln Life receives information
establishing any right or conferring any benefit upon any Participant or
Beneficiary, such receipt shall be deemed to take place on any Business
Day that such information is received.
12.14 SEPARABILITY OF PROVISIONS: If any provision of this Contract is
determined to be invalid, the remainder of the provisions shall remain in
full force and effect.
12.15 THE SEPARATE ACCOUNT: The Separate Account is registered and operated as
a Unit Investment Trust under the Investment Company Act of 1940. As such,
the assets of each Sub-Account are invested in a registered management
investment company (mutual fund).
The Separate Account will be legally separated from Lincoln Life's other
accounts. The Separate Account's assets will, at the time during the year
that adjustments in the reserves are made, have a value of at least equal
to the reserves and other contract liabilities with respect to the
Separate Account, and at all other
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times, will have a value approximately equal to, or in excess of, such
reserves and liabilities. The portion of the assets having a value equal
to, or approximately equal to, the reserves and contract liabilities will
not be chargeable with liabilities arising out of any other business which
Lincoln Life may conduct.
Lincoln Life reserves the right, subject to compliance with applicable
law, including approval by You or the Participants if required by law, (1)
to create additional Sub-Accounts, (2) to combine or eliminate Sub-
Accounts, (3) to transfer assets from one Sub-Account to another, (4) to
transfer assets to the General Account and other separate accounts, (5) to
cause the deregistration and subsequent re-registration of the Separate
Account under the Investment Company Act of 1940, (6) to operate the
Separate Account under a committee and to discharge such committee at any
time, and (7) to eliminate any voting rights which You or Participants may
have with respect to the Separate Account, (8) to amend the Contract to
meet the requirements of the Investment Company Act of 1940 or other
federal securities laws and regulations, (9) to operate the Separate
Account in any form permitted by law, (10) to substitute shares of another
fund for the shares held by a Sub-Account, and (11) to make any change
required by the Internal Revenue Code, the Employee Retirement Income
Security Act of 1974, or the Securities Act of 1933, to the extent not
provided in Section 12.2.
12.16 PAYMENT OF BENEFITS: Lincoln Life shall make payment of benefits under
this Contract directly to a Participant or Beneficiary at the last known
address on file with Lincoln Life.
12.17 FREE-LOOK PERIOD: A Participant will receive an Active Life Certificate
upon Lincoln Life's receipt of a duly completed participation enrollment
form. If the Participant chooses not to participate under this Contract,
he may exercise his Free-look right by sending a written notice to Lincoln
Life that he does not wish to participate under this Contract within ten
(10) days after the date the Certificate is received by the Participant.
For purposes of determining the date on which the Participant has sent
written notice, the postmark date will be used.
If a Participant exercises his Free-look right in accordance with the
foregoing procedure, Lincoln Life will refund in full the Participant's
aggregate Contributions less aggregate withdrawals, or if greater, with
respect to Contributions to the Variable Investment Division, the
Participant's Account balance in the Variable Investment Division on the
date the canceled Certificate is received by Lincoln Life.
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ATTACHMENT I
SYSTEMATIC WITHDRAWAL OPTION
The formula for the interest equivalency amount (IEA) is:
29.5/366
IEA = ACCT.BAL x ( (1 + I ) - 1)
WHERE:
IEA is the Interest Equivalency Amount.
ACCT. BAL. is the Participant's Account balance at
the later of: the beginning of the contract
year and the most recent date on which the
credited interest rate changed.
I is the interest rate currently being credited
to the contract
EXAMPLE: The Account balance at the beginning of the year is
one hundred thousand dollars ($100,000) and the interest rate
credited to the contract is six percent (6.00%). The Interest
Equivalency Amount for each month of the current year is:
29.5/366
IEA = $100,000 x (1.06 - 1)
= $470.76
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[LETTERHEAD OF LINCOLN NATIONAL LIFE INSURANCE CO.]
GROUP VARIABLE
ANNUITY CONTRACT NO.: EFFECTIVE DATE:
CONTRACTHOLDER:
(Herein referred to as "You" or "Your")
THIS CONTRACT WAS DELIVERED IN THE State/Commonwealth of
and is subject to the laws of that jurisdiction.
Lincoln Life by this Contract agrees to provide benefits for Participants in
accordance with the terms and conditions of the Contract. The entire Contract
consists of the provisions on the following pages, and the Application,
including any amendments, schedules, or endorsements.
IN WITNESS HEREOF, Lincoln Life has executed this Contract at Fort Wayne,
Indiana on this day of , 20 , and caused this Contract to
be in full force as of its Effective Date as set forth above.
Jon A Boscia, Kelly D. Clevenger,
Jon A Boscia, President Kelly D. Clevenger, Vice President
Non-Participating
PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
<PAGE>
TABLE OF CONTENTS
I. CONTRACT SPECIFICATIONS
II. DEFINITIONS
III. CONTRIBUTIONS
IV. GUARANTEED INTEREST DIVISION
V. VARIABLE INVESTMENT DIVISION
VI. TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
VII. WITHDRAWALS AND DISTRIBUTIONS
VIII. DEATH BENEFITS
IX. PAYOUT ANNUITIES
X. LOANS
XI. DISCONTINUANCE AND TERMINATION OF CONTRACT
XII. GENERAL PROVISIONS
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ARTICLE I - CONTRACT SPECIFICATIONS
1.1 MINIMUM CONTRIBUTION AMOUNT: Your minimum annual Contribution on behalf of
all Participants under this Contract shall be twenty thousand dollars
($20,000). This minimum figure is for aggregate annual Contributions, not
for each Participant.
1.2 SEPARATE ACCOUNT: Lincoln National Variable Annuity Account L
1.3 DIVISIONS AVAILABLE UNDER THIS CONTRACT:
A. Guaranteed Interest Division:
B. Variable Investment Division:
1.4 LIMITATIONS ON TRANSFERS AND WITHDRAWALS DURING THE ACCUMULATION PERIOD:
Unlimited transfer requests may be made by a Participant each calendar
year.
1.5 ANNUAL ADMINISTRATION CHARGE:
Twenty-five dollars ($25) per Participant.
Twenty-five dollars ($25) per Participant who allocates a contribution,
during the year ending on a Participation Anniversary, to any one (1) or
more of the Sub-Accounts established in the Variable Investment Division.
1.6 ANNUAL MORTALITY AND EXPENSE RISK CHARGE APPLICABLE TO VARIABLE INVESTMENT
DIVISION SUB-ACCOUNTS: Annual rate of one percent (1.00%).
1.7 LOAN SET-UP CHARGE: Fifty dollars ($50) per loan
1.8 PLAN NAME:
1.9 EMPLOYER:
1.10 SYSTEMATIC WITHDRAWAL SET-UP CHARGE: Thirty dollars ($30.00). If the
total Account balance is twenty-five thousand dollars ($25,000), or
greater, such amount will be waived.
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ARTICLE II - DEFINITIONS
2.1 ACCUMULATION UNIT: An accounting unit of measure used to record amounts of
increases to, decreases from and accumulations in each Sub-Account during
the Accumulation Period.
2.2 ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each
Sub-Account on any Valuation Date.
2.3 ACCUMULATION PERIOD: The period commencing on a Participant's
Participation Date and terminating when the Participant's Account balance
is reduced to zero, either through withdrawal(s), conversion to an annuity,
imposition of charges, payment of a Death Benefit or a combination thereof.
2.4 ANNUITANT: The person receiving annuity payments under the terms of this
Contract.
2.5 ANNUITY COMMENCEMENT DATE: The date on which Lincoln Life makes the first
annuity payment to the Annuitant as required by the Retired Life
Certificate. This date, as well as the date each subsequent annuity
payment is made, will be the first day of a calendar month.
2.6 ANNUITY CONVERSION AMOUNT: The amount of a Participant's Account applied
toward the purchase of an Annuity.
2.7 ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion
Amount in determining the dollar amount of an annuitant's annuity payments
for Guaranteed Annuities or the initial payment for Variable Annuities.
2.8 ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the
first day of a calendar month. For Variable Annuities, this is the
Valuation Date ten (10) business days prior to the first day of a calendar
month.
2.9 ANNUITY PERIOD: The period concurrent with or following the Accumulation
Period, during which an Annuitant's annuity payments are made.
2.10 ANNUITY UNIT: An accounting unit of measure that is used in calculating
the amounts of annuity payments to be made from each Sub-Account during the
Annuity Period.
2.11 ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in each Sub-
Account on any Valuation Date.
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2.12 BENEFICIARY: The person(s) designated to receive a Participant's Account
balance in the event of the Participant's death during the Accumulation
Period or the person(s) designated to receive any applicable remainder of
an annuity in the event of the Annuitant's death during the Annuity Period.
2.13 BUSINESS DAY: A day on which Lincoln Life and the New York Stock Exchange
are customarily open for business.
2.14 CERTIFICATE: An Active Life Certificate is issued to each Participant
outlining the basic provisions of the Contract. A Retired Life Certificate
is issued to each Annuitant outlining the basic provisions of his Annuity.
2.15 CONTRIBUTIONS: All amounts deposited by You or the Participant under this
Contract including any amount transferred from another contract.
2.16 DIVISION(S): The Guaranteed Interest Division and/or the Variable
Investment Division named in Section 1.3.
2.17 GENERAL ACCOUNT: All assets of Lincoln Life other than those in the
Separate Account specified in Section 1.2 or any other separate account.
2.18 GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is
reduced when a withdrawal occurs, including any applicable Contingent
Deferred Sales Charge and Annual Administration Charge.
2.19 GUARANTEED ANNUITY: An annuity for which Lincoln Life guarantees the
amount of each payment as long as the annuity is payable.
2.20 GUARANTEED INTEREST DIVISION: The Division maintained by Lincoln Life for
these and other contracts for which Lincoln Life guarantees the principal
amount and interest credited thereto, subject to any fees and charges as
set forth in this Contract. Amounts allocated to the Guaranteed Interest
Division are part of the General Account.
2.21 LINCOLN LIFE: Lincoln National Life Insurance Company, at its home office
in Fort Wayne, Indiana. All correspondence and inquiries should be
submitted to Lincoln Life's Servicing Office: P.O. Box 9740, Portland ME
04101-5001.
2.22 NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant
Account less any net Withdrawal Amounts, outstanding loan (including
principal and due and accrued interest) and amounts converted to a Payout
Annuity.
2.23 NET WITHDRAWAL AMOUNT: The amount paid to a Participant when a withdrawal
occurs.
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2.24 PARTICIPANT: A person who has enrolled under this Contract and maintains a
Participant's Account.
2.25 PARTICIPANT'S ACCOUNT: An account maintained for a Participant during the
Accumulation Period, the total balance of which equals the Participant's
Account balance in the Variable Investment Division plus the Participant's
Account balance in the Guaranteed Interest Division.
2.26 PARTICIPATION ANNIVERSARY: For each Participant, a date at one year
intervals from that Participant's Participation Date. If an anniversary
occurs on a non-Business Day, it is treated as occurring on the next
Business Day.
2.27 PARTICIPATION DATE: A date assigned to each Participant corresponding to
the date on which the first Contribution on behalf of that Participant
under this Contract is received by Lincoln Life. A Participant will receive
a new Participation Date if such Participant makes a Total Withdrawal as
defined in Section 7.2 and Contributions on behalf of the Participant are
resumed under any Contract.
2.28 PARTICIPATION YEAR: A period beginning with one Participation Anniversary
and ending the day before the next Participation Anniversary, except for
the first Participation Year that begins with the Participation Date.
2.29 PAYOUT ANNUITY: A series of payments paid under the terms of this Contract
to a person. A Payout Annuity may be either a Guaranteed Annuity or a
Variable Annuity.
2.30 PENDING ALLOCATION ACCOUNT: An account established under the Variable
Investment Division that invests unallocated contributions in shares of a
money market mutual fund. Lincoln Life does not guarantee the principal
amount or investment results.
2.31 PLAN: The Plan named in Section 1.8 that qualifies for federal tax benefits
under Section 403(b) of the Internal Revenue Code of 1986 and under which
this Contract is authorized.
2.32 SEPARATE ACCOUNT: The Lincoln National Variable Annuity Account L is a
group of assets segregated from Lincoln Life's General Account whose
income, gains and losses, realized or unrealized, are credited to or
charged against the Separate Account without regard to other income, gains
or losses of Lincoln Life. Additional information is provided in Section
12.15.
2.33 SUB-ACCOUNT(S): An account established in the Variable Investment Division
that invests in shares of a corresponding mutual fund.
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2.34 VALUATION DATE: A Business Day. Accumulation and Annuity Units are
computed on each Valuation Date as of the close of trading on the New York
Stock Exchange.
2.35 VALUATION PERIOD: A period used in measuring the investment experience of
each Sub-Account. The Valuation Period begins at the close of trading on
the New York Stock Exchange on one Valuation Date and ends at the
corresponding time on the next Valuation Date.
2.36 VARIABLE ANNUITY: An annuity with payments that increase or decrease in
accordance with the investment results of the selected Sub-Account(s).
2.37 VARIABLE INVESTMENT DIVISION: The Division specified in Section 1.3 that
is maintained by Lincoln Life for this and other Section 403(b) Lincoln
Life contracts for which Lincoln Life does not guarantee the principal
amount or investment results. Amounts allocated to the Variable
Investment Division are part of the Separate Account.
2.38 YOU or YOUR: The Contractholder named on the face page of this Contract.
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<PAGE>
ARTICLE III - CONTRIBUTIONS
3.1 INITIAL CONTRIBUTION: The initial Contribution for a Participant will be
credited to the Participant's Account no later than two (2) Business Days
after it is received by Lincoln Life if it is preceded or accompanied by a
completed enrollment form containing all the information necessary for
processing the Participant's Contribution.
3.2 ALLOCATION OF CONTRIBUTIONS: Participant Contributions will be allocated
to the Divisions and Sub-Accounts according to the percentages requested by
the Participant. The allocation percentage can be any whole percent and
may be changed on an unlimited basis per year. You or the Participant
shall notify Lincoln Life in writing in a form acceptable to Lincoln Life
or by telephone in accordance with procedures published by Lincoln Life of
such changes.
3.3 PAYMENT OF SUBSEQUENT CONTRIBUTIONS: You shall forward Contributions to
Lincoln Life specifying the amount being contributed on behalf of each
Participant. You shall forward such Contributions and provide such
allocation information in accordance with procedures established by Lincoln
Life. The Contributions shall be allocated among the Guaranteed Interest
Division and each Sub-Account in accordance with the percentage information
provided by the Participant subject to the terms of the Plan.
3.4 CHARACTERIZATION OF TRANSFER CONTRIBUTIONS: For all Contributions
transferred from another Contract, Lincoln Life must be provided with the
following information in a form acceptable to Lincoln Life:
(a) The source of the Contributions transferred (e.g., salary reduction,
employer match or post-tax Contributions). Lincoln Life will record
all such transferred amounts where no source information is provided
as salary reduction Contributions.
(b) Identification of Contributions transferred as Contributions made or
earnings credited:
(i) prior to January 1, 1987;
(ii) during 1987 and 1988; or
(iii) subsequent to December 31, 1988.
Amounts not so identified will be treated as attributable to period
(iii) for purposes of Sections 7.4 and 7.5.
8
<PAGE>
3.5 MAXIMUM CONTRIBUTION: Total and overall limitations on Contributions in a
calendar year for a Participant are subject to the limits imposed under
Sections 402(g), 403(b) and 415 of the Internal Revenue Code of 1986 (the
Code), as it may be amended from time to time. Lincoln Life assumes no
responsibility for monitoring these limits for a Participant.
Elective deferrals made under the terms of a salary reduction agreement
must not exceed the annual limits on elective deferrals as provided in IRC
Section 402(g). Contributions in excess of such amounts may be distributed
upon request of the Contractholder and Participant by Lincoln Life as
permitted by law.
3.6 VALUATION: A Guaranteed Interest Division Contribution will be allocated as
of the Business Day that Lincoln Life receives the Contribution and Lincoln
Life will credit interest beginning with the next calendar day following
the Business Day that Lincoln Life receives the Contribution.
For a Variable Investment Division Sub-Account Contribution, Lincoln Life
will credit a Participant's Account with the number of Accumulation Units
for each Sub-Account selected by the Participant with the number of
Accumulation Units equal to the Contribution Amount divided by the
Accumulation Unit Value which is next computed following Lincoln Life's
receipt of the Contribution.
3.7 ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated
in Section 1.5 from each Participant's Account each year on the last
Business Day of the month in which his Participation Anniversary occurs
unless the Contractholder pays the charge in a single payment. If the
Participant's Account balance is less than this amount on that day, Lincoln
Life will deduct the entire balance from his Account.
When a Total Withdrawal of a Participant's Account, as defined in Section
7.2, occurs on a date other than the last Business Day of the month in
which his Participation Anniversary occurs, Lincoln Life will first deduct
the amount stated in Section 1.5 from his Participant's Account.
ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated
in Section 1.5 on a pro-rata basis from the Participant's Variable
Investment Division Account balance each year on the last Business Day of
the month in which his Participation Anniversary occurs unless the
Contractholder pays the charge in a single payment. If the Participant's
Variable Investment Division Account balance is less than this amount on
that day, Lincoln Life will deduct the entire balance from his Variable
Investment Division Account.
When a Participant requests, on a date other than the last Business Day of
the month in which his Participation Anniversary occurs,
(a) a withdrawal, or
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(b) a transfer,
from the Variable Investment Division, which would leave a remaining
balance of less than the Annual Administration Charge defined in Section
1.5, Lincoln Life will first deduct the amount stated in Section 1.5 from
the Participant's Variable Investment Division Account balance prior to the
Withdrawal or Transfer.
3.8 UNALLOCATED CONTRIBUTION: If a properly completed enrollment form has not
been received for a Participant, Lincoln Life will deposit such
Contributions to the Pending Allocation Account as described in ARTICLE II
- DEFINITIONS, unless such Contributions are designated to another Account
in accordance with the Plan.
Lincoln Life will follow up with the Contractholder monthly for a period of
ninety (90) days for enrollment information for Participants with deposits
in the Pending Allocation Account.
Within two (2) business days of receipt of a completed enrollment form, the
Participant's Account balance in the Pending Allocation Account will be
transferred to the Divisions and/or Sub-Accounts according to the
percentages requested by the Participant. When the completed enrollment
form is received, the Participation Date will be the date on which the
first Contribution on behalf of the Participant was deposited into the
Pending Allocation Account.
If an enrollment form is not received after the ninety (90) day notice, a
Participant's Account balance in the Pending Allocation Account will be
refunded to the Contractholder within one hundred five (105) days of the
date of the initial Contribution. Contributions received after a refund
while there is still no allocation information, will be deposited to the
Pending Allocation Account.
The Pending Allocation Account will only be used for the purpose mentioned
above; Participants may not direct a portion of their Contributions to this
Account. Contributions deposited in the Pending Allocation Account will
not be afforded the same rights as Contributions under this Contract. The
following Articles and/or Sections under this Contract will not be
applicable: (i) Section 3.7 ANNUAL ADMINISTRATION CHARGE, (ii) ARTICLE
VI - TRANSFERS BETWEEN DIVISION AND SUB-ACCOUNTS, (iii) ARTICLE VII -
WITHDRAWALS AND DISTRIBUTIONS, (iv) ARTICLE IX - PAYOUT ANNUITIES, and (v)
ARTICLE X - LOANS.
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ARTICLE IV - GUARANTEED INTEREST DIVISION
4.1 PARTICIPANT'S ACCOUNT BALANCE IN GUARANTEED INTEREST DIVISION: The dollar
value of a Participant's Account balance in the Guaranteed Interest
Division as of a date will be equal to the sum of:
(a) Contributions allocated, on behalf of the Participant, to the
Guaranteed Interest Division on or prior to that date, and
(b) Amounts transferred, on behalf of the Participant, to the Guaranteed
Interest Division from the Variable Investment Division on or prior to
that date, less any;
(c) Gross Withdrawal Amounts from the Guaranteed Interest Division, on
behalf of the Participant, on or prior to that date; and
(d) Amounts transferred, on behalf of the Participant, to the Variable
Investment Division on or prior to that date; and
(e) Applicable charges to the Participant's Account on or prior to that
date; and
(f) Annuity Conversion Amounts, on behalf of the Participant, on or prior
to that date, plus any;
(g) Interest credited to the Participant's Account balance in the
Guaranteed Interest Division on or prior to that date.
4.2 INTEREST: Lincoln Life will credit interest each day to the portion of the
Participant's Account balance in the Guaranteed Interest Division, using
the previous day's ending balance. The rate of interest credited each day,
if compounded for three hundred sixty-five (365) days, yields the annual
interest rate in effect for the day.
Lincoln Life will declare in advance a guaranteed interest rate which will
be effective for all amounts in the Participant's Account balance in the
Guaranteed Interest Division during the designated year. This rate will
never be less than three percent (3%). However, this minimum rate will not
be considered for purposes of Section 10.6 (EFFECT OF LOAN ON PARTICIPANT'S
ACCOUNT) under this Contract.
Lincoln Life may also declare in advance separate interest rate guarantees
which are in excess of the guaranteed interest rate for some or all of the
Participant's Account balance in the Guaranteed Interest Division for
specific period(s) during the designated year.
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ARTICLE V - VARIABLE INVESTMENT DIVISION
5.1 PARTICIPANT'S ACCOUNT BALANCE IN THE VARIABLE INVESTMENT DIVISION: The
Participant's Account balance in the Variable Investment Division is equal
to the sum of the dollar value of a Participant's Account balance in each
Sub-Account as of the end of a Valuation Period which will be equal to the
product of:
(a) The Participant's number of Accumulation Units as of the end of that
Valuation Period; times
(b) The Accumulation Unit Value as of the end of that Valuation Period.
5.2 ACCUMULATION UNITS: The number of Accumulation Units a Participant has in
a Sub-Account as of the end of any Valuation Period is the number of
Accumulation Units the Participant had in that Sub-Account as of the end of
the preceding Valuation Period; plus
(a) The number of Accumulation Units attributable to amounts deposited to
or transferred to that Sub-Account during the current Valuation
Period; minus
(b) The number of Accumulation Units attributable to amounts transferred
from, converted to an annuity, removed as a charge, paid as a death
benefit, or withdrawn from that Sub-Account during the current
Valuation Period.
5.3 ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Sub-Account
was set initially at ten dollars ($10), except for the Index Account which
was set at nine and nine hundred six one thousands ($9.9060) of a dollar.
Subsequent Accumulation Unit Values are determined by multiplying;
(a) The Net Investment Factor for the current Valuation Period by;
(b) The Accumulation Unit Value as of the end of the immediately preceding
Valuation Period.
5.4 NET INVESTMENT FACTOR: The Net Investment Factor is used to measure the
investment experience of a Sub-Account net of the Mortality and Expense
Risk Charge as defined in Section 5.5. The Net Investment Factor for a
Valuation Period is equal to (a) divided by (b) with the result multiplied
by (c) and adjusted by the amount per share of any taxes which are incurred
by Lincoln Life because of the existence of the Sub-Account;
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where (a) is;
the net asset value per share of the underlying mutual fund held by
the Sub-Account as of the end of the Valuation Period, plus;
the amount per share of any dividend or capital gain distribution
from the underlying mutual fund held by the Sub-Account during the
Valuation Period,
where (b) is;
the net asset value per share of the underlying mutual fund held by
the Sub-Account as of the end of the immediately preceding Valuation
Period,
where (c) is;
one (1.00) minus the Annual Mortality and Expense Risk Charge shown
in Section 1.6 to the n/365th power where n equals the number of
calendar days since the immediately preceding Valuation Date.
5.5 MORTALITY AND EXPENSE RISK CHARGE: This charge is imposed to compensate
Lincoln Life for its assumption of mortality and expense risks under this
Contract. This charge is shown on an annualized basis in Section 1.6 and
is deducted on a daily basis as described in Section 5.4. This charge may
not be increased without the approval of a majority of all affected Lincoln
Life contractholders.
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ARTICLE VI - TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
6.1 TRANSFERS DURING ACCUMULATION PERIOD: Subject to the limitations stated in
Section 1.4, Participants may transfer all or part of their Account balance
in any Division or Sub-Account to another Division or Sub-Account.
You or the Participant may make a transfer request by notifying Lincoln
Life in writing in a form acceptable to Lincoln Life or by telephone in
accordance with procedures published by Lincoln Life.
6.2 TRANSFERS DURING ANNUITY PERIOD: An Annuitant may not transfer any part of
the Annuitant's Annuity Conversion Amount.
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ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS
7.1 WITHDRAWALS DURING THE ACCUMULATION PERIOD: During the Accumulation
Period, a Participant may withdraw from any or all Divisions, subject to
the restrictions stated in Section 7.4, all or part of the Participant's
Account balance in the Division or Sub-Accounts remaining after reductions
for any applicable Annual Administration Charge (imposed on Total
Withdrawals), Contingent Deferred Sales Charge (CDSC), premium taxes and
outstanding loan, including the loan security thereon. Annuity Conversion
Amounts are not considered withdrawals.
All withdrawal requests must be submitted in a form acceptable to Lincoln
Life and must indicate the amount and the Division(s) from which the
withdrawal is to be made.
Lincoln Life reserves the right to delay payment of Guaranteed Interest
Division withdrawal amounts per Section 12.8.
7.2 TOTAL WITHDRAWALS: A Total Withdrawal of a Participant's Account will
occur when a Participant who has no outstanding loans
(a) requests the liquidation of his entire Account balance, or
(b) requests an amount such that the amount requested plus any CDSC as
defined in Section 7.6 results in a remaining Participant's Account
balance being less than the applicable Annual Administration Charge as
defined in Section 1.5, in which case, the request is treated as if it
were a request for liquidation of the Participant's entire Account
balance.
The Participant's Active Life Certificate must be surrendered to Lincoln
Life when a Total Withdrawal of a Participant's Account occurs.
A Participant refund under the Free-look provisions of Section 12.17 is not
considered a Total Withdrawal under this Article.
7.3 PARTIAL WITHDRAWALS: A Partial Withdrawal of a Participant's Account will
occur when:
(a) A Participant who has an outstanding loan makes a withdrawal; or
(b) A Participant who has no outstanding loans, requests an amount less
than a total withdrawal.
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7.4 WITHDRAWAL REQUIREMENTS FOR SECTION 403(b) PLANS: Withdrawals are subject
to the requirements set forth in Section 403(b) of the Code and regulations
thereof.
(a) Withdrawal Requests for Participants under Section 403(b) Plans
Subject to Title I of ERISA: You must make withdrawal requests on
behalf of Participants. All withdrawal requests will require Your
written authorization and written documentation specifying the portion
of the Participant's Account balance which is available for
distribution to the Participant.
(b) Withdrawal Requests for Participants under Section 403(b) Plans not
---
Subject to Title I of ERISA: Any portion of the Participant's Account
balance that has been recorded by Lincoln Life as a salary reduction
contribution made and/or earnings credited prior to January 1, 1989,
(including transferred amounts recorded as such pursuant to Section
3.4), may be withdrawn for any reason. Any portion of the
Participant's Account balance that has been recorded by Lincoln Life
as a salary reduction Contribution made and/or earnings credited after
December 31, 1988, (including transferred amounts recorded as such
pursuant to Section 3.4), are subject to the withdrawal restrictions
stated in Section 403(b) of the Code. Participants must certify to
Lincoln Life (and provide supporting information, if requested), that
an event permitting withdrawal has occurred and that Lincoln Life may
rely on such representation in granting the withdrawal request.
7.5 MINIMUM DISTRIBUTION REQUIREMENTS FOR SECTION 403(b) PLANS: Section
403(b)(10) of the Code and regulations thereunder require that
distributions be made from this Contract in a manner which satisfies
requirements similar to the requirements of Section 401(a)(9) including
the incidental death benefit requirements of Section 401(a)(9)(G).
(1) Section 401(a)(9) requires that:
(a) the Participant's Account be distributed not later than the
required beginning date; or
(b) the Participant's Account be distributed not later than the
required beginning date, over the life of the Participant or over
the lives of the Participant and a designated Beneficiary.
(2) A Participant may choose to have the Participant's Account distributed
in one of the following manners:
(a) As a lump sum payment;
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(b) As an annuity meeting the requirements of Section 401(a)(9) of
the Code;
(c) As an annual distribution where the amount distributed each
calendar year is at least an amount equal to the quotient
obtained by dividing: (a) the amount of the Participant's
Account required to be distributed as of December 31 of the
calendar year immediately preceding the calendar year for which
the distribution is being made; by (b) the life expectancy of the
Participant, or the life expectancy of the Participant and the
Beneficiary; or
(d) A combination of the above.
With respect to (c) and (d) above, the life expectancy of the Participant
and a surviving spouse Beneficiary may be recalculated, but not more
frequently than annually. A non-spouse Beneficiary's life expectancy may
not be recalculated.
7.6 CONTINGENT DEFERRED SALES CHARGE (CDSC): The following schedule of CDSC
shall apply to all Withdrawal Amounts.
(a) WHEN A WITHDRAWAL IS REQUESTED AND ONE OR THE CDSC WILL
MORE OF THE FOLLOWING CONDITIONS IS MET: EQUAL:
The Participant has died 0%
The Participant has incurred a disability for 0%
which he is receiving Social Security payments
The Participant has attained age fifty-nine 0%
and one-half (59 1/2)
The Participant has separated from service 0%
with the Contractholder and is age fifty-five
(55)
The Participant has separated from service 0%
with the Contractholder
The Participant has demonstrated a financial 0%
hardship need
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The Participant has requested a withdrawal 0%
which will not exceed twenty percent (20%) of
his Participant's Account Balance and no
other withdrawal has been made in that
calendar year
(b) For all other amounts subject to a CDSC, the CDSC will be in
accordance with the schedule below:
During Participation Year CDSC Percent
1-5 6%
6-10 3%
11-15 1%
16+ 0%
Lincoln Life requires reasonable proof necessary to verify that the
withdrawal meets the conditions described above in Section 7.6(a) and such
proof must be submitted with the withdrawal request. If You or the
Participant do not furnish the proof requested by Lincoln Life, the CDSC
stated in Section 7.6(b) shall apply.
The CDSC on any withdrawal may be reduced or eliminated but only to the
extent that Lincoln Life anticipates that it will incur lower sales
expenses or perform fewer sales services due to economies arising from (i)
the size of the particular group, (ii) an existing relationship with the
Contractholder, (iii) the utilization of mass enrollment procedures, or
(iv) the performance of sales functions by the Contractholder or an
employee organization which Lincoln Life would otherwise be required to
perform.
In no event will the CDSC, when added to any CDSC previously imposed due to
a Participant withdrawal, exceed eight and one-half percent (8.5%) of the
cumulative Contributions to a Participant's Account.
7.7 SYSTEMATIC WITHDRAWAL OPTION: Any Participant who: (a) is at least age
fifty-nine and one-half (59 1/2), or (b) is disabled and receiving Social
Security disability benefits, or (c) is separated from service with the
Contractholder may elect this option. A Participant must also have a
vested Participant Account balance of at least ten thousand dollars
$10,000) of pre-tax Contributions under this Contract at the date of the
election.
Amounts held for a spousal payee under a Qualified Domestic Relations Order
(QDRO) shall be recognized as eligible for the Systematic Withdrawal
Option. Any spousal payee who wishes to elect this distribution option
must also meet the minimum ten thousand dollars ($10,000). Account balance
requirement and either the age or disability requirement as discussed
above.
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A Participant may elect to receive monthly, quarterly, semi-annual, or
annual payments in a flat amount or payments on a monthly basis for an
interest equivalency amount. An interest equivalency amount is an
approximation of the interest earned between each payment period based upon
the interest rate in effect at the beginning of each respective payment
period. This amount will be determined by Lincoln Life. (See Attachment I
for illustration.) A Participant may change the frequency, payment type,
or payment amount of his Systematic Withdrawal Option by submitting a
request in writing on a form acceptable to Lincoln Life. A Participant may
make such a change only once during each calendar year.
A Participant may at any time direct Lincoln Life to cease payments under
this option provided the request is made in writing. A Participant who
chooses to stop receiving systematic withdrawals may not request that any
systematic withdrawal payments begin again until the next calendar year.
Systematic withdrawals shall be withdrawn from amounts allocated to the
Guaranteed Interest Division of the Participant's Account balance. If the
balance of the Guaranteed Interest Division is not sufficient to meet the
payment amount requested, the Participant, in writing, may direct Lincoln
Life on a form acceptable to Lincoln Life to transfer the appropriate
amount to the Guaranteed Interest Division; otherwise, such payment will
cease.
Lincoln Life will deduct the Systematic Withdrawal Set-Up Charge indicated
in Section 1.10 from the Participant's Account balance each time a
Systematic Withdrawal Option is established. The applicable CDSC, if any,
will be assessed on each systematic withdrawal payment.
Payments under this option shall stop upon the earliest of the following
events:
(a) On the date of the Participant's death. A Beneficiary who is a spouse
may elect this option by requesting it in writing on a form acceptable
to Lincoln Life, unless election of this form of benefit would violate
any other requirements of this contract. The spousal Beneficiary must
meet the ten thousand dollar ($10,000) minimum Account balance
requirement prior to electing the Systematic Withdrawal Option; or
(b) When there is an insufficient Participant Account balance after
deducting the applicable CDSC and Annual Administration Charge, if
any, to pay the amount requested; or
(c) The Participant fails to meet the requirements of the Systematic
Withdrawal Option as outlined above in the first (1st) paragraph of
this Section.
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If a disabled or terminated Participant, who is currently receiving a
Systematic Withdrawal Option payment, returns to service with the
Contractholder, the Contractholder or Participant must notify Lincoln Life
in writing within thirty (30) days from the date of return to service.
Lincoln Life reserves the right to discontinue the Systematic Withdrawal
Option payment under these circumstances.
If a Participant wishes to exercise this option under another Lincoln Life
Annuity Contract, such request shall be considered separate from this
Contract and shall follow the Systematic Withdrawal Option rules under that
Annuity Contract, if permitted.
Lincoln Life may, at its option, discontinue the Systematic Withdrawal
Option under this Contract at any time provided You are given at least
thirty (30) days advance written notice.
7.8 DIRECT ROLLOVER OPTION: Beginning January 1, 1993, a Participant or
Beneficiary may elect this option for any distribution that qualifies as an
Eligible Rollover Distribution as defined by Section 402(c) of the Internal
Revenue Code and that meets all the following requirements:
(1) The distribution must be paid directly to either a single Individual
Retirement Account or to a single Tax Deferred Annuity. The check,
wire, or other form of remittance shall be made payable to the
trustee, custodian, or financial institution sponsoring the Individual
Retirement Account or Tax Deferred Annuity. The form of remittance
will not be an instrument that can be negotiated by the Participant.
(2) The Participant must provide, in a form acceptable to Lincoln Life,
all information necessary to make the payment to an Individual
Retirement Account or Tax Deferred Annuity.
(3) The Participant or Beneficiary may not revoke a request for payment
under this option for any payment after Lincoln Life has received a
written request for a direct rollover.
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ARTICLE VIII - DEATH BENEFITS
8.1 DEATH BENEFIT DURING THE ACCUMULATION PERIOD: If death of the Participant
occurs during the Accumulation Period, Lincoln Life will pay the
Beneficiary, if one is living, the greater of the following amounts:
(a) The Net Contributions, or
(b) The Participant's Account balance less any outstanding loan (including
principal and due and accrued interest).
Lincoln Life will calculate the Death Benefit as of the end of the
Valuation Period during which it receives both satisfactory notification of
the Participant's death, pursuant to Section 8.2, and the election of a
form of benefit pursuant to Section 8.3. If no election is made pursuant
to Section 8.3 within sixty (60) days following Lincoln Life's receipt of
satisfactory notice of death, the Death Benefit will be calculated as of
the end of the Valuation Period during which that sixtieth (60th) day
occurs.
If Lincoln Life makes a withdrawal payment pursuant to a Participant
request prior to receiving notice that the Participant has died, but
subsequent to the Participant's death, Lincoln Life will deduct that
payment from each of (a) and (b) above in calculating the Death Benefit.
8.2 NOTIFICATION OF DEATH: Lincoln Life must be notified of a Participant's
death no later than six (6) months from the Participant's date of death in
order for the Beneficiary to receive the Death Benefit amount described in
Section 8.1(a) above. Such notification must be in a form satisfactory to
Lincoln Life. Beneficiaries for whom notification of a Participant's death
is received more than six (6) months after the Participant's date of death
shall receive the Death Benefit amount described in Section 8.1(b) above.
8.3 PAYMENT OF DEATH BENEFIT: Within sixty (60) calendar days after Lincoln
Life receives satisfactory notification of the Participant's death, the
Beneficiary must make an election to have the Death Benefit applied in one
of the following ways:
(a) As a lump sum payment to the Beneficiary; or
(b) Towards an annuity to be distributed in substantially equal
installments over the life expectancy of the Beneficiary or a period
certain not exceeding the life expectancy of the Beneficiary; or
(c) A combination of the above.
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A Beneficiary who does not make an election pursuant to this section within
sixty (60) days after Lincoln Life receives notification of the
Participant's death will receive a lump sum payment calculated in
accordance with Section 8.1(b) above.
If the Beneficiary is someone other than the spouse of the deceased
Participant, the Code provides that the Beneficiary may not elect an
annuity which would commence later than December 31 of the calendar year
following the calendar year of the Participant's death. If a non-spousal
Beneficiary elects to receive payment in a single lump sum, such payment
must be received no later than December 31 of the fourth (4th) calendar
year following the calendar year of the Participant's death.
If the Beneficiary is the surviving spouse of the deceased Participant,
under the Code, distributions are not required to begin earlier than
December 31 of the calendar year in which the Participant would have
attained age seventy and one-half (70-1/2). If the surviving spouse dies
before the date on which annuity distributions commence, then, for purposes
of the Death Benefit, the surviving spouse shall be deemed to be the
Participant.
If there is no living named Beneficiary on file with Lincoln Life at the
time of a Participant's death, Lincoln Life will pay the Death Benefit to
the Participant's estate in a single lump sum upon receipt of satisfactory
proof of the Participant's death, but not later than December 31 of the
fourth (4th) calendar year following the calendar year of the Participant's
death. Valuation of the Death Benefit shall occur as of the end of the
Valuation Period during which due proof of the Participant's death is
received by Lincoln Life.
8.4 DEATH DURING THE ANNUITY PERIOD: If the Annuitant dies during the Annuity
Period, the Beneficiary, if any, or the Annuitant's estate will receive the
amount payable, if any, according to the in-force annuity options. Any
remaining Participant's Account balance will be paid in accordance with the
provisions of this Article.
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ARTICLE IX - PAYOUT ANNUITIES
9.1 ELECTION OF PAYOUT ANNUITY OPTION: A Participant eligible to receive a
distribution under the Code or a Beneficiary of a deceased Participant may
notify Lincoln Life in writing in a form acceptable to Lincoln Life that
the Participant or the Beneficiary is electing to convert all or part of
the Participant's Account balance or Death Benefit to a Payout Annuity
option available under this Contract. Upon being notified of such an
election, Lincoln Life shall calculate the amount to be converted to a
Payout Annuity as either the Participant's Account balance, or a portion
thereof, or the Death Benefit as of the initial Annuity Payment Calculation
Date, as appropriate, less the charge for premium taxes, if any.
If the Participant's Account balance or the Beneficiary's Death Benefit is
less than two thousand dollars ($2,000) or if the amount of the first
scheduled payment is less than twenty dollars ($20), Lincoln Life may, at
its option, cancel the Payout Annuity and pay the Participant or
Beneficiary his entire Account balance or Death Benefit in a lump sum.
9.2 GUARANTEED ANNUITY: The payment amount is determined by dividing the
Annuitant's Annuity Conversion Amount in the Guaranteed Interest Division
as of the initial Annuity Payment Calculation Date by the applicable
Annuity Conversion Factor as defined in Section 9.4.
9.3 VARIABLE ANNUITY: The initial payment amount of the Annuitant's Variable
Annuity for each Sub-Account is determined by dividing his Annuity
Conversion Amount in each Sub-Account as of the initial Annuity Payment
Calculation Date by the applicable Annuity Conversion Factor as defined in
Section 9.4.
The amount of the Annuitant's subsequent Variable Annuity payment for each
Sub-Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payment amount by
the Annuity Unit Value for that Sub-Account selected for his interest
rate option as described in Section 9.4 as of his initial Annuity
Payment Calculation Date; and
(b) Multiplying the resultant number of annuity units by the Annuity Unit
Values for the Sub-Account selected for his interest rate option for
his respective subsequent Annuity Payment Calculation Dates.
The Annuity Unit Value for all Sub-Accounts for all interest rate options
will initially be set at ten dollars ($10). Each subsequent Annuity Unit
Value for a Sub-Account for an interest rate option is determined by:
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Dividing the Accumulation Unit Value for the Sub-Account as of the
subsequent Annuity Payment Calculation Date (APCD) by the Accumulation
Unit Value for the Sub-Account as of the immediately preceding APCD,
Dividing the resultant factor by one (1.00) plus the interest rate
option to the n/365 power where n is the number of days from the
immediately preceding APCD to the subsequent APCD, and
Multiplying this factor times the Annuity Unit Value as of the
immediately preceding APCD.
9.4 BASIS OF ANNUITY CONVERSION FACTORS:
(a) Guaranteed Annuities - The maximum Annuity Conversion Factors that may
be used by Lincoln Life under this Contract are based on the 1983
Individual Annuity Mortality Table, set back four (4) years, and an
interest rate of three percent (3.0%). From time to time, lower
conversion factors may be used by Lincoln Life. (Lowering the
conversion factor will increase the amount of the annuity payment.)
(b) Variable Annuities - The Annuity Conversion Factors which are used to
determine the initial payments are based on the 1983 Individual
Annuity Mortality Table, set back four (4) years, and an interest rate
in an integral percentage ranging from zero to six percent (0 to
6.00%) as selected by the Annuitant.
9.5 PAYOUT ANNUITY OPTIONS: The following Payout Annuity options are
available:
(a) Life
(b) Life with payments guaranteed for ten (10), fifteen (15) or twenty
(20) years
(c) Joint and Survivor
(d) Payments guaranteed for ten (10), fifteen (15) or twenty (20) years
(e) Other offered by Lincoln Life.
To the extent option (d) is elected for a Variable Annuity, the Annuitant
may request at any time during the payment period that the present value of
any remaining installments be paid in one lump sum. However, any lump sum
so elected will be treated as a withdrawal during the Accumulation Period
subject to the applicable CDSC stated in Section 7.6.
9.6 RETIRED LIFE CERTIFICATE: Once an annuity option is selected by a
Participant, or the Beneficiary of a deceased Participant, Lincoln Life
will issue to the Annuitant an appropriate Certificate evidencing Lincoln
Life's obligations.
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ARTICLE X - LOANS
10.1 GENERAL: During a Participant's Accumulation Period, the Participant, if
permitted by the applicable Section 403(b) Plan, may apply for a loan under
this Contract by completing a loan application available from Lincoln Life.
Loans are secured by the Participant's Account balance in the Guaranteed
Interest Division.
10.2 RESTRICTIONS ON LOAN AMOUNT: The amount and terms of a loan are subject to
the restrictions imposed under Section 72(p) of the Code, as it may be
amended from time to time.
Additionally, the initial amount of a Participant's loan may not exceed
ninety percent (90%) of the Participant's Account balance in the Guaranteed
Interest Division.
10.3 MINIMUM LOAN AMOUNT: The initial amount of a loan must be at least one
thousand dollars ($1,000).
10.4 NUMBER OF LOANS OUTSTANDING: A Participant may have only one loan
outstanding at any time and may not establish more than one loan in any six
(6) month period. However, a Participant may renegotiate an outstanding
loan balance once during the term of the loan.
10.5 LOAN INTEREST RATE: The initial interest rate on a loan will be the lesser
of (a) the rate being credited in the Guaranteed Interest Division as of
the date of the loan and (b) the Moody's Corporate Bond Yield Average,
rounded to the nearest five basis points (0.05%) for the first month in
the calendar quarter which precedes the date of the loan. The loan
interest rate will remain fixed for the term of the loan, unless the
initial interest rate on a hypothetical new loan to the Participant would
be lower than the Participant's actual loan rate by more than fifty basis
points (0.50%). In such case, the loan interest rate will be reduced to
such lower rate as of the first day that such lower rate would
hypothetically be effective.
10.6 EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT: When a Participant takes a loan,
Lincoln Life will subdivide his Participant's Account balance in the
Guaranteed Interest Division by establishing a loan reserve account in an
amount initially equal to the initial loan amount. Funds held in the loan
reserve account are held as security for the loan and will accrue interest
at a rate which is three percent (3.0%) below the loan interest rate. To
the extent that the loan interest rate is subsequently reduced, the rate
credited to funds in the loan reserve account will also be reduced in order
to maintain the three percent (3.0%) differential.
As the Participant makes repayments to Lincoln Life on the loan, an amount
equal to the principal component of the repayment, plus the interest
accrued in the loan
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reserve account, will be transferred from his loan reserve account back to
his Participant's Account balance in the Guaranteed Interest Division.
In addition, an amount equal to ten percent (10%) of the principal of the
loan will be held as security to cover the interest and the CDSC, should
the Participant fail to make the required quarterly payments of principal
and interest. This amount will earn interest at the interest rate in
effect in the Guaranteed Interest Division but will not be available for
withdrawals. As the principal is reduced, the amount held as security will
also be reduced.
10.7 DEFAULT IN LOAN REPAYMENT: If a Participant fails to make any quarterly
principal and interest payment within thirty (30) days of the payment due
date, his loan will be in default and Lincoln Life will deduct from his
loan reserve account and from his Participant's Account balance in the
Guaranteed Interest Division the principal, due and accrued interest, and a
loan default charge of 5% and any CDSC thereon, as of the default date.
Lincoln Life will also recharacterize the principal and due and accrued
interest as a withdrawal.
10.8 RESERVATION OF RIGHTS BY LINCOLN LIFE: Lincoln Life reserves the right to:
(a) Delay making a loan for up to six (6) months from the date the loan
application is received; or
(b) With ninety (90) days written notice to You, amend any portion of the
loan specifications with regard to applications for new loans; or
(c) With ninety (90) days written notice to You, discontinue making new
loans under this Contract.
10.9 LOAN SET-UP CHARGE: Lincoln Life will charge a Participant the amount
specified in Section 1.7 each time a loan is established. The amount will
be withdrawn from the Participant's Account balance.
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ARTICLE XI - DISCONTINUANCE AND TERMINATION OF CONTRACT
11.1 CONTRACT DISCONTINUANCE BY CONTRACTHOLDER: You may discontinue this
Contract by written notice to Lincoln Life. This contract will be deemed
discontinued on the later of the date You specify or the date the written
notice is received by Lincoln Life.
11.2 CONTRACT DISCONTINUANCE BY LINCOLN LIFE: Lincoln Life may, at its option,
discontinue this Contract in whole or in part if (a) You fail to meet the
Minimum Contribution Amount specified in Section 1.1 or (b) a modification
in this Contract is necessary in order to comply with Federal or State
requirements, including the Employee Retirement Income Security Act of
1974, and You refuse to accept a substantially similar contract offered by
Lincoln Life that incorporates such modification. Discontinuance pursuant
to this Section shall be effective as of a date specified by Lincoln Life,
provided You are given at least fifteen (15) days advance written notice in
which to cure any remediable defaults. Discontinuance by Lincoln Life
supersedes any date established under Section 11.1.
11.3 EFFECT OF DISCONTINUANCE: As of the date this Contract is discontinued
under either 11.1 or 11.2 above:
(a) No further Contributions will be accepted by Lincoln Life.
(b) Participants will be allowed to request withdrawals subject to the
restrictions set forth in Section 403(b) of the Code and regulations
thereof.
(c) Participants will be allowed to request transfers from each Sub-
Account of the Variable Investment Division to the Guaranteed Interest
Division. Transfers from the Guaranteed Interest Division to the
Variable Investment Division are not allowed. Transfers among the
Sub-Accounts of the Variable Investment Division are not allowed.
(d) Participants will not be allowed to request loans.
(e) Lincoln Life will send written notice to each Participant's last known
address stating that the Contract is discontinued and that the
Participant's remaining Account balance may be distributed in either
(i) a lump sum payment, (ii) a Payout Annuity conversion amount, or
(iii) some combination of (i) and (ii).
Such form of payment will be distributed at the earlier of:
(1) the Participant's attainment of age fifty-nine and one-half (59
1/2), or
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(2) the Participant's separation from service [and age fifty-five
(55)], or
(3) the Participant has died, or
(4) the Participant has incurred a disability for which he is
receiving Social Security payments, or
(5) the date the Participant directs Lincoln Life to transfer the
entire value of the Participant's Account to another 403(b)
funding vehicle.
The Participant's remaining Account balance shall be the balance
remaining after (i) the repayment of any, if applicable, outstanding
loans including principal, due and accrued interest, and (ii) any
applicable CDSC or Annual Administration Charge that applies to the
Participant's Account.
11.4 CONTRACT TERMINATION: This Contract will terminate when there are no
participant Account balances under this Contract.
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ARTICLE XII - GENERAL PROVISIONS
12.1 CONTRACT: This Contract, together with Your attached Application and any
riders, constitutes the entire Contract between You and Lincoln Life.
Lincoln Life is not a party to any Plan document, and is not responsible
for the validity of any Plan or actions taken by You under that Plan. The
terms of this Contract shall govern with respect to the rights and
obligations of Lincoln Life, notwithstanding any contrary provisions or
conditions of any trust or plan.
Lincoln Life may rely on any action or information provided by You under
the terms of this Contract and shall be relieved and discharged from any
further liability to any party in acting at the direction and upon the
authority of You. All statements made by You shall be deemed
representations and not warranties.
Lincoln Life may deactivate this Contract by prohibiting new Contributions
and/or new Participants after the date of deactivation. Lincoln Life will
give You not less than ninety (90) days notice of the date of deactivation.
12.2 CONTRACT AMENDMENTS: Lincoln Life may amend this Contract at any time by
amendment or replacement. Such amendments will not, without Your consent,
adversely alter (a) the minimum interest rate set forth in Section 4.2, (b)
the maximum annuity conversion factors under Section 9.4, or (c) the amount
or terms of any annuity benefit already selected under Section 9.1 prior to
the effective date of the change. No change in this Contract will
adversely affect the rights of a Participant with respect to Contributions
received or annuities purchased before the effective date of the change
unless:
(a) Such amendments are made in order to comply with rulings, regulations
and laws applicable to the program provided by this Contract; or
(b) Your consent to the Amendment is obtained.
Lincoln Life will give You not less than ninety (90) days notice prior to
the effective date of any change made in accordance with this Section.
12.3 CONTRACT INTERPRETATION: Whenever the context so requires, the plural
includes the singular, the singular the plural and the masculine the
feminine.
12.4 INFORMATION, REPORTS AND DETERMINATIONS: You shall furnish Lincoln Life
with such facts and information as Lincoln Life may require for the
administration of this Contract, including, upon request, the original or
photocopy of any pertinent records You keep. All information that You
furnish to Lincoln Life pursuant to this Contract, including the
information pertaining to Contributions described in Article III, shall be
legible, accurate and satisfactory in
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form to Lincoln Life. Such information shall be sent to a location
designated by Lincoln Life.
You shall make any determination required under this Contract pursuant to
the terms of the Contract or required under ERISA and shall report that
determination in writing to Lincoln Life. Such determination shall be
conclusive for the purpose of this Contract. Lincoln Life shall be fully
protected in relying on the reports and other information furnished by You
and need not inquire as to the accuracy or completeness of such reports and
information.
12.5 MISSTATEMENTS: If Lincoln Life provides a benefit under this Contract
based upon misstated or omitted information, including but not limited to
misstatement of age, Lincoln Life will make adjustments to the benefit to
reflect the correct information. Lincoln Life is relieved and discharged
from any liability and responsibility with respect to benefits provided in
reliance upon information You furnish.
12.6 ASSIGNMENT: You may not assign this Contract without Lincoln Life's prior
written consent. A Participant or Beneficiary under this Contract may not,
unless permitted by law, assign or encumber any payment due under this
Contract.
12.7 MARKET EMERGENCIES: If transactions are to be made to or from the Variable
Investment Division, Lincoln Life may not suspend the right of redemption
or delay payment for more than seven (7) calendar days after tender for
redemption, except for (1) any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings); (2) any period
when trading in the markets normally utilized is restricted, or an
emergency exists as determined by the Securities and Exchange Commission,
so that disposal of investments or determination of the Accumulation Unit
Value is not reasonably practicable; or (3) for such other periods as the
Securities and Exchange Commission by order may permit for the protection
of the Participants.
12.8 DEFERRAL PERIODS: If a withdrawal is to be made from the Guaranteed
Interest Division, Lincoln Life may defer the payment for the period
permitted by the law of the state in which this Contract was delivered but
not more than six (6) months after a written election is received by
Lincoln Life. During the period of deferral, interest at the then current
interest rate(s) will continue to be credited to a Participant's Account in
the Guaranteed Interest Division.
12.9 DEDUCTIONS FOR PREMIUM TAXES: Lincoln Life will deduct from Participant
Account balances any premium tax levied as a result of the existence of
Participant Accounts by any state or other governmental entity.
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12.10 FACILITY OF PAYMENT: If any person is, in the judgment of Lincoln Life,
physically or mentally incapable of personally receiving and giving a
valid receipt for any payment due him under this Contract, Lincoln Life
may, unless and until claim shall have been made by a duly appointed legal
guardian or conservator of the person and property of such person, make
such payment or any part thereof to such other person or institution
which, in the judgment of Lincoln Life, is then contributing toward or
providing for the care and maintenance of such person. In no event will
any such payment exceed the maximum allowed under the applicable law of
the state in which this Contract is delivered. Such payment shall fully
discharge Lincoln Life of its obligations to the extent of the payment.
Lincoln Life will make any payment which has become due to a Participant
or an Annuitant and has not been paid prior to his death, to the
Participant's Beneficiary or Beneficiaries, his executors or
administrators. If no Beneficiary or personal representative has been
named, Lincoln Life may make payment to any one or more of the surviving
members of the following classes of relatives; spouse, children,
grandchildren, brothers, sisters, and parents. Such payment shall fully
discharge Lincoln Life for all liability to the extent of the payment.
12.11 EVIDENCE OF SURVIVAL: When a benefit payment is contingent upon the
survival of any person, evidence of such person's survival must be
furnished to Lincoln Life, either by such person's endorsement of the
check drawn for such payment, or by other satisfactory means.
12.12 NON-WAIVER: The failure on Lincoln Life's part to perform or insist upon
the strict performance of any provision or condition of this Contract
shall neither constitute a waiver of Lincoln Life's rights to perform or
require performance of such provision or condition, nor stop Lincoln Life
from exercising any other rights it may have in such provision, condition,
or otherwise in this Contract or any Plan.
12.13 RECEIPT OF NOTICE: Whenever Lincoln Life receives information establishing
any right or conferring any benefit upon any Participant or Beneficiary,
such receipt shall be deemed to take place on any Business Day that such
information is received.
12.14 SEPARABILITY OF PROVISIONS: If any provision of this Contract is
determined to be invalid, the remainder of the provisions shall remain in
full force and effect.
12.15 THE SEPARATE ACCOUNT: The Separate Account is registered and operated as a
Unit Investment Trust under the Investment Company Act of 1940. As such,
the assets of each Sub-Account are invested in a registered management
investment company (mutual fund).
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The Separate Account will be legally separated from Lincoln Life's other
accounts. The Separate Account's assets will, at the time during the year
that adjustments in the reserves are made, have a value of at least equal
to the reserves and other contract liabilities with respect to the
Separate Account, and at all other times, will have a value approximately
equal to, or in excess of, such reserves and liabilities. The portion of
the assets having a value equal to, or approximately equal to, the
reserves and contract liabilities will not be chargeable with liabilities
arising out of any other business which Lincoln Life may conduct.
Lincoln Life reserves the right, subject to compliance with applicable
law, including approval by You or the Participants if required by law, (1)
to create additional Sub-Accounts, (2) to combine or eliminate Sub-
Accounts, (3) to transfer assets from one Sub-Account to another, (4) to
transfer assets to the General Account and other separate accounts, (5) to
cause the deregistration and subsequent re-registration of the Separate
Account under the Investment Company Act of 1940, (6) to operate the
Separate Account under a committee and to discharge such committee at any
time, and (7) to eliminate any voting rights which You or Participants may
have with respect to the Separate Account, (8) to amend the Contract to
meet the requirements of the Investment Company Act of 1940 or other
federal securities laws and regulations, (9) to operate the Separate
Account in any form permitted by law, (10) to substitute shares of another
fund for the shares held by a Sub-Account, and (11) to make any change
required by the Internal Revenue Code, the Employee Retirement Income
Security Act of 1974, or the Securities Act of 1933, to the extent not
provided in Section 12.2.
12.16 PAYMENT OF BENEFITS: Lincoln Life shall make payment of benefits under
this Contract directly to a Participant or Beneficiary at the last known
address on file with Lincoln Life.
12.17 FREE-LOOK PERIOD: A Participant will receive an Active Life Certificate
upon Lincoln Life's receipt of a duly completed participation enrollment
form. If the Participant chooses not to participate under this Contract,
he may exercise his Free-look right by sending a written notice to Lincoln
Life that he does not wish to participate under this Contract within ten
(10) days after the date the Certificate is received by the Participant.
For purposes of determining the date on which the Participant has sent
written notice, the postmark date will be used.
If a Participant exercises his Free-look right in accordance with the
foregoing procedure, Lincoln Life will refund in full the Participant's
aggregate Contributions less aggregate withdrawals, or if greater, with
respect to Contributions to the Variable Investment Division, the
Participant's Account balance in the Variable Investment Division on the
date the canceled Certificate is received by Lincoln Life.
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ATTACHMENT I
SYSTEMATIC WITHDRAWAL OPTION
The formula for the interest equivalency amount (IEA) is:
29.5/366
IEA = ACCT.BAL x ( (1 + I ) - 1)
WHERE:
IEA is the Interest Equivalency Amount.
ACCT. BAL. is the Participant's Account balance at the later of: the
beginning of the contract year and the most recent date
on which the credited interest rate changed.
I is the interest rate currently being credited to the
contract
EXAMPLE: The Account balance at the beginning of the year is one
hundred thousand dollars ($100,000) and the interest rate credited to
the contract is six percent (6.00%). The Interest Equivalency Amount
for each month of the current year is:
29.5/366
IEA = $100,000 x (1.06 - 1)
= $470.76
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[LETTERHEAD OF LINCOLN NATIONAL LIFE INSURANCE CO.]
-------------------------------------------------
GROUP VARIABLE
ANNUITY CONTRACT NO.: EFFECTIVE DATE:
CONTRACTHOLDER:
(Herein referred to as "You" or "Your")
THIS CONTRACT WAS DELIVERED IN THE [State/Commonwealth of ]
and is subject to the laws of that jurisdiction.
Lincoln Life by this Contract agrees to provide benefits for Participants in
accordance with the terms and conditions of the Contract. The entire Contract
consists of the provisions on the following pages, and the Application,
including any amendments, schedules, or endorsements.
IN WITNESS HEREOF, Lincoln Life has executed this Contract at Fort Wayne,
Indiana on this day of , 20 , and caused this Contract to be
in full force as of its Effective Date as set forth above.
/s/ Jon A. Boscia /s/ Kelley D. Clevenger
Jon Boscia, President Kelly D. Clevenger, Vice President
Non-Participating
PAYMENTS AND VALUES PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT
EXPERIENCE OF A SEPARATE ACCOUNT, ARE VARIABLE AND ARE NOT GUARANTEED AS TO
DOLLAR AMOUNT.
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TABLE OF CONTENTS
I. CONTRACT SPECIFICATIONS
II. DEFINITIONS
III. CONTRIBUTIONS
IV. GUARANTEED INTEREST DIVISION
V. VARIABLE INVESTMENT DIVISION
VI. TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
VII. WITHDRAWALS AND DISTRIBUTIONS
VIII. DEATH BENEFITS
IX. PAYOUT ANNUITIES
X. LOANS
XI. DISCONTINUANCE AND TERMINATION OF CONTRACT
XII. GENERAL PROVISIONS
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ARTICLE I - CONTRACT SPECIFICATIONS
1.1 MINIMUM CONTRIBUTION AMOUNT: Your minimum annual Contribution on behalf of
all Participants under this Contract shall be twenty thousand dollars
($20,000). This minimum figure is for aggregate annual Contributions, not
for each Participant.
1.2 SEPARATE ACCOUNT: Lincoln National Variable Annuity Account L
1.3 DIVISIONS AVAILABLE UNDER THIS CONTRACT:
A. Guaranteed Interest Division
B. Variable Investment Division
1.4 LIMITATIONS ON TRANSFERS AND WITHDRAWALS DURING THE ACCUMULATION PERIOD:
Unlimited transfer requests may be made between Sub-Accounts by a
Participant each calendar year.
During any one (1) calendar year, a Participant may make one (1) transfer
from the Guaranteed Interest Division to the Variable Investment Division,
or one (1) withdrawal from the Guaranteed Interest Division in an amount
not to exceed twenty percent (20%) of the Participant's Account balance in
the Guaranteed Interest Division.
1.5 ANNUAL ADMINISTRATION CHARGE:
Twenty-five dollars ($25) per Participant.
Twenty-five dollars ($25) per Participant who allocates a contribution,
during the year ending on a Participation Anniversary, to any one (1) or
more of the Sub-Accounts established in the Variable Investment Division.
1.6 ANNUAL MORTALITY AND EXPENSE RISK CHARGE APPLICABLE TO VARIABLE INVESTMENT
DIVISION SUB-ACCOUNTS: Annual rate of one percent (1.00%).
1.7 LOAN SET-UP CHARGE: Fifty dollars ($50) per loan
1.8 PLAN NAME:
1.9 EMPLOYER:
1.10 SYSTEMATIC WITHDRAWAL SET-UP CHARGE: Thirty dollars ($30.00). If the total
Account balance is twenty-five thousand dollars ($25,000), or greater, such
amount will be waived.
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ARTICLE II - DEFINITIONS
2.1 ACCUMULATION UNIT: An accounting unit of measure used to record amounts of
increases to, decreases from and accumulations in each Sub-Account during
the Accumulation Period.
2.2 ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each
Sub-Account on any Valuation Date.
2.3 ACCUMULATION PERIOD: The period commencing on a Participant's
Participation Date and terminating when the Participant's Account balance
is reduced to zero, either through withdrawal(s), conversion to an annuity,
imposition of charges, payment of a Death Benefit or a combination thereof.
2.4 ANNUITANT: The person receiving annuity payments under the terms of this
Contract.
2.5 ANNUITY COMMENCEMENT DATE: The date on which Lincoln Life makes the first
annuity payment to the Annuitant as required by the Retired Life
Certificate. This date, as well as the date each subsequent annuity
payment is made, will be the first day of a calendar month.
2.6 ANNUITY CONVERSION AMOUNT: The amount of a Participant's Account applied
toward the purchase of an Annuity.
2.7 ANNUITY CONVERSION FACTOR: The factor applied to the Annuity Conversion
Amount in determining the dollar amount of an annuitant's annuity payments
for Guaranteed Annuities or the initial payment for Variable Annuities.
2.8 ANNUITY PAYMENT CALCULATION DATE: For Guaranteed Annuities, this is the
first day of a calendar month. For Variable Annuities, this is the
Valuation Date ten (10) business days prior to the first day of a calendar
month.
2.9 ANNUITY PERIOD: The period concurrent with or following the Accumulation
Period, during which an Annuitant's annuity payments are made.
2.10 ANNUITY UNIT: An accounting unit of measure that is used in calculating
the amounts of annuity payments to be made from each Sub-Account during the
Annuity Period.
2.11 ANNUITY UNIT VALUE: The dollar value of an Annuity Unit in each Sub-
Account on any Valuation Date.
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2.12 BENEFICIARY: The person(s) designated to receive a Participant's Account
balance in the event of the Participant's death during the Accumulation
Period or the person(s) designated to receive any applicable remainder of
an annuity in the event of the Annuitant's death during the Annuity Period.
2.13 BUSINESS DAY: A day on which Lincoln Life and the New York Stock Exchange
are customarily open for business.
2.14 CERTIFICATE: An Active Life Certificate is issued to each Participant
outlining the basic provisions of the Contract. A Retired Life Certificate
is issued to each Annuitant outlining the basic provisions of his Annuity.
2.15 CONTRIBUTIONS: All amounts deposited by You or the Participant under this
Contract including any amount transferred from another contract.
2.16 DIVISION(S): The Guaranteed Interest Division and/or the Variable
Investment Division named in Section 1.3.
2.17 GENERAL ACCOUNT: All assets of Lincoln Life other than those in the
Separate Account specified in Section 1.2 or any other separate account.
2.18 GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is
reduced when a withdrawal occurs, including any applicable Annual
Administration Charge.
2.19 GUARANTEED ANNUITY: An annuity for which Lincoln Life guarantees the
amount of each payment as long as the annuity is payable.
2.20 GUARANTEED INTEREST DIVISION: The Division maintained by Lincoln Life for
these and other contracts for which Lincoln Life guarantees the principal
amount and interest credited thereto, subject to any fees and charges as
set forth in this Contract. Amounts allocated to the Guaranteed Interest
Division are part of the General Account.
2.21 LINCOLN LIFE: Lincoln National Life Insurance Company, at its home office
in Fort Wayne, Indiana. All correspondence and inquiries should be
submitted to Lincoln Life's Servicing Office: P.O. Box 9740, Portland ME
04101-5001.
2.22 NET CONTRIBUTIONS: The sum of all Contributions credited to a Participant
Account less any net Withdrawal Amounts, outstanding loan (including
principal and due and accrued interest) and amounts converted to a Payout
Annuity.
2.23 NET WITHDRAWAL AMOUNT: The amount paid to a Participant when a withdrawal
occurs.
2.24 PARTICIPANT: A person who has enrolled under this Contract and maintains
a Participant's Account.
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2.25 PARTICIPANT'S ACCOUNT: An account maintained for a Participant during the
Accumulation Period, the total balance of which equals the Participant's
Account balance in the Variable Investment Division plus the Participant's
Account balance in the Guaranteed Interest Division.
2.26 PARTICIPATION ANNIVERSARY: For each Participant, a date at one year
intervals from that Participant's Participation Date. If an anniversary
occurs on a non-Business Day, it is treated as occurring on the next
Business Day.
2.27 PARTICIPATION DATE: A date assigned to each Participant corresponding to
the date on which the first Contribution on behalf of that Participant
under this Contract is received by Lincoln Life. A Participant will
receive a new Participation Date if such Participant makes a Total
Withdrawal as defined in Section 7.2 and Contributions on behalf of the
Participant are resumed under any Contract.
2.28 PARTICIPATION YEAR: A period beginning with one Participation Anniversary
and ending the day before the next Participation Anniversary, except for
the first Participation Year that begins with the Participation Date.
2.29 PAYOUT ANNUITY: A series of payments paid under the terms of this
Contract to a person. A Payout Annuity may be either a Guaranteed Annuity
or a Variable Annuity.
2.30 PENDING ALLOCATION ACCOUNT: An account established under the Variable
Investment Division that invests unallocated contributions in shares of a
money market mutual fund. Lincoln Life does not guarantee the principal
amount or investment results.
2.31 PLAN: The Plan named in Section 1.8 that qualifies for federal tax
benefits under Section 403(b) of the Internal Revenue Code of 1986 and
under which this Contract is authorized.
2.32 SEPARATE ACCOUNT: The Lincoln National Variable Annuity Account L is a
group of assets segregated from Lincoln Life's General Account whose
income, gains and losses, realized or unrealized, are credited to or
charged against the Separate Account without regard to other income, gains
or losses of Lincoln Life. Additional information is provided in Section
12.15.
2.33 SUB-ACCOUNT(S): An account established in the Variable Investment Division
that invests in shares of a corresponding mutual fund.
2.34 VALUATION DATE: A Business Day. Accumulation and Annuity Units are
computed on each Valuation Date as of the close of trading on the New York
Stock Exchange.
2.35 VALUATION PERIOD: A period used in measuring the investment experience of
each Sub-Account. The Valuation Period begins at the close of trading on
the New York Stock Exchange on one Valuation Date and ends at the
corresponding time on the next Valuation Date.
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2.36 VARIABLE ANNUITY: An annuity with payments that increase or decrease in
accordance with the investment results of the selected Sub-Account(s).
2.37 VARIABLE INVESTMENT DIVISION: The Division specified in Section 1.3 that
is maintained by Lincoln Life for this and other Section 403(b) Lincoln
Life contracts for which Lincoln Life does not guarantee the principal
amount or investment results. Amounts allocated to the Variable
Investment Division are part of the Separate Account.
2.38 YOU or YOUR: The Contractholder named on the face page of this Contract.
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ARTICLE III - CONTRIBUTIONS
3.1 INITIAL CONTRIBUTION: The initial Contribution for a Participant will be
credited to the Participant's Account no later than two (2) Business Days
after it is received by Lincoln Life if it is preceded or accompanied by a
completed enrollment form containing all the information necessary for
processing the Participant's Contribution.
3.2 ALLOCATION OF CONTRIBUTIONS: Participant Contributions will be allocated
to the Divisions and Sub-Accounts according to the percentages requested by
the Participant. The allocation percentage can be any whole percent and
may be changed on an unlimited basis per year. You or the Participant
shall notify Lincoln Life in writing in a form acceptable to Lincoln Life
or by telephone in accordance with procedures published by Lincoln Life of
such changes.
3.3 PAYMENT OF SUBSEQUENT CONTRIBUTIONS: You shall forward Contributions to
Lincoln Life specifying the amount being contributed on behalf of each
Participant. You shall forward such Contributions and provide such
allocation information in accordance with procedures established by Lincoln
Life. The Contributions shall be allocated among the Guaranteed Interest
Division and each Sub-Account in accordance with the percentage information
provided by the Participant subject to the terms of the Plan.
3.4 CHARACTERIZATION OF TRANSFER CONTRIBUTIONS: For all Contributions
transferred from another Contract, Lincoln Life must be provided with the
following information in a form acceptable to Lincoln Life:
(a) The source of the Contributions transferred (e.g., salary reduction,
employer match or post-tax Contributions). Lincoln Life will record
all such transferred amounts where no source information is provided
as salary reduction Contributions.
(b) Identification of Contributions transferred as Contributions made or
earnings credited:
(i) prior to January 1, 1987;
(ii) during 1987 and 1988; or
(iii) subsequent to December 31, 1988.
Amounts not so identified will be treated as attributable to period
(iii) for purposes of Sections 7.4 and 7.5.
3.5 MAXIMUM CONTRIBUTION: Total and overall limitations on Contributions in a
calendar year for a Participant are subject to the limits imposed under
Sections 402(g), 403(b) and 415 of the Internal Revenue Code of 1986 (the
Code), as it may be amended from time to time. Lincoln Life assumes no
responsibility for monitoring these limits for a Participant.
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Elective deferrals made under the terms of a salary reduction agreement
must not exceed the annual limits on elective deferrals as provided in IRC
Section 402(g). Contributions in excess of such amounts may be distributed
upon request of the Contractholder and Participant by Lincoln Life as
permitted by law.
3.6 VALUATION: A Guaranteed Interest Division Contribution will be allocated
as of the Business Day that Lincoln Life receives the Contribution and
Lincoln Life will credit interest beginning with the next calendar day
following the Business Day that Lincoln Life receives the Contribution.
For a Variable Investment Division Sub-Account Contribution, Lincoln Life
will credit a Participant's Account with the number of Accumulation Units
for each Sub-Account selected by the Participant with the number of
Accumulation Units equal to the Contribution Amount divided by the
Accumulation Unit Value which is next computed following Lincoln Life's
receipt of the Contribution.
3.7 ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated
in Section 1.5 from each Participant's Account each year on the last
Business Day of the month in which his Participation Anniversary occurs
unless the Contractholder pays the charge in a single payment. If the
Participant's Account balance is less than this amount on that day, Lincoln
Life will deduct the entire balance from his Account.
When a Total Withdrawal of a Participant's Account, as defined in Section
7.2, occurs on a date other than the last Business Day of the month in
which his Participation Anniversary occurs, Lincoln Life will first deduct
the amount stated in Section 1.5 from his Participant's Account.
ANNUAL ADMINISTRATION CHARGE: Lincoln Life will deduct the amount stated
in Section 1.5 on a pro-rata basis from the Participant's Variable
Investment Division Account balance each year on the last Business Day of
the month in which his Participation Anniversary occurs unless the
Contractholder pays the charge in a single payment. If the Participant's
Variable Investment Division Account balance is less than this amount on
that day, Lincoln Life will deduct the entire balance from his Variable
Investment Division Account.
When a Participant requests, on a date other than the last Business Day of
the month in which his Participation Anniversary occurs,
(a) a withdrawal, or
(b) a transfer,
from the Variable Investment Division, which would leave a remaining
balance of less than the Annual Administration Charge defined in Section
1.5, Lincoln Life will first deduct the amount stated in Section 1.5 from
the Participant's Variable Investment Division Account balance prior to the
Withdrawal or Transfer.
3.8 UNALLOCATED CONTRIBUTION: If a properly completed enrollment form has not
been received for a Participant, Lincoln Life will deposit such
Contributions to the
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Pending Allocation Account as described in ARTICLE II- DEFINITIONS, unless
such Contributions are designated to another Account in accordance with the
Plan.
Lincoln Life will follow up with the Contractholder monthly for a period of
ninety (90) days for enrollment information for Participants with deposits
in the Pending Allocation Account.
Within two (2) business days of receipt of a completed enrollment form, the
Participant's Account balance in the Pending Allocation Account will be
transferred to the Divisions and/or Sub-Accounts according to the
percentages requested by the Participant. When the completed enrollment
form is received, the Participation Date will be the date on which the
first Contribution on behalf of the Participant was deposited into the
Pending Allocation Account.
If an enrollment form is not received after the ninety (90) day notice, a
Participant's Account balance in the Pending Allocation Account will be
refunded to the Contractholder within one hundred five (105) days of the
date of the initial Contribution. Contributions received after a refund
while there is still no allocation information, will be deposited to the
Pending Allocation Account.
The Pending Allocation Account will only be used for the purpose mentioned
above; Participants may not direct a portion of their Contributions to this
Account. Contributions deposited in the Pending Allocation Account will
not be afforded the same rights as Contributions under this Contract. The
following Articles and/or Sections under this Contract will not be
applicable: (i) Section 3.7 ANNUAL ADMINISTRATION CHARGE, (ii) ARTICLE
VI - TRANSFERS BETWEEN DIVISION AND SUB-ACCOUNTS, (iii) ARTICLE VII -
WITHDRAWALS AND DISTRIBUTIONS, (iv) ARTICLE IX - PAYOUT ANNUITIES, and (v)
ARTICLE X - LOANS.
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ARTICLE IV - GUARANTEED INTEREST DIVISION
4.1 PARTICIPANT'S ACCOUNT BALANCE IN GUARANTEED INTEREST DIVISION: The dollar
value of a Participant's Account balance in the Guaranteed Interest
Division as of a date will be equal to the sum of:
(a) Contributions allocated, on behalf of the Participant, to the
Guaranteed Interest Division on or prior to that date, and
(b) Amounts transferred, on behalf of the Participant, to the Guaranteed
Interest Division from the Variable Investment Division on or prior to
that date, less any;
(c) Gross Withdrawal Amounts from the Guaranteed Interest Division, on
behalf of the Participant, on or prior to that date; and
(d) Amounts transferred, on behalf of the Participant, to the Variable
Investment Division on or prior to that date; and
(e) Applicable charges to the Participant's Account on or prior to that
date; and
(f) Annuity Conversion Amounts, on behalf of the Participant, on or prior
to that date, plus any;
(g) Interest credited to the Participant's Account balance in the
Guaranteed Interest Division on or prior to that date.
4.2 INTEREST: Lincoln Life will credit interest each day to the portion of the
Participant's Account balance in the Guaranteed Interest Division, using
the previous day's ending balance. The rate of interest credited each day,
if compounded for three hundred sixty-five (365) days, yields the annual
interest rate in effect for the day.
Lincoln Life will declare in advance a guaranteed interest rate which will
be effective for all amounts in the Participant's Account balance in the
Guaranteed Interest Division during the designated year. This rate will
never be less than three percent (3%). However, this minimum rate will not
be considered for purposes of Section 10.6 (EFFECT OF LOAN ON PARTICIPANT'S
ACCOUNT) under this Contract.
Lincoln Life may also declare in advance separate interest rate guarantees
which are in excess of the guaranteed interest rate for some or all of the
Participant's Account balance in the Guaranteed Interest Division for
specific period(s) during the designated year.
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ARTICLE V - VARIABLE INVESTMENT DIVISION
5.1 PARTICIPANT'S ACCOUNT BALANCE IN THE VARIABLE INVESTMENT DIVISION: The
Participant's Account balance in the Variable Investment Division is equal
to the sum of the dollar value of a Participant's Account balance in each
Sub-Account as of the end of a Valuation Period which will be equal to the
product of:
(a) The Participant's number of Accumulation Units as of the end of that
Valuation Period; times
(b) The Accumulation Unit Value as of the end of that Valuation Period.
5.2 ACCUMULATION UNITS: The number of Accumulation Units a Participant has in
a Sub-Account as of the end of any Valuation Period is the number of
Accumulation Units the Participant had in that Sub-Account as of the end of
the preceding Valuation Period; plus
(a) The number of Accumulation Units attributable to amounts deposited to
or transferred to that Sub-Account during the current Valuation
Period; minus
(b) The number of Accumulation Units attributable to amounts transferred
from, converted to an annuity, removed as a charge, paid as a death
benefit, or withdrawn from that Sub-Account during the current
Valuation Period.
5.3 ACCUMULATION UNIT VALUE: The Accumulation Unit Value for each Sub-Account
was set initially at ten dollars ($10), except for the Index Account which
was set at nine and nine hundred six one thousands ($9.9060) of a dollar.
Subsequent Accumulation Unit Values are determined by multiplying;
(a) The Net Investment Factor for the current Valuation Period by;
(b) The Accumulation Unit Value as of the end of the immediately preceding
Valuation Period.
5.4 NET INVESTMENT FACTOR: The Net Investment Factor is used to measure the
investment experience of a Sub-Account net of the Mortality and Expense
Risk Charge as defined in Section 5.5. The Net Investment Factor for a
Valuation Period is equal to (a) divided by (b) with the result multiplied
by (c) and adjusted by the amount per share of any taxes which are incurred
by Lincoln Life because of the existence of the Sub-Account;
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where (a) is;
the net asset value per share of the underlying mutual fund held by
the Sub-Account as of the end of the Valuation Period, plus;
the amount per share of any dividend or capital gain distribution from
the underlying mutual fund held by the Sub-Account during the
Valuation Period,
where (b) is;
the net asset value per share of the underlying mutual fund held by
the Sub-Account as of the end of the immediately preceding Valuation
Period,
where (c) is;
one (1.00) minus the Annual Mortality and Expense Risk Charge shown in
Section 1.6 to the n/365th power where n equals the number of calendar
days since the immediately preceding Valuation Date.
5.5 MORTALITY AND EXPENSE RISK CHARGE: This charge is imposed to compensate
Lincoln Life for its assumption of mortality and expense risks under this
Contract. This charge is shown on an annualized basis in Section 1.6 and
is deducted on a daily basis as described in Section 5.4. This charge may
not be increased without the approval of a majority of all affected Lincoln
Life contractholders.
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ARTICLE VI - TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
6.1 TRANSFERS DURING ACCUMULATION PERIOD: Subject to the limitations stated in
Section 1.4, Participants may transfer all or part of their Account balance
in any Division or Sub-Account to another Division or Sub-Account.
You or the Participant may make a transfer request by notifying Lincoln
Life in writing in a form acceptable to Lincoln Life or by telephone in
accordance with procedures published by Lincoln Life.
6.2 TRANSFERS DURING ANNUITY PERIOD: An Annuitant may not transfer any part of
the Annuitant's Annuity Conversion Amount.
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ARTICLE VII - WITHDRAWALS AND DISTRIBUTIONS
7.1 WITHDRAWALS DURING THE ACCUMULATION PERIOD: During the Accumulation
Period, a Participant may withdraw from any or all Divisions, subject to
the limitations stated in Section 7.6, and to the restrictions stated in
Section 7.4, all or part of the Participant's Account balance in the
Division or Sub-Accounts remaining after reductions for any applicable
Annual Administration Charge (imposed on Total Withdrawals), premium taxes
and outstanding loan, including the loan security thereon. Annuity
Conversion Amounts are not considered withdrawals.
All withdrawal requests must be submitted in a form acceptable to Lincoln
Life and must indicate the amount and the Division(s) from which the
withdrawal is to be made.
Lincoln Life reserves the right to delay payment of Guaranteed Interest
Division withdrawal amounts per Section 12.8.
7.2 TOTAL WITHDRAWALS: A Total Withdrawal of a Participant's Account will
occur when a Participant who has no outstanding loans
(a) requests the liquidation of his entire Account balance, or
(b) requests an amount such that the amount requested results in a
remaining Participant's Account balance being less than the applicable
Annual Administration Charge as defined in Section 1.5, in which case,
the request is treated as if it were a request for liquidation of the
Participant's entire Account balance.
The Participant's Active Life Certificate must be surrendered to Lincoln
Life when a Total Withdrawal of a Participant's Account occurs.
A Participant refund under the Free-look provisions of Section 12.17 is not
considered a Total Withdrawal under this Article.
7.3 PARTIAL WITHDRAWALS: A Partial Withdrawal of a Participant's Account will
occur when:
(a) A Participant who has an outstanding loan makes a withdrawal; or
(b) A Participant who has no outstanding loans, requests an amount less
than a total withdrawal.
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7.4 WITHDRAWAL REQUIREMENTS FOR SECTION 403(b) PLANS: Withdrawals are subject
to the requirements set forth in Section 403(b) of the Code and regulations
thereof.
(a) Withdrawal Requests for Participants under Section 403(b) Plans
Subject to Title I of ERISA: You must make withdrawal requests on
behalf of Participants. All withdrawal requests will require Your
written authorization and written documentation specifying the portion
of the Participant's Account balance which is available for
distribution to the Participant.
(b) Withdrawal Requests for Participants under Section 403(b) Plans not
---
Subject to Title I of ERISA: Any portion of the Participant's Account
balance that has been recorded by Lincoln Life as a salary reduction
contribution made and/or earnings credited prior to January 1, 1989,
(including transferred amounts recorded as such pursuant to Section
3.4), may be withdrawn for any reason. Any portion of the
Participant's Account balance that has been recorded by Lincoln Life
as a salary reduction Contribution made and/or earnings credited after
December 31, 1988, (including transferred amounts recorded as such
pursuant to Section 3.4), are subject to the withdrawal restrictions
stated in Section 403(b) of the Code. Participants must certify to
Lincoln Life (and provide supporting information, if requested), that
an event permitting withdrawal has occurred and that Lincoln Life may
rely on such representation in granting the withdrawal request.
7.5 MINIMUM DISTRIBUTION REQUIREMENTS FOR SECTION 403(b) PLANS: Section
403(b)(10) of the Code and regulations thereunder require that
distributions be made from this Contract in a manner which satisfies
requirements similar to the requirements of Section 401(a)(9) including
the incidental death benefit requirements of Section 401(a)(9)(G).
(1) Section 401(a)(9) requires that:
(a) the Participant's Account be distributed not later than the
required beginning date; or
(b) the Participant's Account be distributed not later than the
required beginning date, over the life of the Participant or over
the lives of the Participant and a designated Beneficiary.
(2) A Participant may choose to have the Participant's Account distributed
in one of the following manners:
(a) As a lump sum payment;
(b) As an annuity meeting the requirements of Section 401(a)(9) of
theCode;
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(c) As an annual distribution where the amount distributed each
calendar year is at least an amount equal to the quotient
obtained by dividing: (a) the amount of the Participant's
Account required to be distributed as of December 31 of the
calendar year immediately preceding the calendar year for which
the distribution is being made; by (b) the life expectancy of the
Participant, or the life expectancy of the Participant and the
Beneficiary; or
(d) A combination of the above.
With respect to (c) and (d) above, the life expectancy of the Participant
and a surviving spouse Beneficiary may be recalculated, but not more
frequently than annually. A non-spouse Beneficiary's life expectancy may
not be recalculated.
7.6 LIMITATIONS ON WITHDRAWALS FROM THE GUARANTEED INTEREST DIVISION: A
Participant may make a withdrawal from the Guaranteed Interest Division for
a specified percentage of their Participants Account balance based on the
following schedule:
<TABLE>
<CAPTION>
(a) WHEN A WITHDRAWAL IS REQUESTED THE PERCENTAGE OF
AND ONE OR MORE OF THE THE PARTICIPANT'S
FOLLOWING CONDITIONS IS MET: ACCOUNT BALANCE
AVAILABLE IS:
<S> <C>
The Participant has died 100%
The Participant has incurred a disability for 100%
which he is receiving Social Security payments
The Participant has attained age fifty-nine and 100%
one-half (59 1/2)
The Participant has separated from service with 100%
the Contractholder and is age fifty-five (55)
The Participant has separated from service with 100%
the Contractholder
The Participant has demonstrated a financial 100%
hardship need
</TABLE>
(b) In addition, during one (1) calendar year, a Participant may make one
(1) withdrawal or transfer from the Guaranteed Interest Division in an
amount not to exceed twenty percent (20%) of the Guaranteed Interest
Division Account Balance. Any Participant stating their intention to
liquidate their Guaranteed Interest Division Account balance, however,
may make one (1) withdrawal or transfer for (5) consecutive calendar
years from their Guaranteed Interest Division Account balance in the
following percentage:
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Year Request Received Percentage of Guaranteed
by Lincoln Life Interest Division Available
1 20%
2 25%
3 33 1/3%
4 50%
5
The five (5) consecutive withdrawal or transfers may not be submitted
more frequently than twelve (12) months apart. Lincoln Life also
reserves the right to require that any Participant stating their
intention to liquidate their Guaranteed Interest Division Account
balance stop contributions to the Contract.
(c) There are no limitations on withdrawals from the Variable Investment
Division.
Lincoln Life requires reasonable proof necessary to verify that the
withdrawal meets the conditions described above in Section 7.6(a) and such
proof must be submitted with the withdrawal request.
7.7 SYSTEMATIC WITHDRAWAL OPTION: Any Participant who: (a) is at least age
fifty-nine and one-half (59 1/2), or (b) is disabled and receiving Social
Security disability benefits, or (c) is separated from service with the
Contractholder may elect this option. A Participant must also have a
vested Participant Account balance of at least ten thousand dollars
($10,000) of pre-tax Contributions under this Contract at the date of the
election.
Amounts held for a spousal payee under a Qualified Domestic Relations Order
(QDRO) shall be recognized as eligible for the Systematic Withdrawal
Option. Any spousal payee who wishes to elect this distribution option
must also meet the minimum ten thousand dollars ($10,000). Account balance
requirement and either the age or disability requirement as discussed
above.
A Participant may elect to receive monthly, quarterly, semi-annual, or
annual payments in a flat amount or payments on a monthly basis for an
interest equivalency amount. An interest equivalency amount is an
approximation of the interest earned between each payment period based upon
the interest rate in effect at the beginning of each respective payment
period. This amount will be determined by Lincoln Life. (See Attachment I
for illustration.) A Participant may change the frequency, payment type,
or payment amount of his Systematic Withdrawal Option by submitting a
request in writing on a form acceptable to Lincoln Life. A Participant may
make such a change only once during each calendar year.
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A Participant may at any time direct Lincoln Life to cease payments under
this option provided the request is made in writing. A Participant who
chooses to stop receiving systematic withdrawals may not request that any
systematic withdrawal payments begin again until the next calendar year.
Systematic withdrawals shall be withdrawn from amounts allocated to the
Guaranteed Interest Division of the Participant's Account balance. If the
balance of the Guaranteed Interest Division is not sufficient to meet the
payment amount requested, the Participant, in writing, may direct Lincoln
Life on a form acceptable to Lincoln Life to transfer the appropriate
amount to the Guaranteed Interest Division; otherwise, such payment will
cease.
Lincoln Life will deduct the Systematic Withdrawal Set-Up Charge indicated
in Section 1.10 from the Participant's Account balance each time a
Systematic Withdrawal Option is established.
Payments under this option shall stop upon the earliest of the following
events:
(a) On the date of the Participant's death. A Beneficiary who is a spouse
may elect this option by requesting it in writing on a form acceptable
to Lincoln Life, unless election of this form of benefit would violate
any other requirements of this contract. The spousal Beneficiary must
meet the ten thousand dollar ($10,000) minimum Account balance
requirement prior to electing the Systematic Withdrawal Option; or
(b) When there is an insufficient Participant Account balance after
deducting the Annual Administration Charge, if any, to pay the amount
requested; or
(c) The Participant fails to meet the requirements of the Systematic
Withdrawal Option as outlined above in the first (1st) paragraph of
this Section.
If a disabled or terminated Participant, who is currently receiving a
Systematic Withdrawal Option payment, returns to service with the
Contractholder, the Contractholder or Participant must notify Lincoln Life
in writing within thirty (30) days from the date of return to service.
Lincoln Life reserves the right to discontinue the Systematic Withdrawal
Option payment under these circumstances.
If a Participant wishes to exercise this option under another Lincoln Life
Annuity Contract, such request shall be considered separate from this
Contract and shall follow the Systematic Withdrawal Option rules under that
Annuity Contract, if permitted.
Lincoln Life may, at its option, discontinue the Systematic Withdrawal
Option under this Contract at any time provided You are given at least
thirty (30) days advance written notice.
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7.8 DIRECT ROLLOVER OPTION: Beginning January 1, 1993, a Participant or
Beneficiary may elect this option for any distribution that qualifies as an
Eligible Rollover Distribution as defined by Section 402(c) of the Internal
Revenue Code and that meets all the following requirements:
(1) The distribution must be paid directly to either a single Individual
Retirement Account or to a single Tax Deferred Annuity. The check,
wire, or other form of remittance shall be made payable to the
trustee, custodian, or financial institution sponsoring the Individual
Retirement Account or Tax Deferred Annuity. The form of remittance
will not be an instrument that can be negotiated by the Participant.
(2) The Participant must provide, in a form acceptable to Lincoln Life,
all information necessary to make the payment to an Individual
Retirement Account or Tax Deferred Annuity.
(3) The Participant or Beneficiary may not revoke a request for payment
under this option for any payment after Lincoln Life has received a
written request for a direct rollover.
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ARTICLE VIII - DEATH BENEFITS
8.1 DEATH BENEFIT DURING THE ACCUMULATION PERIOD: If death of the Participant
occurs during the Accumulation Period, Lincoln Life will pay the
Beneficiary, if one is living, the greater of the following amounts:
(a) The Net Contributions, or
(b) The Participant's Account balance less any outstanding loan (including
principal and due and accrued interest).
Lincoln Life will calculate the Death Benefit as of the end of the
Valuation Period during which it receives both satisfactory notification of
the Participant's death, pursuant to Section 8.2, and the election of a
form of benefit pursuant to Section 8.3. If no election is made pursuant
to Section 8.3 within sixty (60) days following Lincoln Life's receipt of
satisfactory notice of death, the Death Benefit will be calculated as of
the end of the Valuation Period during which that sixtieth (60th) day
occurs.
If Lincoln Life makes a withdrawal payment pursuant to a Participant
request prior to receiving notice that the Participant has died, but
subsequent to the Participant's death, Lincoln Life will deduct that
payment from each of (a) and (b) above in calculating the Death Benefit.
8.2 NOTIFICATION OF DEATH: Lincoln Life must be notified of a Participant's
death no later than six (6) months from the Participant's date of death in
order for the Beneficiary to receive the Death Benefit amount described in
Section 8.1(a) above. Such notification must be in a form satisfactory to
Lincoln Life. Beneficiaries for whom notification of a Participant's death
is received more than six (6) months after the Participant's date of death
shall receive the Death Benefit amount described in Section 8.1(b) above.
8.3 PAYMENT OF DEATH BENEFIT: Within sixty (60) calendar days after Lincoln
Life receives satisfactory notification of the Participant's death, the
Beneficiary must make an election to have the Death Benefit applied in one
of the following ways:
(a) As a lump sum payment to the Beneficiary; or
(b) Towards an annuity to be distributed in substantially equal
installments over the life expectancy of the Beneficiary or a period
certain not exceeding the life expectancy of the Beneficiary; or
(c) A combination of the above.
A Beneficiary who does not make an election pursuant to this section within
sixty (60) days after Lincoln Life receives notification of the
Participant's death will receive a lump sum payment calculated in
accordance with Section 8.1(b) above.
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<PAGE>
If the Beneficiary is someone other than the spouse of the deceased
Participant, the Code provides that the Beneficiary may not elect an
annuity which would commence later than December 31 of the calendar year
following the calendar year of the Participant's death. If a non-spousal
Beneficiary elects to receive payment in a single lump sum, such payment
must be received no later than December 31 of the fourth (4th) calendar
year following the calendar year of the Participant's death.
If the Beneficiary is the surviving spouse of the deceased Participant,
under the Code, distributions are not required to begin earlier than
December 31 of the calendar year in which the Participant would have
attained age seventy and one-half (70-1/2). If the surviving spouse dies
before the date on which annuity distributions commence, then, for purposes
of the Death Benefit, the surviving spouse shall be deemed to be the
Participant.
If there is no living named Beneficiary on file with Lincoln Life at the
time of a Participant's death, Lincoln Life will pay the Death Benefit to
the Participant's estate in a single lump sum upon receipt of satisfactory
proof of the Participant's death, but not later than December 31 of the
fourth (4th) calendar year following the calendar year of the Participant's
death. Valuation of the Death Benefit shall occur as of the end of the
Valuation Period during which due proof of the Participant's death is
received by Lincoln Life.
8.4 DEATH DURING THE ANNUITY PERIOD: If the Annuitant dies during the Annuity
Period, the Beneficiary, if any, or the Annuitant's estate will receive the
amount payable, if any, according to the in-force annuity options. Any
remaining Participant's Account balance will be paid in accordance with the
provisions of this Article.
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<PAGE>
ARTICLE IX - PAYOUT ANNUITIES
9.1 ELECTION OF PAYOUT ANNUITY OPTION: A Participant eligible to receive a
distribution under the Code or a Beneficiary of a deceased Participant may
notify Lincoln Life in writing in a form acceptable to Lincoln Life that
the Participant or the Beneficiary is electing to convert all or part of
the Participant's Account balance or Death Benefit to a Payout Annuity
option available under this Contract. Upon being notified of such an
election, Lincoln Life shall calculate the amount to be converted to a
Payout Annuity as either the Participant's Account balance, or a portion
thereof, or the Death Benefit as of the initial Annuity Payment Calculation
Date, as appropriate, less the charge for premium taxes, if any.
If the Participant's Account balance or the Beneficiary's Death Benefit is
less than two thousand dollars ($2,000) or if the amount of the first
scheduled payment is less than twenty dollars ($20), Lincoln Life may, at
its option, cancel the Payout Annuity and pay the Participant or
Beneficiary his entire Account balance or Death Benefit in a lump sum.
9.2 GUARANTEED ANNUITY: The payment amount is determined by dividing the
Annuitant's Annuity Conversion Amount in the Guaranteed Interest Division
as of the initial Annuity Payment Calculation Date by the applicable
Annuity Conversion Factor as defined in Section 9.4.
9.3 VARIABLE ANNUITY: The initial payment amount of the Annuitant's Variable
Annuity for each Sub-Account is determined by dividing his Annuity
Conversion Amount in each Sub-Account as of the initial Annuity Payment
Calculation Date by the applicable Annuity Conversion Factor as defined in
Section 9.4.
The amount of the Annuitant's subsequent Variable Annuity payment for each
Sub-Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payment amount by
the Annuity Unit Value for that Sub-Account selected for his interest
rate option as described in Section 9.4 as of his initial Annuity
Payment Calculation Date; and
(b) Multiplying the resultant number of annuity units by the Annuity Unit
Values for the Sub-Account selected for his interest rate option for
his respective subsequent Annuity Payment Calculation Dates.
The Annuity Unit Value for all Sub-Accounts for all interest rate options
will initially be set at ten dollars ($10). Each subsequent Annuity Unit
Value for a Sub-Account for an interest rate option is determined by:
Dividing the Accumulation Unit Value for the Sub-Account as of the
subsequent Annuity Payment Calculation Date (APCD) by the Accumulation Unit
Value for the Sub-Account as of the immediately preceding APCD,
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<PAGE>
Dividing the resultant factor by one (1.00) plus the interest rate option
to the n/365 power where n is the number of days from the immediately
preceding APCD to the subsequent APCD, and
Multiplying this factor times the Annuity Unit Value as of the immediately
preceding APCD.
9.4 BASIS OF ANNUITY CONVERSION FACTORS:
(a) Guaranteed Annuities - The maximum Annuity Conversion Factors that may
be used by Lincoln Life under this Contract are based on the 1983
Individual Annuity Mortality Table, set back four (4) years, and an
interest rate of three percent (3.0%). From time to time, lower
conversion factors may be used by Lincoln Life. (Lowering the
conversion factor will increase the amount of the annuity payment.)
(b) Variable Annuities - The Annuity Conversion Factors which are used to
determine the initial payments are based on the 1983 Individual
Annuity Mortality Table, set back four (4) years, and an interest rate
in an integral percentage ranging from zero to six percent (0 to
6.00%) as selected by the Annuitant.
9.5 PAYOUT ANNUITY OPTIONS: The following Payout Annuity options are
available:
(a) Life
(b) Life with payments guaranteed for ten (10), fifteen (15) or twenty
(20) years
(c) Joint and Survivor
(d) Payments guaranteed for ten (10), fifteen (15) or twenty (20) years
(e) Other offered by Lincoln Life.
To the extent option (d) is elected for a Variable Annuity, the Annuitant
may request at any time during the payment period that the present value of
any remaining installments be paid in one lump sum.
9.6 RETIRED LIFE CERTIFICATE: Once an annuity option is selected by a
Participant, or the Beneficiary of a deceased Participant, Lincoln Life
will issue to the Annuitant an appropriate Certificate evidencing Lincoln
Life's obligations.
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ARTICLE X - LOANS
10.1 GENERAL: During a Participant's Accumulation Period, the Participant, if
permitted by the applicable Section 403(b) Plan, may apply for a loan under
this Contract by completing a loan application available from Lincoln Life.
Loans are secured by the Participant's Account balance in the Guaranteed
Interest Division.
10.2 RESTRICTIONS ON LOAN AMOUNT: The amount and terms of a loan are subject to
the restrictions imposed under Section 72(p) of the Code, as it may be
amended from time to time.
Additionally, the initial amount of a Participant's loan may not exceed
ninety percent (90%) of the Participant's Account balance in the Guaranteed
Interest Division.
10.3 MINIMUM LOAN AMOUNT: The initial amount of a loan must be at least one
thousand dollars ($1,000).
10.4 NUMBER OF LOANS OUTSTANDING: A Participant may have only one loan
outstanding at any time and may not establish more than one loan in any six
(6) month period. However, a Participant may renegotiate an outstanding
loan balance once during the term of the loan.
10.5 LOAN INTEREST RATE: The initial interest rate on a loan will be the lesser
of (a) the rate being credited in the Guaranteed Interest Division as of
the date of the loan and (b) the Moody's Corporate Bond Yield Average,
rounded to the nearest five basis points (0.05%) for the first month in
the calendar quarter which precedes the date of the loan. The loan
interest rate will remain fixed for the term of the loan, unless the
initial interest rate on a hypothetical new loan to the Participant would
be lower than the Participant's actual loan rate by more than fifty basis
points (0.50%). In such case, the loan interest rate will be reduced to
such lower rate as of the first day that such lower rate would
hypothetically be effective.
10.6 EFFECT OF LOAN ON PARTICIPANT'S ACCOUNT: When a Participant takes a loan,
Lincoln Life will subdivide his Participant's Account balance in the
Guaranteed Interest Division by establishing a loan reserve account in an
amount initially equal to the initial loan amount. Funds held in the loan
reserve account are held as security for the loan and will accrue interest
at a rate which is three percent (3.0%) below the loan interest rate. To
the extent that the loan interest rate is subsequently reduced, the rate
credited to funds in the loan reserve account will also be reduced in order
to maintain the three percent (3.0%) differential.
As the Participant makes repayments to Lincoln Life on the loan, an amount
equal to the principal component of the repayment, plus the interest
accrued in the loan reserve account, will be transferred from his loan
reserve account back to his Participant's Account balance in the Guaranteed
Interest Division.
In addition, an amount equal to ten percent (10%) of the principal of the
loan will be held as security to cover the interest should the Participant
fail to make the required quarterly
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<PAGE>
payments of principal and interest. This amount will earn interest at the
interest rate in effect in the Guaranteed Interest Division but will not be
available for withdrawals. As the principal is reduced, the amount held as
security will also be reduced.
10.7 DEFAULT IN LOAN REPAYMENT: If a Participant fails to make any quarterly
principal and interest payment within thirty (30) days of the payment due
date, his loan will be in default and Lincoln Life will deduct from his
loan reserve account and from his Participant's Account balance in the
Guaranteed Interest Division the principal, due and accrued interest, and a
loan default charge of 5%, as of the default date. Lincoln Life will also
recharacterize the principal and due and accrued interest as a withdrawal.
10.8 RESERVATION OF RIGHTS BY LINCOLN LIFE: Lincoln Life reserves the right to:
(a) Delay making a loan for up to six (6) months from the date the loan
application is received; or
(b) With ninety (90) days written notice to You, amend any portion of the
loan specifications with regard to applications for new loans; or
(c) With ninety (90) days written notice to You, discontinue making new
loans under this Contract.
10.9 LOAN SET-UP CHARGE: Lincoln Life will charge a Participant the amount
specified in Section 1.7 each time a loan is established. The amount will
be withdrawn from the Participant's Account balance.
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<PAGE>
ARTICLE XI - DISCONTINUANCE AND TERMINATION OF CONTRACT
11.1 CONTRACT DISCONTINUANCE BY CONTRACTHOLDER: You may discontinue this
Contract by written notice to Lincoln Life. This contract will be deemed
discontinued on the later of the date You specify or the date the written
notice is received by Lincoln Life.
11.2 CONTRACT DISCONTINUANCE BY LINCOLN LIFE: Lincoln Life may, at its option,
discontinue this Contract in whole or in part if (a) You fail to meet the
Minimum Contribution Amount specified in Section 1.1 or (b) a modification
in this Contract is necessary in order to comply with Federal or State
requirements, including the Employee Retirement Income Security Act of
1974, and You refuse to accept a substantially similar contract offered by
Lincoln Life that incorporates such modification. Discontinuance pursuant
to this Section shall be effective as of a date specified by Lincoln Life,
provided You are given at least fifteen (15) days advance written notice in
which to cure any remediable defaults. Discontinuance by Lincoln Life
supersedes any date established under Section 11.1.
11.3 EFFECT OF DISCONTINUANCE: As of the date this Contract is discontinued
under either 11.1 or 11.2 above:
(a) No further Contributions will be accepted by Lincoln Life.
(b) Participants will be allowed to request withdrawals subject to the
restrictions set forth in Section 403(b) of the Code and regulations
thereof.
(c) Participants will be allowed to request transfers from each Sub-
Account of the Variable Investment Division to the Guaranteed Interest
Division. Transfers from the Guaranteed Interest Division to the
Variable Investment Division are not allowed. Transfers among the
Sub-Accounts of the Variable Investment Division are not allowed.
(d) Participants will not be allowed to request loans.
(e) Lincoln Life will send written notice to each Participant's last known
address stating that the Contract is discontinued and that the
Participant's remaining Account balance may be distributed in either a
payout annuity conversion amount or subject to the five (5)
consecutive year payout schedule in accordance with Section 7.6(b)
with any remaining Account balance being distributed at the earlier
of:
(1) the Participant's attainment of age fifty-nine and one-half (59
1/2), or
(2) the Participant's separation from service, or
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<PAGE>
(3) the Participant has died, or
(4) the Participant has incurred a disability for which he is
receiving Social Security Payments.
11.4 CONTRACT TERMINATION: This Contract will terminate when there are no
participant Account balances under this Contract.
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ARTICLE XII - GENERAL PROVISIONS
12.1 CONTRACT: This Contract, together with Your attached Application and any
riders, constitutes the entire Contract between You and Lincoln Life.
Lincoln Life is not a party to any Plan document, and is not responsible
for the validity of any Plan or actions taken by You under that Plan. The
terms of this Contract shall govern with respect to the rights and
obligations of Lincoln Life, notwithstanding any contrary provisions or
conditions of any trust or plan.
Lincoln Life may rely on any action or information provided by You under
the terms of this Contract and shall be relieved and discharged from any
further liability to any party in acting at the direction and upon the
authority of You. All statements made by You shall be deemed
representations and not warranties.
Lincoln Life may deactivate this Contract by prohibiting new Contributions
and/or new Participants after the date of deactivation. Lincoln Life will
give You not less than ninety (90) days notice of the date of deactivation.
12.2 CONTRACT AMENDMENTS: Lincoln Life may amend this Contract at any time by
amendment or replacement. Such amendments will not, without Your consent,
adversely alter (a) the minimum interest rate set forth in Section 4.2, (b)
the maximum annuity conversion factors under Section 9.4, or (c) the amount
or terms of any annuity benefit already selected under Section 9.1 prior to
the effective date of the change. No change in this Contract will
adversely affect the rights of a Participant with respect to Contributions
received or annuities purchased before the effective date of the change
unless:
(a) Such amendments are made in order to comply with rulings, regulations
and laws applicable to the program provided by this Contract; or
(b) Your consent to the Amendment is obtained.
Lincoln Life will give You not less than ninety (90) days notice prior to
the effective date of any change made in accordance with this Section.
12.3 CONTRACT INTERPRETATION: Whenever the context so requires, the plural
includes the singular, the singular the plural and the masculine the
feminine.
12.4 INFORMATION, REPORTS AND DETERMINATIONS: You shall furnish Lincoln Life
with such facts and information as Lincoln Life may require for the
administration of this Contract, including, upon request, the original or
photocopy of any pertinent records You keep. All information that You
furnish to Lincoln Life pursuant to this Contract, including the
information pertaining to Contributions described in Article III, shall be
legible, accurate and satisfactory in form to Lincoln Life. Such
information shall be sent to a location designated by Lincoln Life.
You shall make any determination required under this Contract pursuant to
the terms of the Contract or required under ERISA and shall report that
determination in writing to
29
<PAGE>
Lincoln Life. Such determination shall be conclusive for the purpose of
this Contract. Lincoln Life shall be fully protected in relying on the
reports and other information furnished by You and need not inquire as to
the accuracy or completeness of such reports and information.
12.5 MISSTATEMENTS: If Lincoln Life provides a benefit under this Contract
based upon misstated or omitted information, including but not limited to
misstatement of age, Lincoln Life will make adjustments to the benefit to
reflect the correct information. Lincoln Life is relieved and discharged
from any liability and responsibility with respect to benefits provided in
reliance upon information You furnish.
12.6 ASSIGNMENT: You may not assign this Contract without Lincoln Life's prior
written consent. A Participant or Beneficiary under this Contract may not,
unless permitted by law, assign or encumber any payment due under this
Contract.
12.7 MARKET EMERGENCIES: If transactions are to be made to or from the Variable
Investment Division, Lincoln Life may not suspend the right of redemption
or delay payment for more than seven (7) calendar days after tender for
redemption, except for (1) any period when the New York Stock Exchange is
closed (other than customary weekend and holiday closings); (2) any period
when trading in the markets normally utilized is restricted, or an
emergency exists as determined by the Securities and Exchange Commission,
so that disposal of investments or determination of the Accumulation Unit
Value is not reasonably practicable; or (3) for such other periods as the
Securities and Exchange Commission by order may permit for the protection
of the Participants.
12.8 DEFERRAL PERIODS: If a withdrawal is to be made from the Guaranteed
Interest Division, Lincoln Life may defer the payment for the period
permitted by the law of the state in which this Contract was delivered but
not more than six (6) months after a written election is received by
Lincoln Life. During the period of deferral, interest at the then current
interest rate(s) will continue to be credited to a Participant's Account
in the Guaranteed Interest Division.
12.9 DEDUCTIONS FOR PREMIUM TAXES: Lincoln Life will deduct from Participant
Account balances any premium tax levied as a result of the existence of
Participant Accounts by any state or other governmental entity.
12.10 FACILITY OF PAYMENT: If any person is, in the judgment of Lincoln Life,
physically or mentally incapable of personally receiving and giving a
valid receipt for any payment due him under this Contract, Lincoln Life
may, unless and until claim shall have been made by a duly appointed legal
guardian or conservator of the person and property of such person, make
such payment or any part thereof to such other person or institution
which, in the judgment of Lincoln Life, is then contributing toward or
providing for the care and maintenance of such person. In no event will
any such payment exceed the maximum allowed under the applicable law of
the state in which this Contract is delivered. Such payment shall fully
discharge Lincoln Life of its obligations to the extent of the payment.
30
<PAGE>
Lincoln Life will make any payment which has become due to a Participant
or an Annuitant and has not been paid prior to his death, to the
Participant's Beneficiary or Beneficiaries, his executors or
administrators. If no Beneficiary or personal representative has been
named, Lincoln Life may make payment to any one or more of the surviving
members of the following classes of relatives; spouse, children,
grandchildren, brothers, sisters, and parents. Such payment shall fully
discharge Lincoln Life for all liability to the extent of the payment.
12.11 EVIDENCE OF SURVIVAL: When a benefit payment is contingent upon the
survival of any person, evidence of such person's survival must be
furnished to Lincoln Life, either by such person's endorsement of the
check drawn for such payment, or by other satisfactory means.
12.12 NON-WAIVER: The failure on Lincoln Life's part to perform or insist upon
the strict performance of any provision or condition of this Contract
shall neither constitute a waiver of Lincoln Life's rights to perform or
require performance of such provision or condition, nor stop Lincoln Life
from exercising any other rights it may have in such provision, condition,
or otherwise in this Contract or any Plan.
12.13 RECEIPT OF NOTICE: Whenever Lincoln Life receives information establishing
any right or conferring any benefit upon any Participant or Beneficiary,
such receipt shall be deemed to take place on any Business Day that such
information is received.
12.14 SEPARABILITY OF PROVISIONS: If any provision of this Contract is
determined to be invalid, the remainder of the provisions shall remain in
full force and effect.
12.15 THE SEPARATE ACCOUNT: The Separate Account is registered and operated as a
Unit Investment Trust under the Investment Company Act of 1940. As such,
the assets of each Sub-Account are invested in a registered management
investment company (mutual fund).
The Separate Account will be legally separated from Lincoln Life's other
accounts. The Separate Account's assets will, at the time during the year
that adjustments in the reserves are made, have a value of at least equal
to the reserves and other contract liabilities with respect to the
Separate Account, and at all other times, will have a value approximately
equal to, or in excess of, such reserves and liabilities. The portion of
the assets having a value equal to, or approximately equal to, the
reserves and contract liabilities will not be chargeable with liabilities
arising out of any other business which Lincoln Life may conduct.
Lincoln Life reserves the right, subject to compliance with applicable
law, including approval by You or the Participants if required by law, (1)
to create additional Sub-Accounts, (2) to combine or eliminate Sub-
Accounts, (3) to transfer assets from one Sub-Account to another, (4) to
transfer assets to the General Account and other separate accounts, (5) to
cause the deregistration and subsequent re-registration of the Separate
Account under the Investment Company Act of 1940, (6) to operate the
Separate Account under a committee and to discharge such committee at any
time, and (7) to eliminate any voting rights which You or Participants may
have with respect to the Separate Account,
31
<PAGE>
(8) to amend the Contract to meet the requirements of the Investment
Company Act of 1940 or other federal securities laws and regulations, (9)
to operate the Separate Account in any form permitted by law, (10) to
substitute shares of another fund for the shares held by a Sub-Account,
and (11) to make any change required by the Internal Revenue Code, the
Employee Retirement Income Security Act of 1974, or the Securities Act of
1933, to the extent not provided in Section 12.2.
12.16 PAYMENT OF BENEFITS: Lincoln Life shall make payment of benefits under
this Contract directly to a Participant or Beneficiary at the last known
address on file with Lincoln Life.
12.17 FREE-LOOK PERIOD: A Participant will receive an Active Life Certificate
upon Lincoln Life's receipt of a duly completed participation enrollment
form. If the Participant chooses not to participate under this Contract,
he may exercise his Free-look right by sending a written notice to Lincoln
Life that he does not wish to participate under this Contract within ten
(10) days after the date the Certificate is received by the Participant.
For purposes of determining the date on which the Participant has sent
written notice, the postmark date will be used.
If a Participant exercises his Free-look right in accordance with the
foregoing procedure, Lincoln Life will refund in full the Participant's
aggregate Contributions less aggregate withdrawals, or if greater, with
respect to Contributions to the Variable Investment Division, the
Participant's Account balance in the Variable Investment Division on the
date the canceled Certificate is received by Lincoln Life.
32
<PAGE>
ATTACHMENT I
SYSTEMATIC WITHDRAWAL OPTION
The formula for the interest equivalency amount (IEA) is:
29.5/366
IEA = ACCT.BAL x ( (1 + I ) - 1)
WHERE:
IEA is the Interest Equivalency Amount.
ACCT. BAL. is the Participant's Account balance at the
later of: the beginning of the contract year and
the most recent date on which the credited
interest rate changed.
I is the interest rate currently being credited
to the contract
EXAMPLE: The Account balance at the beginning of the year
is one hundred thousand dollars ($100,000) and the interest
rate credited to the contract is six percent (6.00%). The
Interest Equivalency Amount for each month of the current
year is:
29.5/366
IEA = $100,000 x (1.06 - 1)
= $470.76
33
<PAGE>
ENDORSEMENT
(ENDORSEMENTS MAY BE MADE ONLY BY
LINCOLN NATIONAL
LIFE INSURANCE COMPANY
AT ITS HOME OFFICE)
The provisions of this Group Annuity Endorsement shall be effective [August 6,
1999].
This Group Annuity Endorsement is deemed to be attached to and made a part of
Your [Contract] [Certificate].
Whenever the terms of this Group Annuity Endorsement and Your [Contract]
[Certificate] conflict, the terms of this Endorsement will apply.
It is hereby agreed and understood that the following funds will no longer be
available under Your [Contract] [Certificate]:
Socially Responsible Account (Calvert Social Balanced Portfolio)
Growth II Account (VP Capital Appreciation)
The Lincoln National Life Insurance Company
/s/ Gabriel L. Shaheen
-----------------------------
Gabriel L. Shaheen, President
<PAGE>
Group Annuity Amendment
Made a part of the contract to which it is attached
The provisions of this Group Annuity Amendment will be effective January 1,1999.
The first paragraph of Section 11.3 (e) of Article XI will be amended to read as
follows:
"(e) Lincoln Life will send written notice to each Participant's last known
address stating that the Contract is discontinued and that the
Participant's Account balance may be distributed in either a payout
annuity conversion amount, or subject to Section 7.6(c) and to the five
(5) consecutive year payout schedule in accordance with Section 7.6(b),
with any remaining Account balance being distributed at the earlier of:"
The following wording is being added at the end of Section 11.3 (e):
"In addition, if the Contract is discontinued under Section 11.1 above, the
Participant's Account balance in the Guaranteed Interest Division may be
distributed under either of the following options:
(1) According to the schedule in Section 7.6(b), where the following provision
applies:
Any Account balance remaining after the first withdrawal will continue to
receive interest in the same manner as before the consecutive withdrawals
began, but at no less than the Guaranteed Interest Division is earning on
the date of the first withdrawal less 1.50%.
(2) In a lump sum payment, where Lincoln Life will determine the amount payable
in the Guaranteed Interest Division as follows:
The amount payable will be the value in the Guaranteed Interest Division,
less any applicable Annual Administration Charge as specified in Section
3.7, times a market value factor. The market value factor is the lesser of
1.00 or the ratio of:
Current Bond Price
------------------
Par Value of that Bond
Lincoln Life calculates at the time of contract discontinuance the Current
Bond Price to equal the price of a bond:
1. issued with a maturity of 6.5 years;
2. bearing interest at the declared interest rate in effect as of the
discontinuance date;
3. calculated to yield the Merrill Lynch Baa Intermediate Industrial
Average for the week in which the notice of discontinuance is received. If such
average ceases to be published, Lincoln Life will select a comparable survey.
<PAGE>
If the amount payable, as determined above, is less than the principal in the
Guaranteed Interest Division, then the amount payable will be changed to equal
the principal. For purposes of this paragraph, principal is defined as
contributions and transfers to the Guaranteed Interest Division minus
withdrawals and transfers from the Guaranteed Interest Division and minus any
applicable Annual Administration Charge, but no less than zero."
The Lincoln National Life Insurance Company
Gabriel L. Shaheen, President
<PAGE>
ENDORSEMENT
(ENDORSEMENTS MAY BE MADE ONLY BY
LINCOLN NATIONAL
LIFE INSURANCE COMPANY
(Herein Referred To As "LINCOLN LIFE")
AT ITS HOME OFFICE)
The provisions of the Endorsement shall be effective on June 29, 1999.
This Endorsement is deemed attached to and made a part of Your Certificate.
Lincoln Life and the Contractholder hereby mutually agree to the terms of this
Endorsement.
Effective June 29, 1999, The Annual Mortality and Expense Risk Charge Applicable
to Variable Investment Division Sub-Accounts will be lowered from 1.00% to
0.75%.
/s/ Gabriel L. Shaheen
-----------------------------
Gabriel L. Shaheen, President
<PAGE>
[LINCOLN LETTERHEAD APPEARS HERE]
LINCOLN NATIONAL LIFE INSURANCE COMPANY
APPLICATION FOR GROUP ANNUITY CONTRACT
WITH
LINCOLN NATIONAL LIFE INSURANCE COMPANY
FORT WAYNE, INDIANA
__________________________________________ of ________________________________
(herein termed the "Contractholder") (address)
hereby authorizes Lincoln National Life Insurance Company (Lincoln Life) to
issue a Group Annuity Contract providing retirement benefits for the
Contractholder's Employees, members of an Association, or the Employees of the
Company on whose behalf the above designated Contractholder serves as Trustee.
Plan Type: ___ 403(b) ____ 401(a) ____ other _______________
It is understood that Participants under the Contract may be subject to the
restrictions on withdrawals imposed by the Internal Revenue Code of 1986, as
amended.
Contributions to the Contract and transfers of value within the Contract shall
be subject to the limitations imposed by the Plan, if any, named in the
Contract.
If a deposit is not made to the Contract within ninety (90) days after the later
of: (1) the date the Application is signed, or (2) the Effective Date of the
Contract, Lincoln Life may, at its option, declare the Contract invalid and deem
it null and void for all purposes, notwithstanding any provision to the contrary
in the Contract. Lincoln Life will provide the Contractholder thirty (30) days
notice prior to declaring this Contract invalid.
It is agreed that this Application together with the Contract comprise the
entire agreement between the Applicant and Lincoln Life.
<PAGE>
By signing this Application the Contractholder designates
_____________________________ of __________________________________
(name) (address)
as Broker for said Contract, and as such to receive any commissions payable with
respect to deposits made to the Company in accordance with the terms and
provisions of the Contract.
Dated at ____________________ this ________ day of _______________
By __________________________________
(Contractholder)
__________________________________
(Official Title)
By __________________________________
(Broker)
Applicable to Variable Annuity Contracts only:
It is acknowledged that the Contractholder has received a Prospectus relating to
this Group Variable Annuity Contract prior to the date of this Application.
_____ Check here to request a Statement of Additional Information.
<PAGE>
VARIABLE ANNUITY PRODUCT
Current Crediting Rate: _____________% Guaranteed Through __________________
(Date)
100% of Account Balance available at:
____ Death
____ Disability
____ Age 59 1/2
____ Separation from Service
____ Separation from Service and age 55
____ Hardship
Other Withdrawals subject to:
____ Reducing charge based on years of participation
____ 20% annual maximum withdrawal or transfer from the Guaranteed Interest
Division
Annual Administration Fee paid by: _________ Participant _________
Contractholder
____ $25 per participant
____ $25 per participant contributing to one or more Sub-Accounts
____ Not applicable
Loan Set-up Fee:
____ $50 per loan
____ Not applicable
Variable Investment Division Sub-Accounts (Underlying Institutional Funds):
____ Asset Manager Account (Fidelity's VIPF II: Asset Manager Portfolio)
____ Balanced Account (American Century Variable Portfolios, Inc.: VP Balanced)
____ Growth I Account (Fidelity's VIPF: Growth Portfolio)
____ Growth II Account (American Century Variable Portfolios, Inc.: VP Capital
Appreciation)
____ Index Account (Dreyfus Stock Index Fund)
____ International Stock Account (T. Rowe Price International Series, Inc.)
____ Socially Responsible Account (Calvert Social Balanced)
____ Equity-Income Account (Fidelity's VIPF: Equity-Income Portfolio)
____ Small Cap Account (Dreyfus Variable Investment Fund: Small Cap Portfolio)
____ Global Growth Account
____ Mid Cap Value Account
____ Mid Cap Growth I Account
____ Social Awareness Account
____ Small Cap Growth Account
____ All fourteen Sub-Accounts
<PAGE>
[LOGO]
Lincoln
---------------
Financial Group
Enrollment/Change Request &
Salary Reduction Agreement
The Lincoln National Life Insurance Company Variable Annuity
PO Box 9740
Portland ME 04104-5001
Phone 800 341-0441
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Participant Employee's name Soc. Sec. no.
Information ----------------------------------------------------------------------------------------------------------
Address
----------------------------------------------------------------------------------------------------------
* Proof required, City, State, ZIP
refer to the back ----------------------------------------------------------------------------------------------------------
of this form. [ ] Male [ ] Female Marital status Daytime phone
----------------------------------------------------------------------------------------------------------
Your personal Date of birth Date of hire/rehire Evening phone
investment elections ----------------------------------------------------------------------------------------------------------
should be consistent Employer's name
with your primary ----------------------------------------------------------------------------------------------------------
investment GP/ER ID number Group Annuity Contract nos.
objectives. ----------------------------------------------------------------------------------------------------------
[ ] New enrollment Change of: [ ] Name* [ ] Beneficiary
Refer to your [ ] Allocation election [ ] Address/phone [ ] Salary Reduction
variable annuity Select one primary investment objective for your retirement plan.
brochure for [ ] Stability of Principal [ ] Growth & Income [ ] Growth [ ] Aggressive Growth
investment Number of dependents Occupation
objective ---------------------------- ---------------------------------------------
information. Total family income $ Estimated net worth $
--------------------------- -----------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Salary Reduction Check with your payroll department to determine which option they use per pay period.
Information Salary reduction $ or % of pay Date of reduction
----------------------------------------------------------------------------------------------------------
Percentages must be You may select up to ten investment funds.
in whole numbers % Asset Manager % Guaranteed % Mid Cap Value
only and must total ---------- ---------- ----------
100%. % Balanced % Index % Small Cap
---------- ---------- ----------
% Equity Income % International % Small Cap Growth
---------- ---------- ----------
% Global Growth % Mid Cap Growth I % Social Awareness
---------- ---------- ----------
% Growth I
----------
- ----------------------------------------------------------------------------------------------------------------------------------
Beneficiary Complete the following information for each beneficiary. (You must have at least one primary.)
Designation Primary's name Soc. Sec. no.
----------------------------------------------------------------------------------------------------------
Percentages must be Relationship Date of birth Percentage
in whole numbers ----------------------------------------------------------------------------------------------------------
only. The total of Address
percentages for ----------------------------------------------------------------------------------------------------------
primary and City, State, ZIP
contingent ----------------------------------------------------------------------------------------------------------
beneficiaries must [ ] Primary [ ] Contingent
each equal 100%. Name Soc. Sec. no.
----------------------------------------------------------------------------------------------------------
Relationship Date of birth Percentage
----------------------------------------------------------------------------------------------------------
Address
----------------------------------------------------------------------------------------------------------
City, State, ZIP
----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Authorization and By signing below, you certify that you have read, understand and agree to the terms of the Salary
Signatures Reduction Information and Agreement sections on this form and have received an Active Life Certificate.
The signature of the employer authorized representative certifies that he/she also agrees to the Salary
Reduction Information section.
Participant's signature Date
----------------------------------------------------------------------------------------------------------
Employer authorized
representative's signature Date
----------------------------------------------------------------------------------------------------------
Plan administrator's
signature (if ERISA) Date
----------------------------------------------------------------------------------------------------------
Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. continued on back
Form L1282-94 1/00 Enrollment
White copy - TDA Client Services Yellow copy - Payroll Pink copy - Broker Goldenrod copy - Participant
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Agreement
You agree that:
Variable Annuity Information
.. You have read the prospectus for the insurer's variable annuity and the
underlying funds. You also understand that the underlying funds supporting
the insurer's variable annuity are not public funds, but are available only
through insurance contracts.
.. The investment objectives and policies are stated in each of the underlying
fund's prospectus.
.. You will review your investment selections on a regular basis as your
lifestyle or investment goals may change as you near retirement. As part of
this review you should read current fund prospectuses and financial reports.
You may contact Lincoln Life at any time to receive up-to-date information
about your variable annuity.
.. Withdrawals are restricted to the requirements of Section 403(b) of the
Internal Revenue Code as described in the insurer's current variable annuity
prospectus. Withdrawals must also be in accordance with any restrictions
described in your tax deferred annuity plan sponsored by your employer.
.. If contributions are received by the insurer without complete and accurate
information, your contributions will be allocated to the Pending Allocation
Account. Once this information is received, the insurer will allocate your
contributions as indicated on the form. After the third monthly notice, if
the insurer has not received this information, the account value will be
returned to the contractholder.
.. If you transfer assets to the insurer without a transfer form indicating an
allocation split, the insurer will deposit these assets based on the most
recent investment elections on file.
.. Confirmations will be generated once the insurer receives complete enrollment
information. Please review the confirmation carefully and notify the insurer
immediately if any changes are desired. The insurer may elect to send any
confirmations of transactions relating to your account directly to your
employer.
.. Any changes to your name and/or beneficiary designations must be in writing.
Proof is required for name changes. Sumbit a copy of a marriage license,
divorce decree, or other court document.
.. Returns on the variable accounts are based upon the investment experience of
the insurer's separate account. These amounts will fluctuate and are not
guaranteed as to the dollar amount.
Salary Reduction
.. The employer shall reduce your salary by the amount indicated per pay period.
The employer shall forward this amount to the insurer as contributions toward
a 403(b) annuity.
.. Payroll reductions will begin on the date indicated. Any change in allocation
election will be effective with the next contribution after receiving this
form in the Portland, Maine office.
.. This agreement is legally binding and irrevocable regarding the amounts
already deferred by both you and the employer while employment continues for
amounts earned while it is in effect.
.. This agreement will apply only to amounts earned after this agreement becomes
effective. It will not apply to any amounts earned after it is terminated.
Beneficiary Designation
.. If additional space is needed, attach a separate sheet.
.. If you are married or will be married and if your tax deferred annuity plan
provides, the primary beneficiary will be your spouse unless he/she completes
and signs a waiver form provided by your employer.
.. If your plan is subject to ERISA, your beneficiary designation must be in
compliance with all provisions of the Retirement Equity Act of 1984 and the
applicable tax deferred annuity plan, which requires a plan administrator's
signature.
.. Your beneficiary designation on this form supersedes any prior designation
made in regards to the coverage under this contract.
.. If no beneficiary is selected, or if no beneficiary survives you, all death
benefits will be paid according to the contract and any applicable tax
deferred annuity plan.
.. Your primary beneficiary will be entitled to the entire value of the account.
Multiple surviving primary beneficiaries will be entitled to equal portions
of the account unless specified otherwise.
.. Your contingent beneficiary will be entitled to the entire value of the
account if no primary beneficiary is living. Multiple surviving contingent
beneficiaries will be entitled to equal portions of the account unless
specified otherwise.
- --------------------------------------------------------------------------------
Customer Service
If you have any questions, please contact Lincoln Life at 800 341-0441.
Form L1282-94 1/00
<PAGE>
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
1
<PAGE>
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
2
<PAGE>
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
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<PAGE>
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
1300 South Clinton Street
Ft. Wayne, Indiana 46802
Attention: Kelly D. Clevenger
(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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<PAGE>
(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
<PAGE>
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 Dina Tantra, Distributor's advertising
compliance manager (or such other person as Distributor may designate in
writing) by mail at 4500 Main Street Kansas City, Missouri 64111, or by fax at
(816) 3404074. 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 mark or logo of the Company, or any variation of any such
trademark, trade name, service mark 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 mark 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.
8
<PAGE>
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
<PAGE>
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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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;
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<PAGE>
(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
<PAGE>
(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
<PAGE>
(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
1300 South Clinton Street
Ft. Wayne, Indiana 46802
Attention: Kelly D. Clevenger
(219) 455-5119 (office number)
(219) 455-1773 (telecopy number)
To the Issuer or Distributor:
Twentieth Century Mutual Funds
4500 Main Street
Kansas City, Missouri 64111
Attention: Charles A. Etherington, Esq.
(816) 3404051 (office number)
(816) 3404964 (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
<PAGE>
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
<PAGE>
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: By:
William M. Lyons
Executive Vice PRESIDENT Name:
Title:
18
<PAGE>
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
<PAGE>
SCHEDULE B
SEPARATE ACCOUNTS OF LINCOLN NATIONAL LIFE INSURANCE COMPANY
INVESTING IN THE FUND
Lincoln National Variable Annuity Account L
20
<PAGE>
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:
<PAGE>
(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.
<PAGE>
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:
Name:
Title:
AMERICAN CENTURY INVESTMENT MANAGEMENT, INC.
By:
William M. Lyons
Executive Vice President
AMERICAN CENTURY INVESTMENT SERVICES, INC.
By:
William M. Lyons
Executive Vice President
<PAGE>
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
<PAGE>
AS AMENDED EFFECTIVE
February 1, 1999
SCHEDULE B
SEPARATE ACCOUNTS OF LINCOLN NATIONAL LIFE INSURANCE COMPANY
INVESTING IN CERTAIN FUNDS
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
PARTICIPATION AGREEMENT
AMONG
THE LINCOLN NATIONAL LIFE INSURANCE CO.
AND
BARON CAPITAL FUNDS TRUST
AND
BARON CAPITAL, INC.
THIS AGREEMENT, made and entered into this 28' day of August, 1998
by and among Baron Capital Funds Trust (and all series thereof) a business trust
organized under the laws of the State of Delaware (the "Fund'), and THE LINCOLN
NATIONAL LIFE INSURANCE CO., an Indiana insurance corporation (the "Company"),
on its own behalf and on behalf of each separate account of the Company named in
Schedule I to this Agreement as in effect at the time this Agreement is executed
and such other separate accounts that may be added to Schedule 1 from time to
time in accordance with the provisions of Article XI of this Agreement (each
such account referred to as the "Account"), and Baron Capital, Inc. (the
"Distributor").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and has a class of stock (the "Fund Insurance Shares") that
has been established for the purpose of serving as the investment vehicle 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 "Product owners") to be offered
by insurance companies which have entered into participation agreements with the
Fund ("Participating Insurance Companies"); and
WHEREAS, the Fund 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. 33-40839) under the
Investment Company Act of 1940, as amended (the "1940 Act"), and the Fund
Insurance Shares (File No. 811-85 05) 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 (unless exempt therefrom) certain variable
annuity contracts described in Schedule 2 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 2 from time to
time in accordance with Article XI of this Agreement (such policies and
contracts shall be referred to herein collectively as the "Contracts," each such
registration statement for a class or classes of contracts listed on Schedule 2
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 the owners of the such contracts, as distinguished from all
Product Owners, being referred to as "Contract Owners"); and
<PAGE>
WHEREAS, each Account, a validly existing separate account, duly
authorized by resolution of the Board of Directors of the Company on the date
set forth on Schedule 1, 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 Fund have entered into an
agreement (the "Fund Distribution Agreement") pursuant to which the Distributor
will distribute the Fund Insurance Shares; and
WHEREAS, BAMCO, Inc. (the "Investment Manager") is registered as
an investment adviser under the 1940 Act and any applicable state securities
laws and serves as an investment manager to the Fund pursuant to an agreement;
and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Fund Insurance Shares on behalf of
each Account to fund its Contracts and the Distributor is authorized to sell
such Fund Insurance Shares to unit investment trusts such as the Accounts at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Distributor agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Distributor agrees to sell to the Company those Fund
Insurance Shares, which the Company orders on behalf of each Account, executing
such orders on a daily basis in accordance with Section 1.4 of this Agreement.
2
<PAGE>
1.2. The Fund agrees to make Fund Insurance Shares available for purchase
by the Company on behalf of each Account at the then applicable net asset value
per share on Business Days as defined in Section 1.4 of this Agreement, and the
Fund shall use its best efforts to calculate and deliver such net asset value by
6:00 p.m., E.S.T., on each such Business Day. Notwithstanding any other
provision in this Agreement to the contrary, the Board of Directors of the Fund
(the "Fund Board") may suspend or terminate the offering of shares, if such
action is required by law or by regulatory authorities having jurisdiction or
if, in the sole discretion of the Fund Board acting in good faith and in light
of its fiduciary duties under Federal and any applicable state laws, suspension
or termination is necessary and in the best interests of the shareholders (it
being understood that "shareholders" for this purpose shall mean Product
owners).
1.3. The Fund agrees to redeem, at the Company's request, any full' or
fractional Fund Insurance Shares held by each Account or the Company, executing
such requests at the net asset value on a daily basis (Company will expect same
day redemption wires unless unusual circumstances evolve which cause the Fund to
have to redeem securities) in accordance with Section 1.4 of this Agreement, the
applicable provisions of the 1940 Act and the then currently effective Fund
Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund
Insurance Shares of any series to the extent permitted by the 1940 Act, any
rules, regulations or orders thereunder, or the then currently effective Fund
Prospectus.
1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall
be the agent of the Fund for the limited purpose of receiving
redemption and purchase requests from each Account (but not from
the general account of the Company), and receipt on any Business
Day by the Company as such limited agent of the Fund prior to the
time prescribed in the current Fund Prospectus (which as of the
date of execution of this Agreement is 4 p.m., E.S.T.) shall
constitute receipt by the Fund on that same Business Day, provided
that the Fund, or its designee, receives notice of such redemption
or purchase request by 11:00 a.m., E.S.T. on the next following
Business Day. For purposes of this Agreement, "Business Day" shall
mean any day on which the New York Stock exchange is open for
trading.
(b) The Company shall pay for the shares on the same day that it
places an order with the Fund to purchase those Fund Insurance
Shares for an Account. Payment for Fund Insurance Shares will be
made by each Account or the Company in Federal Funds transmitted
to the Fund by wire to be received by 11:00 a.m., E.S.T. on the
day the Fund is properly notified of the purchase order for
shares. The Fund will confirm receipt of each trade and these
confirmations will be received by the Company via Fax or Email by
1:00 p.m. E.S.T. If Federal Funds are not received on time, such
funds will be invested, and shares purchased thereby will be
issued, as soon as practicable.
3
<PAGE>
(c) Payment for shares redeemed by each Account or the Company
will be made in Federal Funds transmitted to the Company by wire
on the same day the Fund is notified of the redemption order of
shares, except that the Fund reserves the right to delay payment
of redemption proceeds, but in no event may such payment be
delayed longer than the period permitted under Section 22(e) of
the 1940 Act. Neither the Fund nor the Distributor shall bear any
responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds if securities must be redeemed; the Company
alone shall be responsible for such action.
1.5. Issuance and transfer of Fund Insurance Shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Purchase and redemption orders for Fund Insurance Shares will be recorded in an
appropriate ledger for each Account or the appropriate subaccount of each
Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to
the Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of each Account, hereby elects
to receive all such dividends and distributions as are payable on any Fund
Insurance Shares in the form of additional shares. The Company reserves the
right, on its behalf and on behalf of each Account, to revoke this election and
to receive all such dividends in cash. The Fund shall notify the Company of the
number of Fund Insurance Shares so issued as payment of such dividends and
distributions.
1.7. The Fund shall use its best efforts to make the net asset value per
share available to the Company by 6 p.m., E.S.T. each Business Day, and in any
event, as soon as reasonably practicable after the net asset value per share is
calculated, and shall calculate such net asset value in accordance with the then
currently effective Fund Prospectus. Neither the Fund, any Series, the
Distributor, nor the Investment Manager nor any of their affiliates shall be
liable for any information provided to the Company pursuant to this Agreement
which information is based on incorrect information supplied by the Company to
the Fund, the Distributor or the Investment Manager.
1.8.
(a) The Company may withdraw each Account's investment in
the Fund only: (i) as necessary to facilitate Contract owner
requests; (ii) 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 (x)
any Product Owners or (y) the interests of the Participating
Insurance Companies investing in the Fund; (iii) upon requisite
vote of the Contractowners having an interest in the affected Fund
to substitute the shares of another investment company for shares
in accordance with the terms of the Contracts; (iv) as required by
state and/or federal laws or regulations or judicial or other
legal precedent of general application; or (v) at the Company's
sole discretion, pursuant to an order of the SEC under Section
26(b) of the 1940 Act.
4
<PAGE>
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the Fund
Insurance Shares may be sold to other insurance companies (subject
to Section 1.9 hereof) and the cash value of the Contracts may be
invested in other investment companies.
(c) The Company shall not, without prior notice to the
Distributor (unless otherwise required by applicable law), take
any action to operate each Account as a management investment
company under the 1940 Act.
1.9. The Fund and the Distributor agree that Fund Insurance Shares will
be sold only to Participating Insurance Companies and their separate accounts.
The Fund and the Distributor will not sell Fund Insurance Shares to any
insurance company or separate account unless an agreement complying with Article
VII of this Agreement is in effect to govern such sales. No Fund Insurance
Shares will be sold to the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and warrants that it is
an insurance company duly organized and validly existing under applicable law
and that it has legally and validly authorized each Account as a separate
account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered
or, prior to the issuance of any Contracts, will register each Account (unless
exempt therefrom) as a. unit investment trust in accordance with the provisions
of the 1940 Act to serve as a separate account for its Contracts, and that it
will maintain such registrations for so long as any Contracts issued under them
are outstanding.
2.2. The Fund represents and warrants that Fund Insurance 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 Insurance
Shares are sold. The Fund further represents and warrants that it is a business
trust duly organized and in good standing under the laws of the State of
Delaware.
5
<PAGE>
2.3. The Fund represents and warrants that it currently qualifies
as a Regulated Investment Company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). The Fund further represents and warrants
that it will make every effort 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 it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Fund represents and warrants that it will comply with
Section 817(h) of the Code, and all regulations issued thereunder. In the event
of a breach of this Section 3.6 by the Fund, it will a) immediately notify the
Company of the breach and b) to adequately diversify each series so as to
achieve compliance with the grace period offered by Regulation 1.817-5.
2.5. The Company represents that the Contracts are currently and
at the time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund and the Distributor immediately upon having a reasonable basis for
believing that the Contracts have ceased to be so treated or that they might not
be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees
and expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of California, to the extent required to
perform this Agreement; and with any state-mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Fund, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Distributor represents and warrants that it is duly
registered as a broker-dealer under the 1934 Act, a member in good standing of
the NASD, and duly registered as a broker dealer under applicable state
securities laws; its operations are in compliance with applicable law, and it
will distribute the Fund Insurance Shares according to applicable law.
2.8. The Distributor, on behalf of the Investment Manager,
represents and warrants that the Investment Manager is registered as an
investment adviser under the Investment Advisers Act of 1940 and is in
compliance with applicable federal and state securities laws.
2.9. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule l7g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
6
<PAGE>
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Distributor shall provide the Company with as many
copies of the current Fund Prospectus as the Company may reasonably request. If
requested by the Company in lieu thereof, the Fund at its expense shall provide
to the Company a camera-ready copy, and electronic version, of the current Fund
Prospectus suitable for printing and other assistance as is reasonably necessary
in order for the Company to have a new Contracts Prospectus printed together
with the Fund Prospectus in one document. See Article V for a detailed
explanation of the responsibility for the cost of printing and distributing Fund
prospectuses.
3.2. The Fund Prospectus shall state that the Statement of
Additional Information for the Fund is available from the Distributor (or, in
the Fund's discretion, the Fund Prospectus shall state that such Statement is
available from the Fund), and the Distributor (or the Fund) shall provide such
Statement free of charge to the Company and to any outstanding or prospective
Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and
other communications to shareholders (except proxy
material), in each case in a form suitable for printing, as
determined by the Company. The Fund shall be responsible
for the costs of printing and distributing these materials
to Contract owners.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material.
The Company will provide the appropriate Contractowner
names and addresses to the Fund for this purpose.
3.4. The Company shall furnish each piece of sales literature or
other promotional material in which the Fund or the Investment Manager is named
to the Fund or the Distributor prior to its use. No such material shall be used,
except with the prior written permission of the Fund or the Distributor. The
Fund and the Distributor agree to respond to any request for approval on a
prompt and timely basis. Failure of the Fund to respond within 10 days of the
request by the Company shall relieve the Company of the obligation to obtain the
prior written permission of the Fund or the Distributor.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund other
than the information or representations contained in the Fund Registration
Statement or Fund Prospectus, as such Registration Statement and Prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund or by the Distributor, except with the prior written permission of the
Fund or the Distributor. The Fund agrees to respond to any request for
permission on a prompt and timely basis. If neither the Fund nor the Distributor
responds within 10 days of a request by the Company, then the Company shall be
relieved of the obligation to obtain the prior written permission of the Fund.
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3.6. The Fund and the Distributor shall not give any information
or make any representations on behalf of the Company or concerning the Company,
each Account or the Contracts other than the information or representations
contained in 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 each Account which are in the public
domain or approved in writing by the Company for distribution to Contract
owners, or in sales literature or other promotional material approved in writing
by the Company, except with the prior written permission of the Company. The
Company agrees to respond to any request for permission on a prompt and timely
basis. If the Company fails to respond within 10 days of a request by the Fund
or the Distributor, then the Fund and the Distributor are relieved of the
obligation to obtain the prior written permission of the Company.
3.7. The Fund will provide to the Company at least one complete
copy of all Fund Registration Statements, Fund Prospectuses, Statements of
Additional Information, annual and semi-annual reports and other reports, proxy
statements, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments or supplements to
any of the above, that relate to the Fund or Fund Insurance Shares, within 20
days after the filing of such document with the SEC or other regulatory
authorities.
3.8. The Company will provide to the Fund at least one complete
copy of all Contracts Registration Statements, Contracts Prospectuses,
Statements of Additional Information, Annual and Semi-annual Reports, sales
literature and other promotional materials, and all amendments or supplements to
any of the above, that relate to the Contracts, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft
versions of any registration statements, prospectuses, and statements of
additional information, reports, proxy statements, and solicitations for voting
instructions, sales literature and other promotional materials, applications for
exemptions, requests for no-action letters, and all amendments or supplements to
any of the above, to the extent that the other party reasonably needs such
information for purposes of preparing a report or other filing to be filed with
or submitted to a regulatory agency. If a party requests any such information
before it has been filed, the other party will provide the requested information
if then available and in the version then available at the time of such request.
3.10. For purposes of this Article III, 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
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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 NASD rules, the 1940 Act or the 1933 Act.
ARTICLE. IV. Voting
4.1 Subject to applicable law and the order referred to in Article
VII, the Fund shall: solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the order referred to in Article
VII, the Company shall:
(a) vote Fund Insurance Shares attributable to Contract
owners in accordance with instructions or proxies received
in timely fashion from such Contract owners;
(b) vote Fund Insurance Shares attributable to Contract
owners for which no instructions have been received in the
same proportion as Fund Insurance Shares of such series for
which instructions have been received in timely fashion;
and
(c) vote Fund Insurance Shares held by the Company on its
own behalf or on behalf of each Account that are not
attributable to Contract owners in the same proportion as
Fund Insurance Shares of such series for which instructions
have been received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement (including
expenses expressly assumed by the Fund pursuant to this Agreement) shall be paid
by the Fund to the extent permitted by law. Except as may otherwise be provided
in Section 1.4 and Article VII of this Agreement, the Company shall not bear any
of the expenses for the cost of registration and qualification of the Fund
Insurance Shares under Federal and any state securities law, preparation and
filing of the Fund Prospectus and Fund Registration Statement, the preparation
of all statements and notices required by any Federal or state securities law,
all taxes on the issuance or transfer of Fund Insurance Shares, and any expenses
permitted to be paid or assumed by the Fund pursuant to a plan, if any, under
Rule l2b-1 under the 1940 Act.
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The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company may print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contract owners.)
The Company is responsible for the cost of printing and
distributing Fund prospectuses and SAIs for new sales; and Account Prospectuses
and SAIs for existing Contractowners. The Company shall have the final decision
on choice of printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section
817(h) of the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements
under the 1933 Act and each Account's Registration Statement under the 1940 Act
from time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under
the 1933 Act and the 1940 Act from time to time as required in order to effect
for so long as Fund Insurance Shares are sold the continuous offering of Fund
Insurance Shares as described in the then currently effective Fund Prospectus.
The Fund shall register and qualify Fund Insurance Shares for sale to the extent
required by applicable securities laws of the various states.
6.4. The Company shall be responsible for assuring that any
prospectus offering a Contract that is a life insurance contract where it is
reasonably possible that such Contract would be deemed a "modified endowment
contract," as that term is defined in Section 7702A of the Code, will describe
the circumstances under which a Contract could be treated as a modified
endowment contract (or policy).
6.5. To the extent that it decides to finance distribution
expenses pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of
Directors, a majority of whom are not interested persons of the Fund, formulate
and approve any plan under Rule 12b-I to finance distribution expenses.
6.6. (a) The Company shall amend Schedule 3 when appropriate in
order to inform the Fund of any applicable state-mandated
investment restrictions with which the Fund must comply.
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(b) Should the Fund or the Distributor become aware of any
restrictions which may be appropriate for inclusion in Schedule 3,
the Company shall be informed immediately of the substance of
those restrictions.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Company has reviewed a copy of the order (the "Mixed and
Shared Funding Order") dated June 16, 1998 of the Securities and Exchange
Commission under Section 6c of the Act and, in particular, has reviewed the
conditions to the relief set forth in the related Notice. As set forth therein,
the Company agrees to report to the Board of Directors of the Fund (the "Board")
any potential or existing conflicts between the interests of Product Owners of
all separate accounts investing in the Fund, and to assist the Board in carrying
out its responsibilities under the conditions of the Mixed and Shared Funding
Order by providing all information reasonably necessary for the Board to
consider any issues raised, including information as to a decision to disregard
voting instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested
Board Members, determines that a material irreconcilable conflict exists, the
Board shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to the
Company and a reasonable opportunity for the Company to appear
before it and present its case, determines that the Company is
responsible for said conflict, and if the Company agrees with that
determination, the Company shall, at its sole cost and expense,
take whatever steps are necessary to remedy the irreconcilable
material conflict. These steps could include: (a) withdrawing the
assets allocable to some or all of the affected Accounts from the
Fund and reinvesting such assets in a different investment
vehicle, or submitting the question of whether such segregation
should be implemented to a vote of all affected Contractowners
and, as appropriate, segregating the assets of any particular
group (i.e., variable annuity Contractowners, variable life
insurance policyowners, or variable Contractowners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the option
of making such a change; and (b) establishing a new registered
mutual fund or management separate account, or taking such other
action as is necessary to remedy or eliminate the irreconcilable
material conflict.
(b) If the Company disagrees with the Board's
determination, the Company shall file a written protest with the
Board, reserving its right to dispute the determination as between
just the Company and the Fund. After reserving that right the
Company, although disagreeing with the Board that it (the Company)
was responsible for the conflict, shall take the necessary steps,
under protest, to remedy the conflict, substantially in accordance
with paragraph (a) just above, for the protection of
Contractowners.
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(c) As between the Company and the Fund, if within 45 days
after the Board's determination the Company elects to press the
dispute, it shall so notify the Board in writing. The parties
shall then attempt to resolve the matter amicably through
negotiation by individuals from each party who are authorized to
settle the matter.
If the matter has not been amicably resolved within 60 days
from the date of the Company's notice of its intent to press the
dispute, then before either party shall undertake to litigate the
dispute it shall be submitted to non-binding arbitration conducted
expeditiously in accordance with the CPR Rules for
Non-Administered Arbitration of Business Disputes, by a sole
arbitrator; provided, however, that if one party has requested the
other party to seek an amicable resolution and the other party has
failed to participate, the requesting party may initiate
arbitration before expiration of the 60-day period set out just
above.
If within 45 days of the commencement of the process to
select an arbitrator the parties cannot agree upon the arbitrator,
then he or she will be selected from the CPR Panels of Neutrals.
The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. Sec. 1-16. The place of arbitration shall be Fort
Wayne, Indiana. The Arbitrator is not empowered to award damages
in excess of compensatory damages.
(d) If the Board shall determine that the Fund or another
insurer was responsible for the conflict, then the Board shall
notify the Company immediately of that determination. The Fund
shall assure the Company that it (the Fund) or that other insurer,
as applicable, shall, at its sole cost and expense, take whatever
steps are necessary to eliminate the conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contractowner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company shall withdraw (without charge or penalty) each Account's investment in
the Fund, if the Fund so elects.
7.4. Subject to the terms of Section 7.2 above, the Company shall carry
out the responsibility to take remedial action in the event of a Board
determination of an irreconcilable material conflict with a view only to the
interests of Contractowners.
7.5. For purposes of this Article, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable conflict, but in no event will the Fund
be required to establish a new funding medium for any variable contract, nor
will the Company be required to establish a new funding medium for any
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Contract if in either case an offer to do so has been declined by a vote of a
majority of affected Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. 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, 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, 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 famished in writing to the Company by the Fund or 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
Insurance 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 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 Insurance 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 Fund by or on behalf of the Company;
or
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(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 Insurance Shares on a
timely basis in accordance with the procedures set forth in
Article 1; or
(f) arise as a result of the Company's providing the Fund
with inaccurate information, which causes the Fund 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.
8.2. 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, 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, 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 the Company to the Fund or the
Distributor for use in the Fund
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Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature for the Fund or otherwise
for use in connection with the sale of the Contracts or Fund
Insurance 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 or the Fund (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 the Fund or persons under their
control) or wrongful conduct of the Distributor or persons under
its control with respect to the sale or distribution of the
Contracts or Fund Insurance 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 or the Fund 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 Fund 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 Article VI 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 Contracts Prospectuses); or
(e) arise out of any material breach by the Distributor or
the Fund 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 willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3 INDEMNIFICATION PROCEDURES. AFTER receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII 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 Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter,
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<PAGE>
provided that the omission to so notify the indemnifying party will not relieve
it from any liability under this Article VIH, 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 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 Article VIH. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of laws.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant,
and the terms hereof shall be limited, interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance written
notice to the other parties; or
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(b) at the option of the Company if shares of the Fund are not
available to meet the requirements of the Contracts as determined by the
Company. Prompt notice of the election to terminate for such cause shall
be furnished by the Company. Termination shall be effective ten days
after the giving of notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the operation of each Account, the administration of the
Contracts or the purchase of Fund Insurance Shares, or an expected or
anticipated ruling, judgment or outcome which would, in the Fund's
reasonable judgment, materially impair the Company's ability to perform
the Company's obligations and duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the Distributor, the Investment Manager or
any Sub Investment Manager, by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body regarding the duties
of the Fund or the Distributor under this Agreement, or an expected or
anticipated ruling, judgment or outcome which would, in the Company's
reasonable judgment, materially impair the Fund's or the Distributor's
ability to perform Fund's or Distributor's obligations and duties
hereunder; or
(e) at the option of the Company upon institution of formal
proceedings against the Investment Manager or Sub-investment Manager by
the NASD, the SEC, or any state securities or insurance commission or any
other regulatory body which would, in the good faith opinion of the
Company, result in material harm to the Accounts, the Company, or
Contractowners.
(f) upon requisite vote of the Contract owners having an interest
in the affected Series (unless otherwise required by applicable law) and
written approval of the Company, to substitute the shares of another
investment company for the corresponding shares of the Fund in accordance
with the terms of the Contracts; or
(g) at the option of the Fund in the event any of the Contracts
are not registered, issued or sold in accordance with applicable Federal
and/or state law; o
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(h) 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 Product owners or (ii) the interests of the
Participating Insurance Companies investing in the Fund; or
(i) 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; or
(j) 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; or
(k) at the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the
Code, or if the Fund reasonably believes that the Contracts may fail to
so qualify; or
(1) 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
(m) at the option of the Company, if the Company shall determine,
in its sole judgment exercised in good faith, that either: (1) the Fund
and the Distributor, or either of them, shall have suffered a material
adverse change in their respective businesses or financial condition; or
(2) the Fund or the Distributor, or both of them, 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; or
(n) upon the assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Accounts to another
insurance company pursuant to an assumption reinsurance agreement) unless
the nonassigning party consents thereto or unless this Agreement is
assigned to an affiliate of the Distributor.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1,
no termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to all other parties to
this Agreement of its intent to terminate which notice shall set forth the basis
for such termination. Furthermore:
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(a) In the event that any termination is based upon the provisions
of Article VII or the provisions of Section 10.1 (a) of this Agreement,
such prior written notice shall be given in advance of the effective date
of termination as required by such provisions; and
(b) in the event that any termination is based upon the provisions
of Section 10.1 (c) or 10.1 (d) of this Agreement, such prior written
notice shall be given at least ninety (90) days before the effective date
of termination, or sooner if required by law or regulation.
(c) in the event that any termination is based upon the provisions
of Section 10.1 (e) of this Agreement, such prior written notice shall
all be given at least sixty (60) days before the date of any proposed
vote to replace the Fund's shares
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund and the Distributor will, at
the option of the Company, continue to make available additional Fund
Insurance Shares for so long after the termination of this Agreement as
the Company desires, pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below, 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 Insurance Shares
available, the owners of the Existing Contracts or the Company, whichever
shall have legal authority to do so, shall be permitted to reallocate
investments in the Fund, redeem investments in the Fund and/or invest in
the Fund upon the making of additional purchase payments under the
Existing Contracts.
(b) In the event of a termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund and the Distributor shall
promptly notify the Company whether the Distributor and the Fund will
continue to make Fund Insurance Shares available after such termination.
If Fund Insurance Shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect
except for Section 10.1 (a) and thereafter either the Fund or the
Company may terminate the Agreement, as so continued pursuant to this
Section 10.3, 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.
(c) The parties agree that this Section 10.3 shall not apply to
any termination made pursuant to Article VII or any conditions or
undertakings incorporated by reference in Article VII, and the effect of
such Article VII termination shall be governed by the provisions set
forth or incorporated by reference therein.
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ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts
and to add new classes of variable annuity contracts and variable life insurance
policies to be issued by the Company through an Account investing in the Fund.
The provisions of this Agreement shall be equally applicable to each such class
of contracts or policies, unless the context otherwise requires.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party(ies) at the address of such party(ies) set
forth below or at such other address as such party(ies) may from time to time
specify in writing to the other party.
If to the Fund:
Baron Capital Funds Trust
767 Fifth Avenue
New York, New York, 10153
Attn: David E. Kaplan
cc: Linda S. Martinson, Esq.
If to the Company:
The Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Distributor:
Baron Capital, Inc.
767 Fifth Avenue
New York, New York, 10153
Attn: David E. Kaplan
cc: Linda S. Martinson, Esq.
20
<PAGE>
ARTICLE XIII. MISCELLANEOUS
13.1. 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.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3 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.
13.4. Each party hereto 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.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
21
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
Baron Capital Funds Trust
Date: Signature:
Name:
Title:
LINCOLN NATIONAL LIFE INSURANCE CO. Date:
Signature:
Name:
Title:
Baron Capital, Inc.
Date: Signature:
Name:
Title:
22
<PAGE>
SCHEDULE 1
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of August 28, 1998
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN NATIONAL VARIABLE ANNUITY-ACCOUNT L
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT
23
<PAGE>
SCHEDULE 2
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of August 28, 1998
MULTI-FUND-REGISTERED TRADEMARK- VARIABLE ANNUITY (INDIVIDUAL AND GROUP
ANNUITIES)
eANNUITY (INDIVIDUAL ANNUITY)
LINCOLN LIFE GROUP VARIABLE ANNUITY - GVA (GROUP VARIABLE ANNUITY)
24
<PAGE>
SCHEDULE 3
State-mandated Investment Restrictions
Applicable to the Fund
As of August 28, 1998
The California Department of Insurance has established the following Guidelines
for an underlying portfolio of a Separate Account:
BORROWING. Borrowing limits for any variable contract separate account portfolio
are (1) 10% of net asset value when borrowing for any general purpose; and (2)
25% of net asset value when borrowing as a temporary measure to facilitate
redemptions. Net asset value of a portfolio is the market value of all
investments or assets owned less outstanding liabilities of the portfolio at the
time that any new or additional borrowing is undertaken.
FOREIGN INVESTMENTS - DIVERSIFICATION.
1. A portfolio will be invested in a minimum of five different foreign
countries at all times. However, this minimum is reduced to four when foreign
investments comprise less than 80% of the portfolio's net asset value; to three
when legs than 60% of that value; to two when less than 40%; and to one when
less than 20%.
2. Except as set forth in items 3 and 4 below, a Portfolio will have no more
than 20% of its net asset value invested in securities of issuers located in any
one country.
3. A Portfolio may have an additional 15% of its net asset value invested in
securities of issuers located in any one of the following countries: Australia,
Canada, France, Japan, the United Kingdom or Germany.
4. A Portfolio's investments in United States issuers are not subject to the
foreign country diversification guidelines.
25
<PAGE>
The Participation Agreement (the "Agreement"), dated August 28, 1998, by
and among Baron Capital Funds Trust (and all series thereof) a business trust
organized under the laws of the State of Delaware and The Lincoln National Life
Insurance Co., an Indiana insurance corporation, is hereby amended as follows:
Schedule 2 of the Agreement is hereby deleted in its entirety and replaced
with the following:
SCHEDULE 2
Amended as of October 15, 1999
Cumulative Listing of the
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
Amended as of October 15, 1999
Multi Fund Individual Variable Annuity
eAnnuity
Group Variable Annuity
Lincoln VUL
Group Multi Fund Variable Annuity
Lincoln SVUL
Lincoln CVUL
Multi Fund - Non-registered - Variable Annuity
Lincoln VUL(DB)
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule 2 to be executed in its name and behalf by its duly authorized officer
on the date specified below.
BARON CAPITAL FUNDS TRUST
Date: By:
------------------------------ ---------------------------------
Name:
-------------------------------
Title:
------------------------------
BARON CAPITAL, INC.
Date: By:
------------------------------ ---------------------------------
Name:
-------------------------------
Title:
------------------------------
LINCOLN NATIONAL LIFE INSURANCE CO.
Date: By:
------------------------------ ---------------------------------
Name: Steven M. Kluever
-------------------------------
Title: Second Vice President
------------------------------
<PAGE>
The Participation Agreement (the "Agreement'), dated August 28, 1998, by
and among Baron Capital Funds Trust (and all series thereof) a business trust
organized under the laws of the State of Delaware and The Lincoln National Life
Insurance Co., an Indiana insurance corporation, is hereby amended as follows:
Schedule 1 and Schedule 2 of the Agreement are hereby deleted in their
entirety and replaced with the following:
SCHEDULE I
Cumulative Listing of the
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Trust
Amended As of May 1, 1999
Lincoln National Variable Annuity Account C
Lincoln National Variable Annuity Account L
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Variable Annuity Account Q
Lincoln Life Flexible Premium Variable Life Account R
Lincoln Life Flexible Premium Variable Life Account S
Lincoln National Variable Annuity Account 53
<PAGE>
SCHEDULE 2
Amended as of May 1, 1999
Cumulative Listing of the
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule I
Amended as of May 1, 1999
Multi Fund Individual Variable Annuity
eAnnuity
Group Variable Annuity
Lincoln VUL
Group Multi Fund Variable Annuity
Lincoln SVUL
Lincoln CVUL
Multi Fund - Non-registered - Variable Annuity
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules I and 2 to be executed in its name and behalf by its duly authorized
officer on the date specified below.
BARON CAPITAL FUNDS TRUST
Date: By:
Name:
Title:
BARON CAP
Date: Name:
Title:
LINCOLN NATIONAL LIFE INSURANCE CO.
Date: By:
Name:
Title:
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the lst day of
September, 1996, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Indiana corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular
managed portfolio of securities and other assets, any one or more of which may
be made available under this Agreement, as may be amended from time to time by
mutual agreement of the parties hereto (each such series hereinafter referred
to as a "Portfolio"); and
WHEREAS, the Fund filed with the Securities and Exchange
Commission (the "SEC") a registration statement on Form N- I A and the SEC has
declared effective said registration statement; and
WHEREAS, the Fund has obtained an order from the SEC- dated
October 15, 1985 (File No. 812-6102), granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the " 1940.
1
<PAGE>
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser")
is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors
of the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with
the SEC under the Securities Exchange Act of 1934, as amended, (hereinafter the
" 1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid variable life and
variable annuity contracts and the Underwriter is authorized to sell such
shares to unit investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those
shares of the Fund which each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Fund. For purposes of this Section
1. 1, the Company shall be the designee of the Fund for receipt of such orders
from each Account and receipt by such designee shall constitute receipt by the
Fund; provided that the
2
<PAGE>
Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to
any insurance company or separate account unless an agreement containing
provisions substantially the same as Articles 1, 1111, V, VII and Section 2.5
of Article II of this Agreement is in effect to govern such sales.
1.5. The Fund. agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of the request for redemption. For
purposes of this Section 1.5, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable annuity contracts with the
form number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, (as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto), (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in the
Company's general account, provided that such amounts may also be invested in
investment companies other than the Fund. The Company shall notify the Fund as
to which other investment companies are available as investment options under
the Contract not later than the time such investment companies are made
available to owners of the
3
<PAGE>
Contracts. The investment companies available to Contract owners as of the date
of this Agreement are as shown on Schedule C.
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1. 1 hereof. Payment shall be in federal funds
transmitted by wire. For purpose of Section 2. 10 and 2.11, upon receipt by the
Fund of -the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any
Account. Shares ordered from the Fund will be recorded in an appropriate title
for each Account or the appropriate subaccount. of each Account.
1.9. The Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the light to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
state laws and that the Company will require of every person distributing the
Contracts that the Contracts be offered and sold in compliance in all material
respects with all applicable Federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and
validly existing under applicable law and that it has legally and validly
established each Account, prior to any issuance or sale thereof, as a segregated
asset account under Section 27-1-5-1 of the Indiana Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, win register each
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Indiana and all applicable federal and state securities laws
4
<PAGE>
and that the Fund is and shall remain registered under the 1940 Act. The Fund
shall amend the Registration Statement for its shares under the 1933 Act and
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort 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 it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently
treated as life insurance policies or annuity insurance contracts, under
applicable provisions of the Code and that it will make every effort to
maintain such treatment and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b- I under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or-" defensive" Rule l2b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b- I to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states except that the Fund represents that the Fund's investment
policies, fees and expenses are and shall at all times remain in compliance
with the laws of the State of Indiana and the Fund and the Underwriter
represent that their respective operations are and shall at all times remain in
material compliance with the laws of the State of Indiana to the extent
required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Indiana and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and
validly existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act.
5
<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws
of the State of Indiana and any applicable state, and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(I) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company. The Fund and the Underwriter agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agree to notify the Company immediately in
the event that such coverage no longer applies.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, and that said bond is issued by a reputable bonding company, includes
coverage for larceny and embezzlement, and is in an amount not less than $5
million. The Company agrees to make all reasonable efforts to see that this
bond or another bond containing these provisions is always in effect, and
agrees to notify the Fund and the Underwriter in the event that such coverage
no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company -may reasonably request If requested by the Company
in lieu thereof, the Fund shall provide camera- ready film containing the
Fund's prospectus and Statement of Additional Information, and such other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus and/or Statement of Additional
Information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document, and
to have the Statement of Additional Information for the Fund and the Statement
of Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies'
prospectuses and statements of additional information. Except as provided in
the following three sentences, all expenses of printing and distributing Fund
prospectuses and Statements of Additional Information shall be the expense of
the Company. For prospectuses and Statements of Additional Information provided
by the Company to its existing owners of Contracts in order to update
disclosure as required by the 1933 Act and/or the 1940 Act, the cost of
printing shall be borne by the Fund. If the Company chooses to receive
camera-ready film in lieu of receiving printed copies of the Fund's prospectus,
the Fund
6
<PAGE>
will reimburse the Company in an amount equal to the product of A and B where A
is the number of such prospectuses distributed to owners of the Contracts, and
B is the Fund's per unit cost of typesetting and printing the Fund's
prospectus. The same procedures shall be followed with respect to the Fund's
Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3. 1) to shareholders in such
quantity as the Company shall reasonably require for distributing to Contract
owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate
account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule B attached hereto and incorporated herein by this reference,
which standards will also be provided to the other Participating Insurance
Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
7
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or other
promotional material in which the Fund or its investment adviser or the
Underwriter is named, at least ten Business Days prior to its use. No such
material shall be used if the Fund or its designee reasonably objects to such
use within ten Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional. material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects
to such use within ten Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, within
30 days of the filing of such document with the Securities and Exchange
Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to
8
<PAGE>
the Contracts or each Account and their investment in the Fund, within 30 days
of the filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
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 (IE., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and
registration statements, prospectuses, Statements of Additional Information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or
any Portfolio adopts and implements a plan pursuant to Rule 12b- 1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
ARTICLE VI. DIVERSIFICATION
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6.1. The Fund will at all times invest money from the Contracts
in such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 8 17 (h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and
the implications thereof.
7.2. 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.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a
vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such
10
<PAGE>
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Fund shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement,
a majority of the disinterested members of the Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict
but in no event will the Fund be required to establish a new funding medium for
the Contracts. The Company shall not be required by Section 7.3 to establish a
new funding medium for the Contracts if an offer to do so has been declined by
vote of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Accounts investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7. 1,
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<PAGE>
7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.l(a). 'Me Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8. 1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use in
the Registration Statement or prospectus for the Contracts or
in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of any untrue
statements or representations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature of the Fund not supplied by the
Company, or persons under its control) or willful misfeasance,
bad faith, or gross negligence of the Company or persons under
its control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the 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 if such a statement or omission was
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<PAGE>
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms
of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8. 1 (b) and 8. 1
(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed
against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim
shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision. In case any such, action is brought against the
Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party
independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or
proceedings against them in connection with the issuance or
sale of the Fund Shares or the Contracts or the operation of
the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
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<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including reasonable legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) 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 the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission
to state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for
the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of any untrue statements
or representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons
under its control) or willful misfeasance, bad faith,
or gross negligence of the Fund, Adviser or
Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts
or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification requirements
specified in Article VI of this Agreement); or
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<PAGE>
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is
applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund) or litigation
(including reasonable legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross negligence, bad faith or
willful misconduct of the Board or any member thereof, are related to the
operations of the Fund and:
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<PAGE>
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure to
comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof
8.3(b). The Fund 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 as such may arise
from such Indemnified Parry's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties under
this Agreement or to the Company, the Fund, the Underwriter or each Account,
whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing, within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund 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.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
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9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to,
the Shared Funding Exemptive Order) and the terms hereof shall be interpreted
and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by six months
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state. and/or
federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or
to be issued by the Company; or
(d) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio 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 that the Fund may fail to so qualify;
or
(e) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof-, or
(f) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both of the
Fund or the Underwriter respectively, shall determine, in
their sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
17
<PAGE>
(g) termination by the Company by written notice to the Fund
and the Underwriter, if the Company shall determine, in its
sole judgment exercised in good faith, that either the Fund
or the Underwriter has suffered a material adverse change
in its business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) the requisite vote of the Contract owners having an
interest in a Portfolio (unless otherwise required by
applicable law) and written approval of the Company, to
substitute the shares of another investment company for the
corresponding shares of a Portfolio in accordance with the
terms of the Contracts; or
(i) at the option of the Fund, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory
body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of the
Account, the administration of the Contracts or the
purchase of Fund shares, or an expected or anticipated
ruling, judgment or outcome which would, in the Fund's
reasonable judgment, materially impair the Company's
ability to perform the Company's obligations and duties
hereunder; or
(j) at the option of the Company, upon institution of formal
proceedings against the Fund, the Underwriter, the Fund's
investment adviser or any sub-adviser, by the NASD, the
SEC, or any state securities or insurance commission or any
other regulatory body regarding the duties of the Fund or
the Underwriter under this Agreement, or an expected or
anticipated ruling, judgment or outcome which would, in the
Company's reasonable judgment, materially impair the Fund's
or the Underwriter's ability to perform the Fund's or the
Underwriter's obligations and duties hereunder; or
(k) at the option of the Company, upon institution of formal
proceedings against the Fund's investment adviser of any
sub-adviser by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body which
would, in the good faith opinion of the Company, result in
material harm. to the Accounts, the Company or Contract
owners.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall at the option of the
Company, continue to make available additional shares of the Fund 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, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.2 shall
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<PAGE>
not apply to any terminations under Article VII and the effect of such Article
VII terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to
the Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the Underwriter 90 days notice of its intention to do so.
10.4. Notwithstanding any other provision of this Agreement, each
party's obligation under Article VII to indemnify the other parties shall
survive termination of this Agreement, to the extent that the events giving
rise to the obligation to indemnify the other party occurred prior to the date
of termination.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, Indiana 46802
Attention: Kelly D. Clevenger
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
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<PAGE>
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and
regulatory authority, each party here to shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
12.3. 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.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5. 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.
12.6. Each party hereto 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.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Indiana Insurance Commissioner with any non-privileged
information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain whether the
insurance operations of the Company are being conducted in a manner consistent
with the Indiana Insurance Regulations and any other applicable law or
regulations.
12.7. 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.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed
and registered to perform the obligations of the Underwriter under this
Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND
By:
FIDELITY DISTRIBUTORS CORPORATION
By:
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<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Lincoln National Variable Annuity GAC96-1 11
Separate Account L GAC91-101
</TABLE>
22
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 22, 1998 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Lincoln National Variable Annuity Separate GAC96-1 11
Account L GA.C91-101
Lincoln Life Flexible Premium Variable Life
Account M LN605/615 (VUL)
Lincoln Life Flexible Premium Variable Life
Account R SVUL LN650
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND
By:
Name:
Title:
FIDELITY DISTRIBUTORS CORPORATION
By:
Name:
Title:
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Fund by the Underwriter, the Fund and
the Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the
steps delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done in writing approximately two months
before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by
the Company either before or together with the Customers' receipt of a
proxy statement. Underwriter will provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Legal
Department of the Underwriter or its affiliate ("Fidelity Legal") must
approve the Card before it is printed. Allow approximately 2-4 business
days for printing information on the Cards. Information commonly found
on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
23
<PAGE>
5. During), this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to
Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not
been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are considered to be not RECEIVED for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated, illegible)
of the procedure are "hand verified," i.e., examined as to why they did
not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston
time. Fidelity Legal may reasonably request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All arrangements, approvals and "signing-off 'maybe done orally, but must
always be followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Twentieth Century's TCI Portfolios, Inc.
TCI Growth
TCI Balanced
T. Rowe Price International Series, Inc.
Calvert Responsibly Invested Balanced Portfolio
26
<PAGE>
Separate Account: Lincoln National Variable Annuity Separate Account L
Product(s) Name: Group Variable Annuity I, II, and III
Funds Available: Fidelity Investments - Asset Manager
Equity-Income
Growth
American Century - Balanced
Capital Appreciation
Dreyfus - S & P 500 Index
Smallcap
Baron - Asset Fund
Calvert Socially Balanced
Janus - Worldwide
Lynch & Mayer - LN Aggressive Growth
Neuberger & Berman - Partners
T. Rowe Price - International
Vantage Global - LN Social Awareness
<PAGE>
Separate Account: Lincoln Life Flexible Premium Variable Life Account M
Product(s) Name: Variable Universal Life - VUL I
Funds Available: Fidelity Investments - Equity-Income
Asset Manager
Investment Grade Bonds
AIM - Capital Appreciation
Diversified Income
Growth
Value
Delaware - Emerging Markets
Smallcap Value
Trend
MFS - Emerging Growth
Total Return
Utilities
Templeton - Asset Allocation
International
Stock
OpCap - Global Equity
Managed
Bankers Trust - S&P 500 Index
Lincoln Investments - LN Money Market
<PAGE>
Separate Account: Lincoln Life Flexible Premium Variable Life Account R
Product(s) Name: Survivorship, Variable Universal Life - SVUL I
Funds Available: Fidelity Investments - Equity-Income
Asset Manager
Investment Grade Bonds
AIM - Capital Appreciation
Diversified Income
Growth
Value
Delaware - Emerging Markets
Smallcap Value
Trend
MFS - Emerging Growth
Total Return
Utilities
Templeton - Asset Allocation
International
Stock
OpCap - Global Equity
Managed
Bankers Trust - S&P 500 Index
Lincoln Investments - LN Money Market
<PAGE>
PARTICIPATION AGREEMENT
AMONG
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
AND
LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the Ist day of
September, 1996, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Indiana corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund filed with the Securities and Exchange
Commission (the "SEC") a registration statement on Form N- 1 A and the SEC has
declared effective said registration statement; and
WHEREAS, the Fund has obtained an order from the SEC, dated
September 17, 1986 (File No. 812-6422), granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the " 1940
1
<PAGE>
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
SEC under the Securities Exchange Act of 1934, as amended, (hereinafter the
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investmen trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1. 1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the
2
<PAGE>
Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles 1, 111, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any fun or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable annuity contracts with the
form number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, (as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto), (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in the
Company's general account, provided that such amounts may also be invested in
investment companies other than the Fund. The Company shall notify the Fund as
to which other investment companies are available as investment options under
the Contract not later than the time such investment companies are made
available to owners of the
3
<PAGE>
Contracts. The investment companies available to Contract owners as of the date
of this Agreement are as shown on Schedule C.
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1. 1 hereof. Payment shall be in federal funds transmitted
by wire. For purpose of Section 2. 10 and 2. 11, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate tide for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. 'Me
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1. 10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
2. 1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act-, that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
state, laws and that the Company will require of every person distributing the
Contracts that the Contracts be offered and sold in compliance in all material
respects with all applicable Federal and state laws. 'Me Company further
represents and wan-ants that it is an insurance company duly organized and
validly existing under applicable law and that it has legally and validly
established each Account, prior to any issuance or sale thereof, as a segregated
asset account under Section 27-1-5-1 of the Indiana Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Indiana and all applicable federal and state securities laws
4
<PAGE>
and that the Fund is and shall remain registered under the 1940 Act. The Fund
shall amend the Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort 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 it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently
treated as life insurance policies or annuity insurance contracts, under
applicable provisions of the Code and that it will make every effort to maintain
such treatment and that it will notify the Fund and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.5. 'Me Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b- I under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b- 1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b- 1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b- I to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Indiana and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Indiana to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with t he laws of the State of Indiana and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
5
<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Indiana and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(l) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company. The Fund and the Underwriter agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agree to notify the Company immediately in
the event that such coverage no longer applies.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, and that said bond is issued by a reputable bonding company, includes
coverage for larceny and embezzlement, and is in an amount not less than $5
million. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE Ill. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund shall provide cameraready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document. Alternatively,
the Company may print the Fund's prospectus and/or its Statement of Additional
Information in combination with other fund companies' prospectuses and
statements of additional information. Except as provided in the following three
sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Fund. If the Company chooses to receive camera-ready film in lieu of receiving
printed copies of the Fund's prospectus, the Fund
6
<PAGE>
will reimburse the Company in an amount equal to the product of A and B where A
is the. number of such prospectuses distributed to owners of the Contracts, and
B is the Fund's per unit cost of typesetting and printing the Fund's prospectus.
The same procedures shall be followed with respect to the Fund's Statement of
Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which, are covered in Section 3. 1) to shareholders in such
quantity as the Company shall reasonably require for distributing to Contract
owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions have
been received in a particular separate account in
the same proportion as Fund shares of such
portfolio for which instructions have been received
in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
7
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, within 30
days of the filing of such document with the Securities and Exchange Commission
or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to
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<PAGE>
the Contracts or each Account and their investment in the Fund, within 30 days
of the filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: 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 (IE., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b- I to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
ARTICLE VI. DIVERSIFICATION
9
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6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. 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.
7.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such
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<PAGE>
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state, insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7. 1,
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<PAGE>
7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1 (a). The Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8. 1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Contracts
or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Company by
or on behalf of the Fund for use in the Registration
Statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of any untrue statements or
representations (other' than statements or representations
contained in the Registration Statement, prospectus or
sales literature of the Fund not supplied by the Company,
or persons under its control) or willful misfeasance, bad
faith, or gross negligence of the Company or persons under
its control, with respect to the sale or distribution of
the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the 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 if such a statement or
omission was
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<PAGE>
made in reliance upon information furnished to the Fund by
or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and
in accordance with the provisions of Sections 8. 1 (b) and
8. 1 (c) hereof.
8.1 (b). The Company shall not be liable under this
indemnification provision with respect to any losses,
claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1 (c). The Company shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Company in writing within a
reasonable time after the summons or other first legal
process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action.
After notice from the Company to such party of the
Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not
be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party
independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1 (d). The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings
against them in connection with the issuance or sale of the
Fund Shares or the Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
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<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including reasonable legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) 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 the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of any untrue statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or willful
misfeasance, bad faith, or gross negligence of the Fund,
Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or
Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained. in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
14
<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or, after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Fund) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful misconduct of
the Board or any member thereof, are related to the operations of the Fund and:
15
<PAGE>
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of
this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund 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 as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
83(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it; and the Fund 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.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
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<PAGE>
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by six months
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or
to be issued by the Company; or
(d) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio 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 that the Fund may fail to so qualify;
or
(e) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof, or
(f) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both of the
Fund or the Underwriter respectively, shall determine, in
their sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
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<PAGE>
(g) termination by the Company by written notice to the Fund
and the Underwriter, if the Company shall determine, in its
sole judgment exercised in good faith, that either the Fund
or the Underwriter has suffered a material adverse change
in its business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) the requisite vote of the Contract owners having an
interest in a Portfolio (unless otherwise required by
applicable law) and written approval of the Company, to
substitute the shares of another investment company for the
corresponding shares of a Portfolio in accordance with the
terms of the Contracts; or
(i) at the option of the Fund, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory
body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of the
Account, the administration of the Contracts or the
purchase of Fund shares, or an expected or anticipated
ruling, judgment or outcome which would, in the Fund's
reasonable judgment, materially impair the Company's
ability to perform the Company's obligations and duties
hereunder; or
(j) at the option of the Company, upon institution of formal
proceedings against the Fund, the Underwriter, the Fund's
investment adviser or any sub-adviser, by the NASD, the
SEC, or any state securities or insurance commission or any
other regulatory body regarding the duties of the Fund or
the Underwriter under this Agreement, or an expected or
anticipated ruling, judgment or outcome which would, in the
Company's reasonable judgment, materially impair the Fund's
or the Underwriter's ability to perform the Fund's or the
Underwriter's obligations and duties hereunder; or
(k) at the option of the Company, upon institution of formal
proceedings against the Fund's investment adviser of any
sub-adviser by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body which
would, in the good faith opinion of the Company, result in
material harm to the Accounts, the Company or Contract
owners.
10.2. EFFECT OF Termination. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund 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, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall
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<PAGE>
not apply to any terminations under Article VII and the effect of such Article
VII terminations shall be governed by Article VII of this Agreement
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any other provision of this Agreement, each
party's obligation under Article VII to indemnify the other parties shall
survive termination of this Agreement, to the extent that the events giving rise
to the obligation to indemnify the other party occurred prior to the date of
termination.
ARTICLE XI. NOTICES
Any notice -shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, Indiana 46802
Attention: Kelly D. Clevenger
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE X11. MISCELLANEOUS
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12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 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.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 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.
12.6 Each party hereto 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.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Indiana Insurance Commissioner with any non-privileged
information or reports in connection with services provided under this Agreement
which such Commissioner may request in order to ascertain whether the insurance
operations of the Company are being conducted in a manner consistent with the
Indiana Insurance Regulations and any other applicable law or regulations.
12.7 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.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement
20
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND II
By:
FIDELITY DISTRIBUTORS CORPORATION
By:
21
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Lincoln National Variable Annuity GAC96-111
Separate Account L GAC91-101
</TABLE>
22
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 22, 1998 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Lincoln National Variable Annuity Separate GAC96-111
Account L GAC91-101
Lincoln Life Flexible Premium Variable Life
Account M LN605/615 (VUL)
Lincoln Life Flexible Premium Variable Life
Account R SVUL LN650
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
VARIABLE INSURANCE PRODUCTS
By:
Name:
Title:
FIDELITY DISTRIBUTORS CORPORATION
By:
Name:
Title:
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the TERM "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
I The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done in writing approximately two months
before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer.") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by
the Company either before or together with the Customers' receipt of a
proxy statement. Underwriter will provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Legal
Department of the Underwriter or its affiliate ("Fidelity Legal") must
approve the Card before it is printed. Allow approximately 2-4 business
days for printing information on the Cards. Information commonly found on
the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
23
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to
Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not
been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated, illegible)
of the procedure are "hand verified," i.e., examined as to why they did
not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston
time. Fidelity Legal may reasonably request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal win provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All arrangements, approvals and "signing-off 'maybe done orally, but must
always be followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Twentieth Century's TCI Portfolios, Inc.
TCI Growth
TCI Balanced
T. Rowe Price International Series, Inc.
Calvert Responsibly Invested Balanced Portfolio
26
<PAGE>
Separate Account: Lincoln National Variable Annuity Separate Account L
Product(s) Name: Group Variable Annuity 1, 11, and III
Funds Available: Fidelity Investments - Asset Manager
Equity-Income
Growth
American Century - Balanced
Capital Appreciation
Dreyfus - S & P 500 Index
Smallcap
Baron - Asset Fund
Calvert Socially Balanced
Janus - Worldwide
Lynch & Mayer - LN Aggressive Growth
Neuberger & Berman - Partners
T. Rowe Price - International
Vantage Global - LN Social Awareness
<PAGE>
Separate Account: Lincoln Life Flexible Premium Variable Life Account M
Product(s) Name: Variable Universal Life - VUL I
Funds Available: Fidelity Investments - Equity-Income
Asset Manager
Investment Grade Bonds
AIM - Capital Appreciation
Diversified Income
Growth
Value
Delaware - Emerging Markets
Smallcap Value
Trend
MFS - Emerging Growth
Total Return
Utilities
Templeton - Asset Allocation
International
Stock
OpCap - Global Equity
Managed
Bankers Trust - S&P 500 Index
Lincoln Investments - LN Money Market
<PAGE>
Separate Account: Lincoln Life Flexible Premium Variable Life Account R
Product(s) Name: Survivorship Variable Universal Life - SVUL I
Funds Available: Fidelity Investments - Equity-Income
Asset Manager
Investment Grade Bonds
AIM - Capital Appreciation
Diversified Income
Growth
Value
Delaware - Emerging Markets
Smallcap Value
Trend
MFS - Emerging Growth
Total Return
Utilities
Templeton - Asset Allocation
International
Stock
OpCap - Global Equity
Managed
Bankers Trust - S&P 500 Index
Lincoln Investments - LN Money Market
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 1, 1999 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class)
<S> <C> <C>
Lincoln National Variable Annuity Account C 18829, 25982RSC, 28645 0697 Contrafund - Service
Lincoln National Variable Annuity Separate GAC96-1 11 Asset Manager - Initial
Account L GAC9 1 -101
Lincoln Life Flexible Premium Variable Life LN605/615 (VUL) Asset Manager - Initial
Account M LN 605/660 Investment Grade Bond-Initial
Class
Contrafund - Service Class
Lincoln Life Variable Annuity Account Q 28883,28884,28890,28867, Contrafund - Service Class
28868,28891,28903
Lincoln Life Flexible Premium Variable Life SVUL LN650 Investment Grade Bond-Initial
Class
Account R Asset Manager - Initial Class
Contrafund - Service Class
Lincoln Life Flexible Premium Variable Life LN920/921 Contrafund - Service
Account S Asset Manager - Service Class
Lincoln National Life Insurance Company 19476 Contrafund - Service Class
Separate Account 35
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by it its seal to be
hereunder affixed hereto as of the date specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
Date VARIABLE INSURANCE TRODUCTS FU S
By:
Name:
Title:
Date FIDELITY DISTRIBUTION
By:
Name
Title:
<PAGE>
Amendment to Schedule C
Effective May 1, 1999
Other investment companies currently available under the separate account listed
in Amended Schedule A:
AIM, American Century, Bankers Trust, Baron, Calvert, Delaware, Dreyfus, Janus,
Kemper, Liberty, Lincoln National, MFS, Neuberger Berman, OpCap, Oppenhiemer, T.
Rowe Price, Templeton
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed In its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:-
Title:
Date VARIABLE INSURANCE PRODUCTS FUND 11
By:
Name:-
Title:
Date FIDELITY DISTRIBUTORS CORPORATION
By:
Name:
Title:
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE OCTOBER 15, 1999 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class)
- -------------------------------------- -------------------------------- ---------------------
<S> <C> <C>
Lincoln National Variable Annuity Account C 18829, 25982RSC, 28645 0697 Contrafund - Service Class
Lincoln National Variable Annuity Separate GAC96-111 Asset Manager - Initial Class
Account L GAC91-101
Lincoln Life Flexible Premium Variable Life LN605/615 (VUL) Asset Manager - Initial Class
Account M LN 605/660 Investment Grade Bond - Initial Class
Contrafund - Service Class
LN680 Contrafund - Service Class
Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, Contrafund - Service Class
28868, 28891, 28903
Lincoln Life Flexible Premium Variable Life SVUL LN650 Investment Grade Bond - Initial Class
Account R Asset Manager - Initial Class
Contrafund - Service Class
Lincoln Life Flexible Premium Variable Life LN920/921 Contrafund - Service Class
Account S Asset Manager - Service Class
Lincoln National Life Insurance Company 19476 Contrafund - Service Class
Separate Account 35
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
---------------------
By:
------------------------
Name: Steven M. Kluever
------------------------
Title: Second Vice President
------------------------
Date VARIABLE INSURANCE PRODUCTS FUNDS II
---------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
Date FIDELITY DISTRIBUTORS CORPORATION
---------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND 111,
FIDELITY DISTRIBUTORS CORPORATION
and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the ____ day of
October, 1998 by and among THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Indiana corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND III, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit
1
<PAGE>
shares of the Fund to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated life insurance
companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser")
is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended, (hereinafter the " 1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life insurance and
variable annuity contracts and the Underwriter is authorized to sell such shares
to unit investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1. 1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall
2
<PAGE>
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 9:00 a.m. Boston time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article 11
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable life insurance or variable
annuity contracts with the form number(s) which are listed on Schedule A
attached hereto and incorporated herein by this reference, as such Schedule A
may be amended from time to time hereafter by mutual written agreement of all
the parties hereto, (the "Contracts") shall be invested in the Fund, in such
other Funds advised by the Adviser as may be mutually agreed to in writing by
the parties hereto, or in the Company's general account, provided that such
amounts may also be invested in one or more investment companies other than the
Fund.
3
<PAGE>
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. For purpose of Section 2. 10 and 2.11, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the night to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company or its designee on a daily basis as soon as
reasonably practical after the net asset value per share is calculated (normally
by 6:30 p.m. Boston time) and shall use its best efforts to make such net asset
value per share available by 7 p.m. Boston time.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act unless an exemption from registration
is available and an opinion of counsel to that effect shall have been furnished
to the Fund; that the Contracts will be issued and sold in compliance in all
material respects with all applicable Federal and State laws. The Company
further represents and warrants that it is an insurance company duly organized
and validly existing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 27-1-5-1 of the Indiana Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and
4
<PAGE>
sold in compliance with the laws of the State of Indiana and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend the Registration Statement
for its shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort 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 it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently
treated as life insurance policies or annuity insurance contracts under
applicable provisions of the Code; that it will make every effort to maintain
such treatment; and that it will notify the Fund and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
l2b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(b) With respect to Service Class shares, the Fund has
adopted a Rule 12b-1 Plan under which it makes payments to finance distribution
expenses. The Fund represents and warrants that it has a board of trustees, a
majority of whom are not interested persons of the Fund, which has formulated
and approved the Fund's Rule 12b-1 Plan to finance distribution expenses of the
Fund and that any changes to the Fund's Rule 12b-1 Plan will be approved by a
similarly constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Indiana and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Indiana to the extent required to perform this
Agreement.
5
<PAGE>
2.7. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Indiana and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under the Investment
Advisers Act of 1940 and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Indiana and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company. The Fund and the Underwriter agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agree to notify the Company immediately in
the event that such coverage no longer applies.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, and that said bond is issued by a reputable bonding company, includes
coverage for larceny and embezzlement, and is in an amount not less than $5
million. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE 111. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund
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shall provide camera-ready film containing the Fund's prospectus (which shall
mean, for purposes of this Article III if the Company so requests, a separate
prospectus for each Fund portfolio used in a particular Account), and Statement
of Additional Information, and such other assistance as is reasonably necessary
in order for the Company once each year (or more frequently if the prospectus
and/or Statement of Additional Information for the Fund is amended during the
year) to have the prospectus for the Contracts and the Fund's prospectus printed
together in one document, and to have the Statement of Additional Information
for the Fund and the Statement of Additional Information for the Contracts
printed together in one document. Alternatively, the Company may print the
Fund's prospectus and/or its Statement of Additional Information in combination
with other fund companies' prospectuses and statements of additional
information. Except as provided in the following three sentences, all expenses
of printing and distributing Fund prospectuses and Statements of Additional
Information shall be the expense of the Company. For prospectuses and Statements
of Additional Information provided by the Company to its existing owners of
Contracts in order to update disclosure annually as required by the 1933 Act
and/or the 1940 Act, the cost of printing shall be borne by the Fund. If the
Company chooses to receive camera-ready film in lieu of receiving printed copies
of the Fund's prospectus, the Fund will reimburse the Company in an amount equal
to the product of A and B where A is the number of such prospectuses distributed
to owners of the Contracts, and B is the Fund's per unit cost of typesetting and
printing the Fund's prospectus. The same procedures shall be followed with
respect to the Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's *prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3.1) to shareholders in such quantity
as the Company shall reasonably require for distributing to Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund
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shares of such portfolio for which instructions have
been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or
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<PAGE>
its designee reasonably objects to such use within ten Business Days after
receipt of such material.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in an offering statement for unregistered contracts, or in published
reports for each Account which are in the public domain or approved by the
Company for distribution to Contract owners, or in sales literature or other
promotional material approved by the Company or its designee, except with the
permission of the Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, within 30
days of the filing of such document with the Securities and Exchange Commission
or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to the
Contracts or each Account, and to their investments in the Fund within 30 days
of the filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
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<PAGE>
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b- I to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with -applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety
10
<PAGE>
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance, tax, or
securities regulatory authorities; (c) an administrative or judicial decision in
any relevant proceeding; (d) the manner in which the investments of any
Portfolio are being managed; (e) a difference in voting instructions given by
variable annuity contract and variable life insurance contract owners; or (f) a
decision by an insurer to disregard the voting instructions of contract owners.
The Board shall promptly inform the Company if it determines that an
irreconcilable material conflict exists and the implications thereof.
7.2. 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.
7.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (IE., variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation, or
offering to the affected contract owners the option of making such a change; and
(2), establishing a new registered management investment company or managed
separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
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<PAGE>
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement,
a majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
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<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1(a). The Company agrees to indemnify and hold harmless the Fund
and each trustee of the Board and officers and each person, if any, who controls
the Fund within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 8. 1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation (including reasonable legal
and other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements are related to the sale or acquisition of the Fund's shares or the
Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration Statement
or prospectus for the Contracts or contained in the Contracts or sales
literature for the Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the Registration Statement or prospectus for the
Contracts or in the 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 Contracts or Fund shares; or
(ii) arise out of or as a result of untrue statements or representations
(other than statements or representations contained in the Registration
Statement, prospectus or sales literature of the Fund not supplied by the
Company, or persons under its control) or willful misfeasance, bad faith or
gross negligence of the Company or persons under its control, with respect to
the sale or distribution of the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or sales
literature of the 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 if
such a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company; or
13
<PAGE>
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or result
from any other material breach of this Agreement by the Company, as limited by
and in accordance with the provisions of Sections 8. 1 (b) and 8. 1 (c) hereof.
8.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Company in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Company of any
such claim shall not relieve the Company from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Company shall be entitled to participate,
at its own expense, in the defense of such action. The Company also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Company to such party of the
Company's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund Shares or the Contracts or the operation of the
Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
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<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) 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 the Fund (or any
amendment or supplement to any of the or the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Underwriter or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund 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 Contracts or
Fund shares; or
(ii) arise out of or as a result of untrue statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or willful misfeasance, bad faith, or gross negligence of
the Fund, Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
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(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Underwriter in this Agreement or arise
out of or result from any other material breach of this Agreement by
the Underwriter; as limited by and in accordance with the provisions
of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever
is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Underwriter in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Underwriter of any
such claim shall not relieve the Underwriter from any liability which
it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties,
the Underwriter will be entitled to participate, at its own expense,
in the defense thereof. The Underwriter also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the
Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with the
issuance or sale of the Contracts or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
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<PAGE>
8.3(a). The Fund agrees to indemnify and hold harmless
the Company, and each of its directors and officers and each person,
if any, who controls the Company within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of
this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under
any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith
or willful misconduct of the Board or any member thereof, are related
to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement);or
(ii) arise out Of Or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections
8.3(b) and 8.3(c) hereof.
8.3(b). The Fund 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 as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or
each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Fund in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Fund of any such
claim shall not relieve the Fund from any liability which it may have
to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the Fund
will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees
and
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<PAGE>
expenses of any additional counsel retained by it, and the Fund 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.
8.3(d). The Company and the Underwriter agree promptly
to notify the Fund of the commencement of any litigation or
proceedings against it or any of its respective officers or directors
in connection with this Agreement, the issuance or sale of the
Contracts, with respect to the operation of either Account, or the
sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the
provisions hereof interpreted under and in accordance with the laws
of the Commonwealth of Massachusetts.
9.2. This Agreement shall be subject to the provisions
of the 1933, 1934 and 1940 Acts, and the rules and regulations and
rulings thereunder, including such exemptions from those statutes,
rules and regulations as the SEC may grant (including, but not
limited to, the Shared Funding Exemptive Order) and the terms hereof
shall be interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by ninety (90) days advance
written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably
available to meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance
with applicable state and/or federal law or such law precludes the
use of such shares as the underlying investment media of the
Contracts issued or to be issued by the Company; or
18
<PAGE>
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio 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 that the Fund may fail to so
qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such
Portfolio fails to meet the diversification requirements specified
in Article VI hereof; or
(f) termination by either the Fund or the Underwriter by written notice
to the Company, if either one or both of the Fund or the Underwriter
respectively, shall determine, in their sole judgment exercised in
good faith, that the Company and/or its affiliated companies has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment
exercised in good faith, that either the Fund or the Underwriter has
suffered a material adverse change in its business, operations,
financial condition or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(h) termination by the Company by written notice to the Fund and the
Underwriter upon the requisite vote of the Contract owners having an
interest in a Portfolio (unless otherwise required by applicable law)
and written approval of the Company, to substitute shares of another
investment company for the corresponding shares of a Portfolio in
accordance with the terms of the Contracts; or
(i) termination by written notice to the Company at the option of the
Fund, upon institution of formal proceedings against the Company and
by the NASD, the SEC, the insurance commission of any state or any
other regulatory body regarding the Company's duties under this
Agreement or related to the sale of the Contracts, the operation of
the Account, the administration of the Contracts or the purchase of
Fund shares, or an expected or anticipated ruling, judgment or
outcome which would, in the Fund's reasonable judgment, materially
impair the Company's ability to perform the Company's obligations and
duties hereunder; or
19
<PAGE>
(j) termination by written notice to the Fund and the Underwriter, at the
option of the Company, upon institution of formal proceedings against
the Fund, the Underwriter, the Fund's investment adviser or any
subadviser, by the NASD, the SEC, or any state securities or
insurance commission or any other regulatory body regarding the
duties of the Fund or the Underwriter under this Agreement, or an
expected or anticipated ruling, judgment or outcome which would, in
the Company's reasonable judgment, materially impair the Fund's or
the Underwriter's ability to perform the Fund's or Underwriter's
obligations and duties hereunder; or
(k) termination by written notice to the Fund and the Underwriter, at the
option of the Company, upon institution of formal proceedings against
the Fund's investment adviser of any sub-adviser by the NASD, the
SEC, or any state securities or insurance commission or any
regulatory body which would, in the good faith opinion of the
Company, result in material harm to the Accounts, the Company or
Contract Owners.
10.2. EFFECT OF TERMINATION. Notwithstanding any
termination of this Agreement, the Fund and the Underwriter shall, at
the option of the Company, continue to make available additional
shares of the Fund 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, the owners of the
Existing Contracts shall be permitted to reallocate investments in
the Fund, redeem investments in the Fund and/or invest in the Fund
upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not apply
to any terminations under Article VII and the effect of such Article
VII terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares
attributable to the Contracts (as opposed to Fund shares attributable
to the Company's assets held in the Account) except (i) as necessary
to implement Contract Owner initiated or approved transactions, or
(ii) as required by state and/or federal laws or regulations or
judicial or other legal precedent of general application (hereinafter
referred to as a "Legally Required Redemption") or (iii) as permitted
by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the
Underwriter the opinion of counsel for the Company (which counsel
shall be reasonably satisfactory to the Fund and the Underwriter) to
the effect that any redemption pursuant to clause (ii) above is a
Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, the Company shall not
prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the
Fund or the Underwriter 90 days notice of its intention to do so.
10.4. Notwithstanding any other provision of this
Agreement, one party's obligation under Article VIII to indemnify
the other party shall survive termination of this Agreement, to the
20
<PAGE>
extent that the events giving rise to the obligation to indemnify
the other party occurred prior to the date of termination.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by
registered or certified mail to the other party at the address of
such party set forth below or at such other address as such party
may from time to time specify in writing to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
The Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, IN 46802
Attention: Kelly D. Clevenger
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1. All person's dealing with the Fund must look
solely to the property of the Fund for the enforcement of any
claims against the Fund as neither the Board, officers, agents or
shareholders assume any personal liability for obligations entered
into on behalf of the Fund.
12.2. Subject to the requirements of legal process and
regulatory authority, each party hereto shall treat as
confidential the names and addresses of the owners of the
Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or
utilize such names and addresses and other confidential
information until such time as it may come into the public domain
without the express written consent of the affected party
12.3. 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.
21
<PAGE>
12.4. This Agreement may be executed, simultaneously in
two or more counterparts, each of which taken together shall
constitute one and the same instrument.
12.5. 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.
12.6. Each party hereto 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. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish any
insurance commissioner with any information or reports in
connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the
insurance operations of the Company are being conducted in a
manner consistent with the insurance regulations and any other
applicable law or regulations of that state.
12.7. 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.
12.8. This Agreement or any of the rights and
obligations hereunder may not be assigned by any party without the
prior written consent of all parties hereto; provided, however,
that the Underwriter may assign this Agreement or any rights or
obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed
and registered to perform the obligations of the Underwriter under
this Agreement. The Company shall promptly notify the Fund and
the Underwriter of any change in control of the Company.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following
reports:
(a) the Company's annual statement(prepared under
statutory accounting principles) and annual
report (prepared under generally accepted
accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90
days after the end of each fiscal year;
(b) the Company's quarterly statements
(statutory) (and GAAP, if any), as soon as
practical and in any event within 45 days
after the end of each quarterly period:
22
<PAGE>
(c) any financial statement, proxy statement,
notice or report of the Company sent to
stockholders and/or policyholders, as soon
as practical after the delivery thereof to
stockholders;
(d) any registration statement (without exhibits)
and financial reports of the Company filed
with the SEC or any state insurance
regulator, as soon as practical after the
filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with
any annual, interim or special audit made
by them of the books of the Company, as soon
as practical after the receipt thereof.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of the
date specified below.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Kelly D. Clevenger
Vice President
VARIABLE INSURANCE PRODUCTS FUND III
By:
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By:
Kevin J. Kelly
Vice President
23
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND-ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class)
- -------------------------------------- -------------------------- ---------------------
<S> <C> <C>
Lincoln Life Variable Annuity AN425LL Growth Opportunities -
Annuity Account N Initial Class
</TABLE>
(November 3, 1997)
24.
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities
for the handling of proxies relating to the Fund by the Underwriter,
the Fund and the Company. The defined terms herein shall have the
meanings assigned in the Participation Agreement except that the term
"Company" shall also include the department or third party assigned by
the Insurance Company to perform the steps delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the
shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of
the Record, Mailing and Meeting dates. This will be done in writing
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape
run", or other activity, which will generate the names, addresses
and number of units which are attributed to each
contractowner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this
date that could affect the status of the Customers' accounts as of
the Record Date.
Note: The number of proxy statements is determined by the
activities described in Step #2. The Company will use its best
efforts to call in the number of Customers to Fidelity, as soon as
possible, but no later than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each
Customer by the Company either before or together with the
Customers' receipt of a proxy statement. Under-writer will provide
the last Annual Report to the Company pursuant to the terms of
Section 3.3 of the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
25
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent
to Company for insertion into envelopes (envelopes and return
envelopes are provided and paid for by the Insurance Company).
Contents of envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c.return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d."urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by Fidelity Legal.
6. The above contents should be received by the Company at least 7
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to
Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but NOT including) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not
been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
26
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are considered to be not received for
purposes of vote tabulation. Any Cards that have "kicked out"
(e.g. mutilated, illegible) of the procedure are "hand verified,"
i.e., examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper
tabulation of votes and accuracy of that tabulation. The most
prevalent is to sort the Cards as they first arrive into
categories depending upon their vote; an estimate of how the vote
is progressing may then be calculated. If the initial estimates
and the actual vote do not coincide, then an internal audit of
that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives
the tabulations stated in terms of a percentage and the number of
SHARES.) Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00
a.m. Boston time. Fidelity Legal may reasonably request an earlier
deadline if required to calculate the vote in time for the
meeting.
14. A Certification of Mailing and Authorization to Vote Shares will
be required from the Company as well as an original copy of the
final vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.
16. All approvals and "signing-off' maybe done orally, but must always be
followed up in writing.
27
<PAGE>
SCHEDULE C
Other investment companies currently available under variable
annuities or variable life insurance issued by the Company:
Separate Account: Lincoln National Variable Annuity Separate Account N
Product(s) Name: Delaware-Lincoln ChoicePlus Variable Annuity
Investment Companies
Available: Fidelity, Delaware, MFS, AIM, Lincoln Investments, Kemper, Colonial,
Bankers Trust, Dreyfus. Vantage Global
28
<PAGE>
Amended Schedule A
Separate Accounts and Associated Contracts
Effective October 15, 1999
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded by Separate Account Fidelity Fund (Class)
- -------------------------------------- -------------------------- ---------------------
<S> <C> <C>
Lincoln Life Flexible Premium Variable Life LN605/660 Growth Opportunities - Service Class
Account M LN680
Lincoln Life Variable Annuity Account N AN425LL Growth Opportunities - Initial Class
Lincoln Life Flexible Premium Variable Life LN650 Growth Opportunities - Service Class
Account R
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Date Lincoln National Life Insurance Company
---------------------
By:
------------------------
Name: Steven M. Kluever
------------------------
Title: Second Vice President
------------------------
Date: Variable Insurance Products Fund III
---------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
Date: Fidelity Distributors Corporation
---------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 1, 2000
(PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Policy Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
Lincoln National Variable Annuity Account C 18829, 25982RSC, 28645 0697, 18831 Growth - Service Class
(Individual MultiFund)
Lincoln National Variable Annuity Account L GAC91-101; GAC96-111 Equity - Income - Initial Class
GAC96-101 (GVA I, II, III) Growth - Initial Class
Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Equity - Income - Initial Class
Account M
LN660 (VUL) Growth - Service Class
LN680 (VULdb) High Income - Service Class
Lincoln Life Variable Annuity Account N AN425 (Choice Plus) Overseas - Initial Class
Equity - Income - Initial Class
Growth - Initial Class
Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, Growth - Service Class
28868, 28891, 28903
(Group MultiFund)
Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth - Service Class
Separate Account R High Income - Service Class
LN655 (SVUL II) Growth - Service Class
High Income - Service Class
Lincoln Life Flexible Premium Variable Life LN920/921 Growth Portfolio
Account S (CVUL) High Income - Service Class
Overseas - Service Class
LN925/926 Growth Portfolio
(CVUL Series III) High Income - Service Class
</TABLE>
<PAGE>
Overseas - Service Class
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule A to be executed in its name and on its behalf by its
duly authorized representative and its seal to be hereunder affixed hereto
as of the date specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
----------------------
By:
----------------------
Steven M. Kluever
2nd Vice President
Date VARIABLE INSURANCE PRODUCTS FUND
-----------------------
By:
----------------------
Name:
----------------------
Title:
----------------------
Date FIDELITY DISTRIBUTORS CORPORATION
----------------------
By:
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 1, 2000 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Policy Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------------- ----------------------
<S> <C> <C>
Lincoln National Variable Annuity Account C 18829, 25982RSC, 28645 0697 Contrafund - Service Class
(Individual MultiFund)
Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class
(GVA I, II, III) Contrafund - Initial Class
Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Asset Manager - Initial Class
Account M Investment Grade Bond - Initial Class
LN660 (VUL) Contrafund - Service Class
LN680 (VULdb) Contrafund - Service Class
Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, Contrafund - Service Class
28868, 28891, 28903
(Group MultiFund)
Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Investment Grade Bond - Initial Class
Separate Account R Asset Manager - Initial Class
Contrafund - Service Class
LN655 (SVUL II) Contrafund - Service Class
Lincoln Life Flexible Premium Variable Life LN920/921 Contrafund - Service Class
Account S (CVUL) Asset Manager - Service Class
LN925/926 (CVUL Series III) Contrafund - Service Class
Asset Manager - Service Class
Lincoln National Life Insurance Company 19476 Contrafund - Service Class
Separate Account 35
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule A to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of the
date specified below.
Date__________________ LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: _______________________
Steven M. Kluever
2nd Vice President
Date__________________ VARIABLE INSURANCE PRODUCTS FUNDS II
By: _______________________
Name: _______________________
Title: _______________________
Date__________________ FIDELITY DISTRIBUTORS CORPORATION
By: _______________________
Name: _______________________
Title: _______________________
<PAGE>
Amended Schedule A
Separate Accounts and Associated Contracts
Effective May 1, 2000
<TABLE>
<CAPTION>
Policy Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
Lincoln Life Flexible Premium Variable Life LN605/660 (VUL) Growth Opportunities - Service Class
Account M LN680 (VULdb)
Lincoln Life Variable Annuity Account N AN425LL Growth Opportunities - Initial Class
Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth Opportunities - Service Class
Separate Account R LN655 (SVUL II)
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule A to be executed in its name and on its behalf by its
duly authorized representative and its seal to be hereunder affixed hereto as
of the date specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
----------------------
By:
-------------------------
Steven M. Kluever
2nd Vice President
Date: VARIABLE INSURANCE PRODUCTS FUND III
----------------------
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Date: FIDELITY DISTRIBUTORS CORPORATION
----------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
87158
<PAGE>
JANUS ASPEN SERIES
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made this 15' day of September, 1998, between JANUS
ASPEN SERIES, an open-end management investment company organized as. a
Delaware business trust (the "Trust"), and The Lincoln National Life Insurance
Company, a life insurance company organized under the laws of the State of
Indiana (the "Company"), on its own behalf and on behalf of each segregated
asset account of the Company set forth on Schedule A, as may be amended from
time to time (the "Accounts").
WITNESSETH:
WHEREAS, the Trust has registered with the Securities and Exchange
Commission as an open-end management investment company under the Investment
Company Act of 1940, as amended (the " 1940 Act"), and has registered the offer
and sale of its shares under the Securities Act of 1933, as amended (the " 1933
Act"); and
WHEREAS, the Trust desires to act as an investment vehicle for separate
accounts established for variable life insurance policies and variable annuity
contracts to be offered by insurance companies that have entered into
participation agreements with the Trust (the "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Trust has received an order from the Securities and
Exchange Commission granting Participating Insurance Companies and their
separate accounts exemptions from the provisions of Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) thereunder,
to the extent necessary to permit shares of the Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Exemptive Order"); and
WHEREAS, the Company has registered or will register (unless
registration is not required under applicable law) certain variable life
insurance policies and/or variable annuity contracts under the 1933 Act (the
"Contracts"); and
WHEREAS, the Company has registered or will register (unless
registration is not required pursuant to Section 3(v)(ii) of the 1940'Act) each
Account as a unit investment trust under the 1940 Act; and
-1-
<PAGE>
WHEREAS, the Company desires to utilize shares of one or more
Portfolios as an investment vehicle of the Accounts;
NOW, THEREFORE, in consideration of their mutual promises, the parties
agree as follows:
ARTICLE I
SALE OF TRUST SHARES
1.1 The Trust shall make shares of its Portfolios available to the
Accounts at the net asset value next computed after receipt of such purchase
order by the Trust (or its agent), as established in accordance with the
provisions of the then current prosp~ctus of the Trust.
Shares of a particular Portfolio of the Trust shall be ordered in such
quantities and at such times as determined by the Company to be necessary to
meet the requirements of the Contracts. The Trustees of the Trust (the
"Trustees") may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in the
best interests of the shareholders of such Portfolio.
1.2 The Trust will redeem any full or fractional shares of any
Portfolio when requested by the Company on behalf of an Account at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus. of the Trust. The Trust 'shall make payment for such
shares in the manner established from time to time by the Trust, but in no
event shall payment be delayed for a greater period than is permitted by the
1940 Act.
1.3 For the purposes of Sections 1.1 and 1.2, the Trust hereby
appoints the Company as its agent for the limited purpose of receiving and
accepting purchase and redemption orders resulting from investment in and
payments under the Contracts. Receipt by the Company shall constitute receipt
by the Trust provided that i) such orders are received by the Company in good
order prior to the time the net asset value of each Portfolio is priced in
accordance with its prospectus and ii) the Trust receives notice of such orders
by 10:00 a.m. New York time on the next following Business Day. The Trust will
confirm receipt of each trade in a manner mutually agreeable to the Trust and
the Company. "Business Day" shall mean any day on which the New York Stock
Exchange is open for trading and on which the Trust calculates its net asset
value pursuant to the rules of the Securities and Exchange Commission.
1.4 Purchase orders that are transmitted to the Trust in accordance
with Section 1.3 shall be paid for no later than 2:00 p.m. New York time on the
same Business Day that the Trust receives notice of the order. The Trust shall
use its best efforts to pay for redemption orders that are transmitted to the
Company in accordance with Section 1.2 no later than 2:30
-2-
<PAGE>
p.m. New York time on the same Business Day that the Trust receives notice of
the order. Payments shall be made in federal funds transmitted by wire.
1.5 Issuance and transfer of the Trust's shares will be by book entry
only. Stock certificates will not be issued to the Company or the Account.
Shares ordered from the Trust will be recorded in the appropriate title for
each Account or the appropriate subaccount. of each Account.
1.6 The Trust shall furnish prompt notice to the Company of any income
dividends or capital gain distributions payable on the Trust's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on a Portfolio's shares in additional shares of
that Portfolio.. The Company reserves the right, on its behalf and on behalf of
the Account, to revoke this election and to receive all such dividends in cash.
The Trust shall notify the Company of the number of shares so issued as payment
of such dividends and distributions.
1.7 The Trust shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated and shall use its
best efforts to make such net asset value per share available by 6 p.m. New
York time.
1.8 The Trust agrees that its shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Exemptive
Order. No shares of any Portfolio will be sold directly to the general public.
The Company agrees that Trust shares will be used only for the purposes of
funding the Contracts and Accounts listed in Schedule A, as amended from time
to time.
1.9 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting (unless
exempt therefrom) and conflicts of interest corresponding to those contained in
Section 2.8 and Article IV of this Agreement.
ARTICLE II
OBLIGATIONS OF THE PARTIES
2.1 The Trust shall prepare and be responsible for filing with the
Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Trust. The Trust shall bear the costs of
registration and qualification of its shares, preparation and Ming of the
documents listed in this Section 2.1 and all taxes to which an issuer is
subject on the issuance and transfer of its shares.
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2.2 At the option of the Company., the Trust shall either (a) provide
the Company (at the Company's expense) with as many copies of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the
foregoing, as the Company shall reasonably request; or (b) provide the Company
with a camera ready copy of such documents in a form suitable for printing. The
Trust shall be responsible for its pro-rated share of the printing costs. The
Trust shall provide the Company with a copy of its statement of additional
information in a form suitable for duplication by the Company. The Trust (at
its expense) shall provide the Company with copies of any Trust-sponsored proxy
materials in such quantity as the Company shall reasonably require for
distribution to Contract owners.
2.3 The Company shall bear the costs (unless Janus Capital Corporation
or the Trust, pursuant to the terms of the letter to Company dated September
15, 1998, is required to bear the costs) of printing and distributing the
Trust's prospectus, statement of additional information, shareholder reports
and other shareholder communications to owners of and applicants for policies
for which the Trust is serving or is to serve as an investment vehicle. The
Company shall bear the costs of distributing proxy materials (or similar
materials such as voting solicitation instructions) to Contract owners. The
Company assumes sole responsibility for ensuring that such materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.
2.4 The Company agrees and acknowledges that the Trust's adviser, Janus
Capital Corporation ("Janus Capital"), is the sole owner of the name and mark
"Janus" and that all use of any designation comprised in whole or part of Janus
(a "Janus Mark") under this Agreement shall inure to the benefit of Janus
Capital. Except as provided in Section 2.5, the Company shall not use any Janus
Mark on its own behalf or on behalf of the Accounts or Contracts in any
registration statement, advertisement, sales literature or other materials
relating to the Accounts or Contracts without the prior written consent of
Janus Capital. Such consent will not be unreasonably withheld and if no written
objection is received within 10 business days of receipt, approval will be
deemed given. Upon termination of this Agreement for any reason, the Company
shall cease all use of any Janus Mark(s) as soon as reasonably practicable.
2.5 (a) The Company shall furnish or cause to be furnished, to the
Trust or its designee, a copy of each Contract prospectus or statement of
additional information in which the Trust or its investment adviser is named
within 20 days of the filing of such document with the Securities and Exchange
Commission. The Company shall furnish, or shall cause to be furnished, to the
Trust or its designee, each piece of sales literature or other promotional
material in which the Trust or its investment adviser is named, at least ten
Business Days prior to its use. No such material shall be used if the Trust or
its designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
(b) The Trust shall furnish, or cause to be furnished, to the Company
or its designee, a copy of each Trust prospectus or statement of additional
information in which the
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<PAGE>
Company is named within 20 days of the filing of such document with the
Securities and Exchange Commission. The Trust shall furnish, or shall cause to
be furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company is named, at least ten Business
Days prior to its use. No such material shall be used if the Company or its
designee reasonably objects to such use within fifteen Business Days after
receipt of such material.
2.6 The Company shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust or
its investment adviser in connection with the sale of the Contracts other than
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
reports of the Trust, Trust-sponsored proxy statements, or in sales literature
or other promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee. Such consent will not be unreasonably
withheld and if no written objection is received within 10 business days of
receipt, approval will be deemed given.
2.7 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from the registration
statement or prospectus for the Contracts (as such registration statement and
prospectus may be amended or supplemented from time to time), or in materials
approved by the Company for distribution including sales literature or other
promotional materials, except as required by legal process or regulatory
authorities or with the written permission of the Company.
2.8 So long as, and to the extent that the Securities and Exchange
Commission interprets the 1940 Act to require pass-through voting privileges
for variable policyowners, the Company will provide pass-through voting
privileges to owners of policies whose cash values are invested, through the
Accounts, in shares of the Trust. The Trust shall require all Participating
Insurance Companies to calculate voting privileges in the same manner and the
Company shall be responsible for assuring that the Accounts calculate voting
privileges in the manner established by the Trust. With respect to each
Account, the Company will vote shares of the Trust held by the Account and for
which no timely voting instructions from policyowners are received as well as
shares it owns that are held by that Account, in the same proportion as those
shares for which voting instructions are received. The Company and its agents
will in no way recommend or oppose or interfere with the solicitation of
proxies for Trust shares held by Contract owners without the prior written
consent of the Trust, which consent may be withheld in the Trust's sole
discretion.
2.9 The Company shall notify the Trust of any applicable state
insurance laws that restrict the Portfolios' investments or otherwise affect the
operation of the Trust and shall notify the Trust of any changes in such laws.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 The Company represents and warrants that it is an insurance company
duly organized and validly existing under the laws of the State of Indiana and
that it has legally and validly established each Account as a segregated asset
account under such law on the date set forth in Schedule A.
3.2 The Company represents and warrants that each Account (1) has been
registered or, prior to any issuance or sale of the Contracts, will be
registered as a unit investment trust in accordance with the provisions of the
1940 Act or, alternatively (2) has not been registered in proper reliance upon
the exclusion from registration under Section 3(c)(ii) of the 1940 Act.
3.3 The Company represents and warrants that the Contracts or
interests in the Accounts (1) are or, prior to issuance, will be registered as
securities under the 1933 Act or, alternatively (2) are not registered because
they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act. The Company further represents and warrants that the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state laws.
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Delaware.
3.5 The Trust represents and warrants that the Trust shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
the Trust shall be registered under the 1940 Act prior to any issuance or sale
of such shares. The Trust shall amend its registration statement under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Trust shall register and qualify its
shares for sale in accordance with the laws of the various states only if and
to the extent deemed advisable by the Trust.
3.6 The Trust represents and warrants that the investments of each
Portfolio will comply with Subchapter M and the diversification requirements
set forth in Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code"), and the rules and regulations thereunder. In the event of a breach of
this Section 3.6 by the Trust, it will a) immediately notify the Company of the
breach and b) take the necessary steps to adequately diversify each Portfolio
so as to achieve compliance within the grace period offered by Regulation
1.817-5.
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ARTICLE IV
POTENTIAL CONFLICTS
4.1 The parties acknowledge that the Trust's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or (f
a decision by an insurer to disregard the voting instructions of contract
owners. The Trustees shall promptly inform the Company if they determine that
an irreconcilable material conflict exists and the implications thereof.
4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Exemptive Order by
providing the Trustees with all information reasonably necessary for the
Trustees to consider any issues raised including, but not limited to,
information as to a decision by the Company to disregard Contract owner voting
instructions.
4.3 If it is determined by a majority of the Trustees, or a majority of
its disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation
with other Participating Insurance Companies whose contract owners are also
affected, at its expense and to the extent reasonably practicable (as
determined by the Trustees) take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, which steps could include: (a)
withdrawing the assets allocable to some or all of the Accounts from the Trust
or any Portfolio and reinvesting such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or submitting
the question of whether or not such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the affected
Contract owners the option of making such a change; and (b) establishing a new
registered management investment company or managed separate account.
4.4 If a material irreconcilable conflict arises because of a decision
by the Company To disregard Contract owner voting instruct9ions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Trust's election, to
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withdraw the affected Account's investment in the Trust and terminate this
Agreement with respect to such Account; provided, however that such withdrawal
and termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested Trustees. Any such withdrawal and termination must take place
within six (6) months after the Trust gives written notice that this provision
is being implemented. Until the end of such six (6) month period, the Trust
shall continue to accept and implement orders- by the Company for the purchase
and redemption of shares of the Trust.
4.5 If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with
the majority of other state regulators, then the Company will withdraw the
affected Account's investment in the Trust and terminate this Agreement with
respect to such Account within six (6) months after the Trustees inform the
Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption
of shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Company be required to establish a new funding medium for the
Contracts if an offer to do so has been declined by vote of a majority of
Contract owners materially adversely affected by the irreconcilable material
conflict. In the event that the Trustees determine that any proposed action
does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in
writing of the foregoing determination; provided, however, that such withdrawal
and termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Trustees.
4.7 The Company shall at least annually submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Exemptive
Order, and said reports, materials and data shall be submitted more frequently
if deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended,
or Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
1940 Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Exemptive Order) on terms and. conditions materially
different from those contained in the Exemptive Order, then the Trust and/or
the Participating Insurance Companies, as appropriate, shall take such steps as
may be necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule
6e-3, as adopted, to the extent such rules are applicable.
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ARTICLE V
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Trust and each of its Trustees, officers, employees and
agents and each person, if any, who controls the Trust within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Company) or expenses (including the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in a
registration statement or prospectus for the Contracts or in the
Contracts themselves or in sales literature generated or approved by
the Company on behalf of the Contracts or Accounts (or any amendment or
supplement to any of the foregoing) (collectively, "Company Documents"
for the purposes of this Article V), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply as
to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon-and was accurately
derived from written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or otherwise for use
in connection with the sale of the Contracts or Trust shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Trust Documents as defined in Section 5.2(a)) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Trust
Documents as defined in Section 5.2(a) or the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to the Trust by or on behalf of the
Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement, or
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(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
(f) arise out of (i) a failure by TRUST to substantially
provide 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 "regulated
investment company" under Subchapter M of the code.
5.2 INDEMNIFICATION BY THE TRUST. The Trust agrees to indemnify and
hold harmless the Company and each of its directors, officers, employees and
agents and each person, if any, who controls the. Company within the meaning of
Section 15 of the 1933 Act (collectively, the "Indemnified Parties" for
purposes of this Article V) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written consent of
the Trust) or expenses (including. the reasonable costs of investigating or
defending any alleged loss, claim, damage, liability or expense and reasonable
legal counsel fees incurred in connection therewith) (collectively, "Losses"),
to which the Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such Losses:
(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 for the Trust (or any amendment
or supplement thereto), (collectively, "Trust Documents" for the
purposes of this Article V), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, provided that this indemnity shall not apply
as to any Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and was
accurately derived from written information furnished to the Trust by
or on behalf of the Company for use -in Trust Documents or otherwise
for use in connection with the sale of the Contracts or Trust shares;
or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Company Documents) or wrongful conduct of the Trust or
persons under its control, with respect to the sale -or acquisition of
the Contracts or Trust shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary' to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of the Trust; or
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(d) arise out of or result from any failure by the Trust to
provide the services or furnish the materials required 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 the Trust in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Trust.
5.3 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or 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.
5.4 Neither the Company nor the Trust shall be liable under the
indemnification provisions of Sections 5.1 or 5.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice
of service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim shall
not relieve that party from any liability which it may have to the Indemnified
Party in the absence of Sections 5. 1 and 5.2.
5.5 In case any such action is brought against the Indemnified
Parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the parry named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified 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 VI
TERMINATION
6.1 This Agreement may be terminated:
(a) by either party for any reason, by ninety (90) days
advance written notice delivered to the other party; or
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(b) at the option of the Company if shares of the Fund are not
available to meet the requirements of the Contracts as determined by
the Company. Prompt notice of the election to terminate for such cause
shall be famished by the Company. Termination shall be effective ten
days after the giving of notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the,
Contracts, the operation of each Account, the administration of the
Contracts or the purchase of Fund shares, or an expected ruling,
judgment or outcome which would, -in the Fund's reasonable judgment,
materially impair the Company's ability to perform the Company's
obligations and duties hereunder;, or
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the Fund's distributor, the Fund's
investment manager or any subinvestment manager, by the NASD, the SEC,
or any state securities or insurance commission or any other regulatory
body regarding the duties of the Fund or its distributor under this
Agreement, or an expected or anticipated ruling, judgment or outcome
which- would, in the Company's reasonable judgment, materially impair
the Fund's or the distributor's ability to perform Fund's or
distributor's obligations and duties hereunder; or
(e) at the option of the Company. upon institution of formal
proceedings against the Fund's investment manager or sub-investment
manager by the NASD, the SEC, or any state securities or insurance
commission or any other regulatory body which would, in the good faith
opinion of the Company, result in material harm to the Accounts, the
Company, or Contractowners; or
(f) upon requisite vote of the Contract owners having an
interest in the affected Portfolios (unless otherwise required by
applicable law) and written approval of the Company, to substitute the
shares of another investment company for the corresponding shares of
the Fund in accordance with the terms of the Contracts; or
(g) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance with
applicable Federal and/or state law; or
(h) 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; or
(i) at the. option of the Company if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of the
Code, on under any
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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; or
(j) 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; or
(k) at the option of the Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as applicable,
under the Code, or if the Fund reasonably believes that the Contracts
may fail to so qualify; or
(1) 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 Rely to have a material adverse impact upon
the business and operations of either the Fund or its distributor; or
(m) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that either:
(1) the Fund and its distributor, or either of them, shall have
suffered a material adverse change in their respective businesses or
financial condition; or (2) the Fund or its distributor, or both of
them, 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; or
(n) upon the assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Accounts to another
insurance company pursuant to an assumption reinsurance agreement)
unless the non-assigning party consents thereto or unless this
Agreement is assigned to an affiliate of the Fund's distributor.
6.2 Notwithstanding any termination of this Agreement, the Trust
shall, at the option of the Company, continue to make available additional
shares of the Trust (or any Portfolio) pursuant to the terms and conditions of
this Agreement for all Contracts in effect on the effective date of termination
of this Agreement, [provided that the Company continues to pay the costs set
forth in Section 2.3].
6.3 The provisions of Article V shall survive the termination of this
Agreement, and the provisions of Article IV and Section 2.8 shall survive the
termination of this Agreement as long as shares of the Trust are held on behalf
of Contract owners in accordance with Section 6.2.
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ARTICLE V11
NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Trust:
Janus Aspen Series
100 Fillmore Street
Denver, Colorado 80206
Attention: General Counsel
If to the Company:
Lincoln National Life Insurance Co.
1300 S. Clinton Street
Fort Wayne, IN 46802
Attention: Kelly D. Clevenger
ARTICLE VIII
MISCELLANEOUS
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.
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8.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the
Securities and Exchange Cornmission, the National Association of Securities
Dealers, Inc., and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
8.7 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
8.8 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.9 Neither this Agreement nor. any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.10 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Participation Agreement as of the date and year first
above written.
JANUS ASPEN SERIES
By:
Name:
Title:
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
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SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Contracts Funded
Date Established by Board of Directors By Separate Account
-------------------------------------- -------------------
Lincoln National Variable Multi Fund Individual
Annuity Account C Variable Annuity and e Annuity
(Established June 3, 1981)
GVA 1, 11, 111
Lincoln National Variable (non-New York)
Annuity Account L
GVA 1, 11, 111
Lincoln Life and Annuity (New York only)
Variable Annuity Account L
Multi Fund Group
Lincoln Life Variable Variable Annuity
Annuity Account Q (non-New York)
Lincoln Life and Annuity Multi Fund Group
Variable Annuity Account Q Variable Annuity
(New York only)
Lincoln National Life Insurance
Company Separate Account 34 Director Group
Variable Annuity
-16-
<PAGE>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of the lst day of July, 1994, by and among
Janus Capital Corporation, a Colorado corporation ("Janus Capital"), Janus
Service Corporation, a Colorado corporation, ("Janus Service") (together
"Janus"), and The Lincoln National Life Insurance Company, a life insurance
company organized under the laws of the State of Indiana (the "Company"), on
its own behalf and on behalf of each segregated asset account of the Company
set forth on Schedule A, as may be Amended from time to time (the "Accounts").
WITNESSETH:
WHEREAS, the Company has established the Accounts to serve as funding
vehicles for certain variable group annuity contracts offered by the Company
set forth on Schedule A ("Contracts"); and
WHEREAS, each Janus Fund set forth on Schedule B hereto (which may be
amended from time to time by mutual written consent) ("Fund or Funds") engages
in business as an investment company registered under the Investment Company
Act of 1940, as amended (" 1940 Act "); and
WHEREAS, to the extent permitted by applicable securities and insurance
laws and regulations, the Company intends to purchase shares in the Funds on
behalf of each Account.
NOW, THEREFORE, in consideration of their mutual promises, the Company
and Janus agree as follows:
ARTICLE I.
SALE OF FUND SHARES
1.1. Janus will provide to the Company closing net asset values,
dividends, and capital gains information at the close of trading each business
day. Orders by the Company will be sent to Janus the morning of the following
business day (after receipt by the Company). The Funds will execute orders at
the net asset values as determined as of the close of trading on the day of
receipt of such orders by the Company, provided that (a) the Company receives
such orders prior to the time the net asset values of the Funds are priced in
accordance with their prospectuses the day before the order is placed with the
Funds, and (b) such orders are received by Janus Capital by 9:00 a.m. Mountain
Time the day following their receipt by the Company and payment for such orders
is received by Janus Capital no later than 2:00 p.m. Mountain Time that day.
Payment for net purchases will be wired to a custodial account designated by
Janus to coincide with the order for shares of the 'Funds. Proceeds from net
redemptions of Fund shares will be wired from the Fund's custodial account to
an account designated by the Company. Dividends and capital gains distributions
shall be reinvested in additional shares at the ex-dividend date net asset
value.
<PAGE>
1.2. Janus Service appoints the Company as its agent for the limited
purpose of accepting orders for the purchase and redemption of shares of the
Funds by the Company on behalf of each Account.
ARTICLE II.
OBLIGATIONS OF THE PARTIES
2.1. Janus Capital shall prepare and be responsible for filing with
the Securities and Exchange Commission and any state regulators requiring such
filing all shareholder reports, notices, proxy materials (or similar materials
such as voting instruction solicitation materials), prospectuses and statements
of additional information of the Funds. Janus Capital shall bear the costs of
registration and qualification of its shares and the preparation and filing of
the documents listed in this section 2. 1.
2.2 Recordkeeping and other administrative services to Contract owners
shall be the responsibility of the Company and shall not be the responsibility
of Janus. Janus and the Funds will recognize one omnibus account for the
Company in the Funds. Upon the request of Janus, the Company shall provide
copies of records related to the Company's Fund transactions as may reasonably
be requested to enable the Funds or their representatives to comply with any
request of a governmental body or self-regulatory organization.
2.3. The Company agrees and acknowledges that Janus Capital is the
sole owner of the name and mark "Janus" and that any and all use of any
designation comprised in whole or in part of Janus (a "Janus Mark") under this
Agreement shall inure to the benefit of Janus. The use by the Company of any
Janus Mark in any advertisement or sales literature of other materials
promoting the Funds shall be with the prior written consent of Janus. Except to
the extent required by law, the Company shall not, without prior written
consent of Janus, make written representations regarding the Funds, Janus or
their affiliates, except those contained in the then current prospectus and the
then current printed sales literature for the Funds. Upon termination of this
Agreement for any reason, the Company shall cease all use of any Janus Mark(s)
as soon as reasonably practicable. The Company shall not hold itself out to the
public or engage in any activity as an agent or distributor for the Funds. The
Company will comply with all applicable state and federal laws with respect to
the use of shares of the Funds.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1. The Company represents and warrants that it is an insurance
company duly organized and in good standing under the laws of the State of
Indiana and that it has legally and validly established each Account as a
segregated asset account under such law on the date set forth in Schedule A.
-2-
<PAGE>
3.2. The Company represents and warrants that the Contracts are
currently treated as group annuity contracts under applicable provisions of the
Code and state law and that it will make every effort to maintain such
treatment and that it will notify Janus immediately upon having a reasonable
basis for believing that the Contracts have ceased to be so treated or that
they might not be so treated in the future.
3.3. The Company represents and warrants that the Contracts will be
issued and sold in compliance in all material respects with all applicable
federal and state laws.
3.4. Janus represents and warrants that it is duly organized and
validly existing under the laws of the State of Colorado.
3.5. Janus represents and warrants that Fund shares offered and sold
pursuant to this Agreement will be registered under the Securities Act of 1933
and the Funds shall be registered under the 1940 Act prior to any issuance or
sale of such shares.
3.6. Janus makes no representation as to whether any aspect of any
Fund's operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states.
ARTICLE IV. INDEMNIFICATION
4.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless Janus Capital, Janus Service, the Funds, and each of their
trustees, officers, employees and agents and each person, if any, who controls
Janus within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Article IV) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or expenses (including the reasonable costs
of investigating or defending any alleged loss, claim, damage, liability or
expense and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses"), to which the Indemnified Parties may become subject
under any statute or regulation, or at common law or otherwise, insofar as such
Losses:
(a) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in any
disclosure document for the Contracts or in the Contracts themselves or
in sales literature generated or approved by the Company on behalf of
the Contracts or Accounts (or any amendment or supplement to any of the
foregoing) (collectively, "Company Documents" for the purposes of this
Article IV), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this indemnity shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or
omission was made in reliance upon and was accurately derived from
written information furnished
-3-
<PAGE>
to the Company by or on behalf of Janus for use in Company Documents
or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(b) arise out of or result from statements or representations
(other than statements or representations contained in and accurately
derived from Janus Documents as defined in Section 4.2(a)) or wrongful
conduct of the Company or persons under its control, with respect to
the sale or acquisition of the Contracts or Fund shares; or
(c) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Fund Documents
as defined in Section 4.2(a) or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading if such
statement or omission was made in reliance upon and accurately derived
from written information furnished to Janus by or on behalf of the
Company; or
(d) arise out of or result from any failure by the Company to
provide the services or furnish the materials required under the terms
of this Agreement; or
(e) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Company.
4.2. INDEMNIFICATION BY JANUS CAPITAL. Janus Capital agrees to
indemnify and hold harmless the Company and each of its directors, officers,
employees and agents and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Article IV) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of Janus) or expenses (including the reasonable costs of investigating
or defending any alleged loss, claim, damage, liability or expense and
reasonable legal counsel fees incurred in connection therewith) (collectively,
"Losses"), to which the Indemnified Parties may become subject under any
statute or regulation, or at common law or otherwise, insofar as such Losses:
(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 for the Fund (or any amendment or
supplement thereto), (collectively, "Fund Documents" for the purposes
of this Article IV), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, provided that this indemnity shall not apply as to any
Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and was accurately
derived from written information furnished to Janus by or on behalf of
the Company for use in Janus Documents or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
-4-
<PAGE>
(b) arise out of or result from any untrue statement or
alleged untrue statement of a material fact contained in Company
Documents or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such statement or omission was
made in reliance upon and accurately derived from written information
furnished to the Company by or on behalf of Janus; or
(c) arise out of or result from any failure by Janus to
provide the services or furnish the materials required under the terms
of this Agreement; or
(d) arise out of or result from any material breach of any
representation and/or warranty made by Janus in this Agreement or arise
out of or result from any other material breach of this Agreement by
Janus.
4.3. Neither the Company nor Janus shall be liable under the
indemnification provisions of sections 4.1 or 4.2, as applicable, with respect
to any Losses incurred or assessed against an Indemnified Party that arise from
such Indemnified Party's willful misfeasance, bad faith or gross negligence in
the performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations or duties under this
Agreement.
4.4. Neither the Company nor Janus shall be liable under the
indemnification provisions of sections 4.1 or 4.2, as applicable, with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified the other party in writing within a reasonable time after
the summons, or other first written notification, giving information of the
nature of the claim shall have been served upon or otherwise received by such
Indemnified Party (or after such Indemnified Party shall have received notice
of service upon or other notification to any designated agent), but failure to
notify the party against whom indemnification is sought of any such claim or
shall not relieve that party from any liability which it may have to the
Indemnified Party in the absence of sections 4.1 and 4.2.
4.5 In case any such action is brought against the Indemnified
Parties, the indemnifying party shall be entitled to participate, at its own
expense, in the defense of such action. The indemnifying party also shall be
entitled to assume the defense thereof, with counsel reasonably satisfactory to
the party named in the action. After notice from the indemnifying party to the
Indemnified Party of an election to assume such defense, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
the indemnifying party will not be liable to the Indemnified 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.
-5-
<PAGE>
ARTICLE V. FEES AND EXPENSES
5.1. Janus recognizes the Company as the sole shareholder of each
Fund's shares purchased under this Agreement. Janus further recognizes that
substantial savings in administrative expense such as significant reductions in
postage expense and shareholder communications and recordkeeping by virtue of
each Fund's having a sole shareholder rather than multiple shareholders will be
derived. In consideration of the administrative savings resulting from such
arrangement, Janus Capital agrees to pay the Company a fee equivalent to 15
basis points per annum of the average amount invested in each Fund through the
Accounts in accordance with this Agreement ("Fee").
5.2. Janus will calculate the amount of the Fee to be paid to the
Company at the end of each calendar quarter and will make such payment to the
Company within thirty (30) days thereafter. Each check for such payment will be
accompanied by a statement showing the calculation of the Fee for the relevant
calendar quarter and such other supporting data as may be reasonably requested
by the Company.
ARTICLE VI. TERMINATION
6.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason on sixty (60) days'
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to Janus with
respect to any Fund based upon the Company's determination that shares
of such Fund are not reasonably available to meet the requirements of
the Contracts; or
(c) termination by the Company by written notice to Janus with
respect to any Fund in the event any of the Fund's shares are not
registered, issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as the
underlying investment media of the Contracts issued or to be issued by
the Company; and
(d) termination by the Company by written notice to Janus with
respect to any Fund in the event that such 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 that such Fund may fail to do so qualify.
(e) termination by Janus if it is determined by any federal or
state regulatory authority that compensation to be paid hereunder is
in violation of or inconsistent with any federal or state law. If
Janus terminates for such reason, the Company may maintain investments
in the Funds without further payment from Janus.
-6-
<PAGE>
ARTICLE VII. Notices
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to Janus:
Janus Capital Corporation
100 Fillmore Street, Suite 300
Denver, Colorado 80206
Attention: Stephen L. Stieneker, Esq.,
Mark B. Whiston
-If to the Company:
The Lincoln National Life Insurance Company
1300 S. Clinton St.
Fort Wayne, Indiana 46809
Attention: Pension Product Management
ARTICLE VIII. MISCELLANEOUS
8.1 . The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
8.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of State of Colorado.
8.5. 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.
-7-
<PAGE>
8.6. The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
8.7. The parties to this Agreement, acknowledge and agree that this
Agreement shall not be exclusive in any respect.
8.8. Neither this Agreement nor any rights or obligations hereunder
may be assigned by either party without the prior written approval of the other
party.
8.9. No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Agreement as of the date and year first above written.
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
JANUS CAPITAL CORPORATION
By :
Name:
Title:
JANUS SERVICE CORPORATION
By:
Name:
Title:
-8-
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and Contracts Funded
Date Established by-Board of Directors By Separate Account
-------------------------------------- -------------------
Separate Account 42 Form 19476
July 1, 1994
-9-
<PAGE>
SCHEDULE B
JANUS FUNDS
Janus Fund
-10-
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
This Amendment to the Fund Participation Agreement ("Agreement") dated
September 15, 1998, as amended, between Janus Aspen Series, an open-end
management investment company organized as a Delaware business trust (the
"Trust"), and The Lincoln National Life Insurance Company, an Indiana life
insurance company (the "Company") is effective as of October 15, 1999.
AMENDMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend the Agreement as follows:
1. Schedule A of this Agreement shall be deleted and replaced with the
attached Schedule A.
2. All other terms of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Amendment as of the date and year first above written.
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By:
----------------------------
Name:
Title:
JANUS ASPEN SERIES
By:
----------------------------
Name: Bonnie M. Howe
Title: Assistant Vice President
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and the Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Lincoln National Variable Multi Fund Individual
Annuity Account C Variable Annuity and e Annuity
(Established June 3, 1981)
Lincoln National Variable GVA I, II, III
Annuity Account L (non-New York)
Lincoln Life Variable Multi Fund Group
Annuity Account Q Variable Annuity
(non-New York)
Lincoln National Life Insurance Director Group
Company Separate Account 34 Variable Annuity
Lincoln Life Flexible Premium Variable Lincoln VUL
Life Account M Lincoln VULDB
Lincoln Life Flexible Premium Variable Lincoln SVUL
Account R
Lincoln Life Flexible Premium Variable Lincoln CVUL
Life Account S
Lincoln National Variable Annuity Multi Fund Individual
Account 53 Variable Annuity (non-registered)
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
This Amendment to the Fund Participation Agreement ("Agreement") dated
September 15, 1998, as amended, between Janus Aspen Series, an open-end
management investment company organized as a Delaware business trust (the
"Trust"), and The Lincoln National Life Insurance Company, an Indiana life
insurance company (the "Company") is effective as of _______________, 1999.
AMENDMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend the Agreement as follows:
1. Schedule A of this Agreement shall be deleted and replaced with the
attached Schedule A.
2. All other terms of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Amendment as of the date and year first above written.
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
JANUS ASPEN SERIES
By:
Name:
Title:
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and the Contracts Funded
Date Established by Board of Directors By Separate Account
-------------------------------------- -------------------
Lincoln National Variable Multi Fund Individual
Annuity Account C Variable Annuity and e Annuity
(Established June 3, 1981)
GVA 1, 11, 111
Lincoln National Variable (non-New York)
Annuity Account L
Multi Fund Group
Lincoln Life Variable Variable Annuity
Annuity Account Q (non-New York)
Lincoln National Life Insurance Director Group
Company Separate- Account 34 Variable Annuity
Lincoln Life Flexible Premium Variable Lincoln VUL
Life Account M
Lincoln SVUL
Lincoln Life Flexible Premium Variable
Account R Lincoln CVUL
Lincoln Life Flexible Premium Variable Multi Fund Individual
Life Account S Variable Annuity (non-registered)
Lincoln National Variable Annuity
Account 53
<PAGE>
AMENDMENT DATED JAN. 21, 1999/8
TO THE FUND PARTICIPATION AGREEMENT
BACKGROUND
WHEREAS, JANUS ASPEN SERIES (the "Trust'), and LINCOLN
NATIONAL LIFE INSURANCE COMPANY (The "Company") entered into a Fund
Participation Agreement dated September 25, 1998.
WHEREAS, the parties now desire to modify the Agreement as follows:
AMENDMENT
For good and valuable consideration the receipt of which is acknowledged, the
parties agree that:
1. Section 2.3. OBLIGATIONS OF THE PARTIES be amended with the addition
of the following:
If the Company elects to include any materials provided by the Trust,
specifically prospectuses, SAIs, shareholder reports and proxy materials, on
its web site or any other computer or electronic format, the Company assumes
sole responsibility for maintaining such materials in the form provided by the
Trust and for promptly replacing such materials with all updates provided by
the Trust.
2. The Agreement, as modified by this Amendment, is ratified and
confirmed.
LINCOLN NATIONAL LIFE JANUS ASPEN SERIES
INSURANCE COMPANY
By: By:
Name:
Title:
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
This Amendment to the Fund Participation Agreement ("Agreement") dated
September 15, 1998, as amended, between Janus Aspen Series, an open-end
management investment company organized as a Delaware business trust (the
"Trust"), and The Lincoln National Life Insurance Company, an Indiana life
insurance company (the "Company") is effective as of May 1, 2000.
AMENDMENT
For good and valuable consideration, the receipt of which is hereby
acknowledged, the parties agree to amend the Agreement as follows:
1. Schedule A of this Agreement shall be deleted and replaced with the
attached Schedule A.
2. All other terms of the Agreement shall remain in full force and
effect.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Amendment as of the date and year first above written.
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By:
----------------------------
Name: Steven M. Kluever
Title: Second Vice President
JANUS ASPEN SERIES
By:
----------------------------
Name: Bonnie M. Howe
Title: Assistant Vice President
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
Name of Separate Account and the Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
Lincoln National Variable Multi Fund Individual
Annuity Account C Variable Annuity and e Annuity
(Established June 3, 1981)
Lincoln National Variable GVA I, II, III
Annuity Account L (non-New York)
Lincoln Life Variable Multi Fund Group
Annuity Account Q Variable Annuity
(non-New York)
Lincoln National Life Insurance Director Group
Company Separate Account 34 Variable Annuity
Lincoln Life Flexible Premium Variable Lincoln VUL
Life Account M Lincoln VUL-DB-
Lincoln Life Flexible Premium Variable Lincoln SVUL
Life Separate Account R Lincoln SVUL II
Lincoln Life Flexible Premium Variable Lincoln CVUL
Life Account S Lincoln CVUL Series III
Lincoln National Variable Annuity Multi Fund Individual
Account 53 Variable Annuity (non-registered)
<PAGE>
AMENDED AND RESTATED
FUND PARTICIPATION AGREEMENT
(FORMER TITLE: "AGREEMENT TO PURCHASE SHARES")
BETWEEN
THE LINCOLN NATIONAL LIFE INSURANCE CO.
AND
LINCOLN NATIONAL AGGRESSIVE GROWTH FUND, INC.
THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and
between Lincoln National Aggressive Growth Fund, Inc. a corporation organized
under the laws of Maryland (the "Fund"), and THE LINCOLN NATIONAL LIFE INSURANCE
CO., an Indiana insurance corporation (the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1 to this
Agreement as in effect at the time this Agreement is executed and such other
separate accounts that may be added to Schedule 1 from time to time in
accordance with the provisions of Article XI of this Agreement (each such
account referred to as the "Account"; collectively, the "Accounts").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle 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 "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund 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-lA to register itself as an open-end management
investment company (File No. 811-3212) under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Fund shares (File No. 2-80743) 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 (unless exempt therefrom) certain variable annuity
contracts and/or variable life insurance policies described in Schedule 2 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 2 from time to time in accordance with Article XI of this
Agreement (such policies and contracts shall be referred to herein collectively
as the "Contracts," each such registration statement for a class or classes of
contracts listed on Schedule 2 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 the owners of the such contracts, as
distinguished from all Product Owners, being referred to as "Contract Owners");
and
<PAGE>
WHEREAS, each Account, a validly existing separate account, duly authorized
by the Company on the date set forth on Schedule 1, 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, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares on behalf of each Account to
fund its Contracts and the Fund is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company and
the Fund agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares which the Company
orders on behalf of the Account, executing such orders on a daily basis in
accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make shares available for purchase by the Company
on behalf of the Account at the then applicable net asset value per share on
Business Days as defined in Section 1.4 of this Agreement, and the Fund shall
use its best efforts to calculate AND DELIVER such net asset value by 7:00 p.m.,
E.S.T., on each such Business Day. Notwithstanding any other provision in this
Agreement to the contrary, the Board of Directors of the Fund (the "Fund Board")
may suspend or terminate the offering of shares, if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Fund Board acting in good faith and in light of its fiduciary
duties under Federal and any applicable state laws, suspension or termination is
necessary and in the best interests of the shareholders (it being understood
that "shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full or
fractional shares of the Fund held by the Account or the Company, executing such
requests at the net asset value on a daily basis (LL will expect same day
redemption wires unless unusual circumstances evolve which cause the Fund to
have to redeem securities) in accordance with Section 1.4 of this Agreement, the
applicable provisions of the 1940 Act and the then currently effective Fund
Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund
shares to the extent permitted by the 1940 Act, any rules, regulations or orders
thereunder, or the then currently effective Fund Prospectus.
1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall
be the agent of the Fund for the limited purpose of receiving
redemption
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and purchase requests from the Account (but not from the general
account of the Company), and receipt on any Business Day by the
Company as such limited agent of the Fund prior to the time prescribed
in the current Fund Prospectus (which as of the date of execution of
this Agreement is 4 p.m., E.S.T.) shall constitute receipt by the Fund
on that same Business Day, provided that the Fund receives notice of
such redemption or purchase request by 9:00 a.m., E.S.T. on the next
following Business Day. For purposes of this Agreement, "Business Day"
shall mean any day on which the New York Stock exchange is open for
trading.
(b) The Company shall pay for the shares on the same day that it
places an order with the Fund to purchase those Fund shares for an
Account. Payment for Fund shares will be made by the Account or the
Company in Federal Funds transmitted to the Fund by wire to be
received by 11:00 a.m., E.S.T. on the day the Fund is properly
notified of the purchase order for shares. The Fund will confirm
receipt of each trade and these confirmations will be received by the
Company via Fax or Email by 3:00 p.m. E.S.T. If Federal Funds are not
received on time, such funds will be invested, and shares purchased
thereby will be issued, as soon as practicable.
(c) Payment for shares redeemed by the Account or the Company
will be made in Federal Funds transmitted to the Company by wire on
the same day the Fund is notified of the redemption order of shares,
except that the Fund reserves the right to delay payment of redemption
proceeds, but in no event may such payment be delayed longer than the
period permitted under Section 22(e) of the 1940 Act. The Fund shall
not bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds if securities must be redeemed; the
Company alone shall be responsible for such action.
1.5. Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Account. Purchase and
redemption orders for Fund shares will be recorded in an appropriate ledger for
the Account or the appropriate subaccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any shares in
the form of additional shares of that Fund. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.7. The Fund shall use its best efforts to make the net asset value per
share available to the Company by 7:00 p.m., E.S.T. each Business Day, and in
any event, as soon as reasonably practicable after the net asset value per share
is calculated, and shall calculate such net asset value in accordance with the
then currently effective Fund Prospectus. The Fund shall not be liable for
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any information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company to the
Fund.
1.8. (a) The Company may withdraw the Account's investment in the
Fund only: (i) as necessary to facilitate Contract owner requests;
(ii) 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 (x) any Product Owners
or (y) the interests of the Participating Insurance Companies
investing in the Fund; (iii) upon requisite vote of the Contractowners
having an interest in the Fund to substitute the shares of another
investment company for shares in accordance with the terms of the
Contracts; (iv) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general
application; or (v) at the Company's sole discretion, pursuant to an
order of the SEC under Section 26(b) of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the Fund
shares may be sold to other insurance companies (subject to Section
1.9 hereof) and the cash value of the Contracts may be invested in
other investment companies.
(c) The Company shall not, without prior notice to the Fund
(unless otherwise required by applicable law), take any action to
operate the Accounts as management investment companies under the 1940
Act.
1.9. The Fund agrees that Fund shares will be sold only to Participating
Insurance Companies and their separate accounts. The Fund will not sell Fund
shares to any insurance company or separate account unless an agreement
complying with Article VII of this Agreement is in effect to govern such sales.
No Fund shares will be sold to the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and warrants that it is
an insurance company duly organized and validly existing under applicable law
and that it has legally and validly authorized each Account as a separate
account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered
or, prior to the issuance of any Contracts, will register each Account (unless
exempt therefrom) as a unit investment trust in accordance with the provisions
of the 1940 Act to serve as a separate account for its Contracts, and that it
will maintain such registrations for so long as any Contracts issued under them
are outstanding.
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2.2. The Fund 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 Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund further represents and warrants that it
will make every effort 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
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees and
expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement; and with any state- mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Fund, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Fund represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will immediately
notify the Company in the event the fidelity bond coverage should lapse at any
time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Fund shall provide the Company with as many copies of the current
Fund Prospectus as the Company may reasonably request. If requested by the
Company in lieu thereof, the Fund at its expense shall provide to the Company a
camera-ready copy, and electronic version, of the current Fund Prospectus
suitable for printing and other assistance as is reasonably necessary in order
for the Company to have a new Contracts Prospectus printed together with the
Fund Prospectus in one document. See Article V for a detailed explanation of the
responsibility for
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<PAGE>
the cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Fund and the Fund shall provide
such Statement free of charge to the Company and to any outstanding or
prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in each case
in a form suitable for printing, as determined by the Company. The
Fund shall be responsible for the costs of printing and distributing
these materials to Contract owners.
(b) The Fund at its expense shall be responsible for preparing,
printing and distributing its proxy material. The Company will provide
the appropriate Contractowner names and addresses to the Fund for this
purpose.
3.4. The Company shall furnish to the Fund, prior to its use, each piece of
sales literature or other promotional material in which the Fund is named. No
such material shall be used, except with the prior written permission of the
Fund. The Fund agrees to respond to any request for approval on a prompt and
timely basis. Failure of the Fund to respond within 10 days of the request by
the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement or
Fund Prospectus, as such Registration Statement and Prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund,
except with the prior written permission of the Fund. The Fund agrees to respond
to any request for permission on a prompt and timely basis. If the Fund does not
respond within 10 days of a request by the Company, then the Company shall be
relieved of the obligation to obtain the prior written permission of the Fund.
3.6. 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 sales literature or other
promotional material approved in writing by the Company, except with the prior
written permission of the Company. The Company agrees to respond to any request
for permission on a prompt and timely basis. If the Company fails to respond
within 10 days of a request by the Fund, then the Fund is relieved of the
obligation to obtain the prior written permission of the Company.
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<PAGE>
3.7. The Fund will provide to the Company at least one complete copy of all
Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy of all
Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft versions of
any registration statements, prospectuses, statements of additional information,
reports, proxy statements, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, 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 literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the requirements of Article VII, the Fund
shall solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the requirements of Article VII, the
Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with
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<PAGE>
instructions or proxies received in timely fashion from such Contract
owners;
(b) vote Fund shares attributable to Contract owners for which
no instructions have been received in the same proportion as Fund
shares of such Series for which instructions have been received in
timely fashion; and
(c) vote Fund shares held by the Company on its own behalf or on
behalf of the Account that are not attributable to Contract owners in
the same proportion as Fund shares of such Series for which
instructions have been received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Fund shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company decided to print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contractowners.)
The Company is responsible for the cost of printing and distributing Fund
prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section 817(h) of
the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements under
the 1933 Act and the Account's Registration Statement under the 1940 Act from
time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent
8
<PAGE>
required by applicable securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the 1933
Act and the 1940 Act from time to time as required in order to effect for so
long as Fund shares are sold the continuous offering of Fund shares as described
in the then currently effective Fund Prospectus. The Fund shall register and
qualify Fund shares for sale to the extentrequired by applicable securities laws
of the various states.
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
6.6. (a) When appropriate in order to inform the Fund of any
applicable state-mandated investment restrictions with which the Fund
must comply, the Company shall arrange with the Fund to amend Schedule
3, pursuant to the requirements of Article XI.
(b) Should the Fund become aware of any restrictions which may
be appropriate for inclusion in Schedule 3, the Company shall be
informed immediately of the substance of those restrictions.
ARTICLE VlI. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of the Fund
(the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist the
Board in carrying out its responsibilities under Section 6e-3(T) of the 1940
Act, by providing all information reasonably necessary for the Board to consider
any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested Board
Members, determines that a material irreconcilable conflict exists, the Board
shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to the
Company and a reasonable opportunity for the Company to appear before
it and present its case, determines that the Company is responsible
for said conflict, and if the Company
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<PAGE>
agrees with that determination, the Company shall, at its sole cost
and expense, take whatever steps are necessary to remedy the material
irreconcilable conflict. These steps could include: (i) withdrawing
the assets allocable to some or all of the affected Accounts from the
Fund and reinvesting such assets in a different investment vehicle, or
submitting the question of whether such segregation should be
implemented to a vote of all affected Contractowners and, as
appropriate, segregating the assets of any particular group (i.e.,
variable annuity Contractowners, variable life insurance policyowners,
or variable Contractowners of one or more Participating Insurance
Companies) that votes in favor of such segregation, or offering to the
affected Contractowners the option of making such a change; and (ii)
establishing a new registered mutual fund or management separate
account; or (iii) taking such other action as is necessary to remedy
or eliminate the material irreconcilable conflict.
(b) If the Company disagrees with the Board's determination, the
Company shall file a written protest with the Board, reserving its
right to dispute the determination as between just the Company and the
Fund and to seek reimbursement from the Fund for the reasonable costs
and expenses of resolving the conflict . After reserving that right
the Company, although disagreeing with the Board that it (the Company)
was responsible for the conflict, shall take the necessary steps,
under protest, to remedy the conflict, substantially in accordance
with paragraph (a) just above, for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45 days after
the Board's determination the Company elects to press the dispute, it
shall so notify the Board in writing. The parties shall then attempt
to resolve the matter amicably through negotiation by individuals from
each party who are authorized to settle the matter. If the matter has
not been amicably resolved within 60 days from the date of the
Company's notice of its intent to press the dispute, then before
either party shall undertake to litigate the dispute it shall be
submitted to non-binding arbitration conducted expeditiously in
accordance with the CPR Rules for Non-Administered Arbitration of
Business Disputes, by a sole arbitrator; PROVIDED, HOWEVER, that if
one party has requested the other party to seek an amicable resolution
and the other party has failed to participate, the requesting party
may initiate arbitration before expiration of the 60-day period set
out just above.
If within 45 days of the commencement of the process to select an
arbitrator the parties cannot agree upon the arbitrator, then he or
she will be selected from the CPR Panels of Neutrals. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. Sec.
1-16. The place of arbitration shall be Fort Wayne, Indiana. The
Arbitrator is not empowered to award damages in excess of compensatory
damages.
(d) If the Board shall determine that the Fund or another was
responsible for the conflict, then the Board shall notify the Company
immediately
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of that determination. The Fund shall assure the Company that it (the
Fund) or that other Participating Insurance Company as applicable,
shall, at its sole cost and expense, take whatever steps are necessary
to eliminate the conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall constitute a
waiver of any right of action which the Company may have against other
Participating Insurance Companies for reimbursement of all or part of
the costs and expenses of resolving the conflict.
7.3. If a material irreconcilable conflict arises because of the Company's
decision to disregard Contractowner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
shall withdraw (without charge or penalty) the Account's investment in the Fund,
if the Fund so elects.
7.4. For purposes of this Article, a majority of the disinterested members
of the Board shall determine whether or not any proposed action adequately
remedies any irreconcilable conflict. However, in no event will the Fund be
required to establish a new funding medium for any variable contract, nor will
the Company be required to establish a new funding medium for any Contract, if
in either case an offer to do so has been declined by a vote of a majority of
affected Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Fund and each person who controls or is associated with the
Fund (other than another Participating Insurance Company) 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, damages
or liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid with the
prior written consent of the Company 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, 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
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<PAGE>
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 Fund (or a person authorized in
writing to do so on behalf of the Fund) 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 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 Fund 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 Article I; or
(f) arise as a result of the Company's providing the Fund with
inaccurate information, which causes the Fund 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.
8.2. INDEMNIFICATION BY THE FUND. The Fund 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, damages or liabilities, joint or several (including any
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<PAGE>
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Fund 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, 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 the Company to the Fund for use in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or
sales literature for 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 Fund (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 the Fund or
persons under their control) or wrongful conduct of the Fund 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 Contract's 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 Fund to the
Company (or a person authorized in writing to do so on behalf of the
Fund); or
(d) arise as a result of any failure by the Fund 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 Sections 2.4 and 6.1 in
Article VI of this Agreement; and (ii) to provide the Company with
accurate information sufficient for it to calculate its accumulation
and/or annuity unit values
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<PAGE>
in timely fashion as required by law and by the Contracts
Prospectuses); or
(e) arise out of any material breach by the Fund of this
Agreement.
This indemnification will be in addition to any liability which the Fund 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.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII 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 Article VIII ("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 Article VIII, 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 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 Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of law.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those
14
<PAGE>
statutes, rules and regulations as the SEC may grant, and the terms hereof shall
be limited, interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance written
notice to the other parties; or
(b) at the option of the Company if shares of the Fund are
not available to meet the requirements of the Contracts as determined
by the Company. Prompt notice of the election to terminate for such
cause shall be furnished by the Company. Termination shall be
effective ten days after the giving of notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the operation of the Account, the administration of the
Contracts or the purchase of Fund shares;
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the investment advisor or any sub-
investment advisor, by the NASD, the SEC, or any state securities or
insurance commission or any other regulatory body; or
(e) upon requisite vote of the Contract owners having an
interest in the Fund (unless otherwise required by applicable law) and
written approval of the Company, to substitute the shares of another
investment company for the corresponding shares of the Fund in
accordance with the terms of the Contracts; or
(f) at the option of the Fund in the event any of the Contracts
are not registered, issued or sold in accordance with applicable
Federal and/or state law; or
(g) 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 Product owners or (ii)
the interests of the Participating Insurance Companies investing in
the Fund; or
(h) 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
15
<PAGE>
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; or
(i) 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; or
(j) at the option of the Fund if the Contracts cease to qualify
as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify; or
(k) at the option of the Fund if the Fund shall determine, in
its 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 the Fund; or
(l) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that: (1) the
Fund shall have suffered a material adverse change in its business or
financial condition; or (2) the Fund 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; or
(m) automatically upon the assignment of this Agreement
(including, without limitation, any transfer of the Contracts or the
Accounts to another insurance company pursuant to an assumption
reinsurance agreement) unless the non-assigning party consents thereto
or unless this Agreement is assigned to an affiliate of the Company or
the Fund, as the case may be.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1, no
termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to the other party of its
intent to terminate, which notice shall set forth the basis for such
termination. Furthermore:
(a) In the event that any termination is based upon the
provisions of Article VII or the provisions of Section 10.1(a) of this
Agreement, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such prior
written notice shall be given at least ninety (90) days before the
effective date of termination, or sooner if required by law or
regulation.
10.3. EFFECT OF TERMINATION
16
<PAGE>
(a) Notwithstanding any termination of this Agreement pursuant
to Section 10.1 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 as provided in
paragraph (b) below, 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 reallocate investments in
the Fund, redeem investments in the Fund and/or invest in the Fund
upon the making of additional purchase payments under the Existing
Contracts.
(b) If Fund shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect
except for Section 10.1(a) and thereafter either the Fund or the
Company may terminate the Agreement, as so continued pursuant to this
Section 10.3, 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.
(c) The parties agree that this Section 10.3 shall not apply to
any termination made pursuant to Article VII, and the effect of such
Article VII termination shall be governed by the provisions set forth
or incorporated by reference therein.
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance policies
to be issued by the Company through new or existing Separate Accounts investing
in the Fund. The provisions of this Agreement shall be equally applicable to
each such separate account and each such class of contracts or policies, unless
the context otherwise requires. Any such amendment must be signed by the parties
and must bear an effective date for that amendment.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party(ies) at the address of such party(ies) set forth below
or at such other address as such party(ies) may from time to time specify in
writing to the other party.
If to the Fund:
Lincoln National Aggressive Growth Fund, Inc.
17
<PAGE>
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Steven M. Kluever
ARTICLE XIII. MISCELLANEOUS
13.1. 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.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. 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.
13.4. Each party hereto 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.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Amended and Restated Fund Participation Agreement, as of its effective
date, hereby supersedes any and all prior agreements to purchase shares between
Lincoln Life and the Fund.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
LINCOLN NATIONAL AGGRESSIVE GROWTH FUND, INC.
Signature:
--------------------------------------------
Name: Kelly D. Clevenger
-------------------------------------------------
Title: President
------------------------------------------------
LINCOLN NATIONAL LIFE INSURANCE CO. (Company)
Signature:
--------------------------------------------
Name: Stephen H. Lewis
-------------------------------------------------
Title: Senior Vice President, Lincoln National Life
Insurance Company
------------------------------------------------
#73844
19
<PAGE>
SCHEDULE 1
Lincoln National Aggressive Growth Fund, Inc.
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of July 1, 1998
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53
VARIOUS NON-REGISTERED SEPARATE ACCOUNTS
20
<PAGE>
SCHEDULE 2
Lincoln National Aggressive Growth Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of July 1, 1998
MULTI FUND VARIABLE ANNUITY
eANNUITY
MULTI FUND VARIABLE LIFE
GVA I, II, III
GROUP MULTI FUND
MULTI FUND - NON-REGISTERED
DIRECTOR
21
<PAGE>
SCHEDULE 3
Lincoln National Aggressive Growth Fund, Inc.
State-mandated Investment Restrictions
Applicable to the Fund
As of July 1, 1998
The California Department of Insurance has established the following Guidelines
for an underlying portfolio of a Separate Account:
BORROWING. The borrowing limit for any FUND is 331/3 percent of total assets.
Entering into a reverse repurchase agreement shall be considered "borrowing" as
that term is used herein.
FOREIGN INVESTMENTS - DIVERSIFICATION
The diversification guidelines to be followed by international and global FUNDS
are as follows:
a. An international FUND or a global FUND is sufficiently diversified if it is
invested in a minimum of three different countries at all times, and has
invested no more than 50 percent of total assets in any one second-tier
country and no more than 25 percent of total assets in any one third-tier
country. First-tier countries are: Germany, the United Kingdom, Japan, the
United States, France, Canada, and Australia. Second-tier countries are all
countries not in the first or third tier. Third-tier countries are
countries identified as "emerging" or "developing" by the International
Bank for Reconstruction and Development ("World Bank") or International
Finance Corporation.
b. A regional FUND is sufficiently diversified if it is invested in a minimum
of three countries. The name of the fund must accurately describe the FUND.
c. The name of the single country FUND must accurately describe the FUND.
d. An index FUND must substantially mirror the index.
22
<PAGE>
The Fund Participation Agreement (the "Agreement"), dated July 1, 1998, by
and among The Lincoln National Life Insurance Company and Lincoln National
Aggressive Growth Fund, Inc. is hereby amended as follows:
Page 2, the second paragraph is replaced in its entirety with the following:
"WHEREAS, the Company has registered or will have registered each Account
with the SEC (unless exempt therefrom) as a unit investment trust under the 1940
Act before any Contracts are issued by that Account; and"
Page 5, Article 2.1 is replaced in its entirety with the following:
"The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the
issuance thereof (unless exempt therefrom), (b) that the Contracts
will be issued in compliance in all material respects with all
applicable Federal and state laws and (c) that the Company will
require of every person distributing the Contracts that the Contracts
be offered and sold in compliance in all material respects with all
applicable Federal and state laws. The Company further represents and
warrants that it is an insurance company duly organized and validly
existing under applicable law and that it has legally and validly
authorized each Account as a separate account under Section 27-1-5-1
of the Indiana Insurance Code, and has registered or, prior to the
issuance of any Contracts, will register each Account (unless exempt
therefrom) as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a separate account for its
Contracts, and that it will maintain such registrations for so long as
any Contracts issued under them are outstanding."
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Fund Participation Agreement to be executed in its name and behalf by its duly
authorized officer on the date specified below.
LINCOLN NATIONAL AGGRESSIVE GROWTH
FUND, INC.
Date: By:
------------------------ ----------------------------------
Name: Kelly D. Clevenger
--------------------------------
Title: President
-------------------------------
LINCOLN NATIONAL LIFE INSURANCE
COMPANY
Date: By:
------------------------ ----------------------------------
Name: Stephen H. Lewis
--------------------------------
Title: Senior Vice President
-------------------------------
91945/1YY104!.DOC
<PAGE>
AMENDED AND RESTATED
FUND PARTICIPATION AGREEMENT
(FORMER TITLE: "AGREEMENT TO PURCHASE SHARES")
BETWEEN
THE LINCOLN NATIONAL LIFE INSURANCE CO.
AND
LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC.
THIS AGREEMENT, made and entered into this 1st day of July, 1998, by and
between Lincoln National Social Awareness Fund, Inc. a corporation organized
under the laws of Maryland (the "Fund"), and THE LINCOLN NATIONAL LIFE INSURANCE
CO., an Indiana insurance corporation (the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1 to this
Agreement as in effect at the time this Agreement is executed and such other
separate accounts that may be added to Schedule 1 from time to time in
accordance with the provisions of Article XI of this Agreement (each such
account referred to as the "Account"; collectively, the "Accounts").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle 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 "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund 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-lA to register itself as an open-end management
investment company (File No. 811-3212) under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Fund shares (File No. 2-80743) 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 (unless exempt therefrom) certain variable annuity
contracts and/or variable life insurance policies described in Schedule 2 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 2 from time to time in accordance with Article XI of this
Agreement (such policies and contracts shall be referred to herein collectively
as the "Contracts," each such registration statement for a class or classes of
contracts listed on Schedule 2 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 the owners of the such contracts, as
distinguished from all Product Owners, being referred to as "Contract Owners");
and
<PAGE>
WHEREAS, each Account, a validly existing separate account, duly
authorized by the Company on the date set forth on Schedule 1, 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, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares on behalf of each Account to
fund its Contracts and the Fund is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value; and
WHEREAS, pursuant to Articles of Merger approved by the Company in 1988,
the Company succeeded to all the legal rights and responsibilities of Lincoln
National Pension Insurance Company, the signatory to the original Agreement to
Purchase Shares, which this Agreement amends and restates; and
NOW, THEREFORE, in consideration of their mutual promises, the Company
and the Fund agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares which the
Company orders on behalf of the Account, executing such orders on a daily basis
in accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make shares available for purchase by the
Company on behalf of the Account at the then applicable net asset value per
share on Business Days as defined in Section 1.4 of this Agreement, and the Fund
shall use its best efforts to calculate AND DELIVER such net asset value by 7:00
p.m., E.S.T., on each such Business Day. Notwithstanding any other provision in
this Agreement to the contrary, the Board of Directors of the Fund (the "Fund
Board") may suspend or terminate the offering of shares, if such action is
required by law or by regulatory authorities having jurisdiction or if, in the
sole discretion of the Fund Board acting in good faith and in light of its
fiduciary duties under Federal and any applicable state laws, suspension or
termination is necessary and in the best interests of the shareholders (it being
understood that "shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full or
fractional shares of the Fund held by the Account or the Company, executing such
requests at the net asset value on a daily basis (LL will expect same day
redemption wires unless unusual circumstances evolve which cause the Fund to
have to redeem securities) in accordance with Section 1.4 of this Agreement, the
applicable provisions of the 1940 Act and the then currently effective Fund
Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund
shares to the
2
<PAGE>
extent permitted by the 1940 Act, any rules, regulations or orders thereunder,
or the then currently effective Fund Prospectus.
1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the
Company shall be the agent of the Fund for the
limited purpose of receiving redemption and purchase requests from
the Account (but not from the general account of the Company), and
receipt on any Business Day by the Company as such limited agent
of the Fund prior to the time prescribed in the current Fund
Prospectus (which as of the date of execution of this Agreement is
4 p.m., E.S.T.) shall constitute receipt by the Fund on that same
Business Day, provided that the Fund receives notice of such
redemption or purchase request by 9:00 a.m., E.S.T. on the next
following Business Day. For purposes of this Agreement, "Business
Day" shall mean any day on which the New York Stock exchange is
open for trading.
(b) The Company shall pay for the shares on the same day
that it places an order with the Fund to purchase those Fund
shares for an Account. Payment for Fund shares will be made by the
Account or the Company in Federal Funds transmitted to the Fund by
wire to be received by 11:00 a.m., E.S.T. on the day the Fund is
properly notified of the purchase order for shares. The Fund will
confirm receipt of each trade and these confirmations will be
received by the Company via Fax or Email by 3:00 p.m. E.S.T. If
Federal Funds are not received on time, such funds will be
invested, and shares purchased thereby will be issued, as soon as
practicable.
(c) Payment for shares redeemed by the Account or the
Company will be made in Federal Funds transmitted to the Company
by wire on the same day the Fund is notified of the redemption
order of shares, except that the Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment
be delayed longer than the period permitted under Section 22(e) of
the 1940 Act. The Fund shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption
proceeds if securities must be redeemed; the Company alone shall
be responsible for such action.
1.5. Issuance and transfer of Fund shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate ledger
for the Account or the appropriate subaccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to
the Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any shares in
the form of additional shares of that Fund. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
3
<PAGE>
1.7. The Fund shall use its best efforts to make the net asset value
per share available to the Company by 7:00 p.m., E.S.T. each Business Day, and
in any event, as soon as reasonably practicable after the net asset value per
share is calculated, and shall calculate such net asset value in accordance with
the then currently effective Fund Prospectus. The Fund shall not be liable for
any information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company to the
Fund.
1.8. (a) The Company may withdraw the Account's investment in
the Fund only: (i) as necessary to facilitate Contract owner
requests; (ii) 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 (x)
any Product Owners or (y) the interests of the Participating
Insurance Companies investing in the Fund; (iii) upon requisite
vote of the Contractowners having an interest in the Fund to
substitute the shares of another investment company for shares in
accordance with the terms of the Contracts; (iv) as required by
state and/or federal laws or regulations or judicial or other
legal precedent of general application; or (v) at the Company's
sole discretion, pursuant to an order of the SEC under Section
26(b) of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the Fund
shares may be sold to other insurance companies (subject to
Section 1.9 hereof) and the cash value of the Contracts may be
invested in other investment companies.
(c) The Company shall not, without prior notice to the
Fund (unless otherwise required by applicable law), take any
action to operate the Accounts as management investment companies
under the 1940 Act.
1.9. The Fund agrees that Fund shares will be sold only to
Participating Insurance Companies and their separate accounts. The Fund will not
sell Fund shares to any insurance company or separate account unless an
agreement complying with Article VII of this Agreement is in effect to govern
such sales. No Fund shares will be sold to the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and warrants that it is
an insurance company duly organized and validly existing under applicable law
and that it has legally and validly authorized each Account as a separate
account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered
or,
4
<PAGE>
prior to the issuance of any Contracts, will register each Account (unless
exempt therefrom) as a unit investment trust in accordance with the provisions
of the 1940 Act to serve as a separate account for its Contracts, and that it
will maintain such registrations for so long as any Contracts issued under them
are outstanding.
2.2. The Fund 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 Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund further represents and warrants that it
will make every effort 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
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees and
expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement; and with any state- mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Fund, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Fund shall provide the Company with as many copies of the
current Fund
5
<PAGE>
Prospectus as the Company may reasonably request. If requested by the Company in
lieu thereof, the Fund at its expense shall provide to the Company a
camera-ready copy, and electronic version, of the current Fund Prospectus
suitable for printing and other assistance as is reasonably necessary in order
for the Company to have a new Contracts Prospectus printed together with the
Fund Prospectus in one document. See Article V for a detailed explanation of the
responsibility for the cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Fund and the Fund shall provide
such Statement free of charge to the Company and to any outstanding or
prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company
a camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in each
case in a form suitable for printing, as determined by the
Company. The Fund shall be responsible for the costs of printing
and distributing these materials to Contract owners.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material. The
Company will provide the appropriate Contractowner names and
addresses to the Fund for this purpose.
3.4. The Company shall furnish to the Fund, prior to its use, each
piece of sales literature or other promotional material in which the Fund is
named. No such material shall be used, except with the prior written permission
of the Fund. The Fund agrees to respond to any request for approval on a prompt
and timely basis. Failure of the Fund to respond within 10 days of the request
by the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund other
than the information or representations contained in the Fund Registration
Statement or Fund Prospectus, as such Registration Statement and Prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund, except with the prior written permission of the Fund. The Fund agrees
to respond to any request for permission on a prompt and timely basis. If the
Fund does not respond within 10 days of a request by the Company, then the
Company shall be relieved of the obligation to obtain the prior written
permission of the Fund.
3.6. 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 sales
literature or other promotional material approved in writing by the Company,
except with the prior written permission of the
6
<PAGE>
Company. The Company agrees to respond to any request for permission on a prompt
and timely basis. If the Company fails to respond within 10 days of a request by
the Fund, then the Fund is relieved of the obligation to obtain the prior
written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy of
all Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy of
all Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft
versions of any registration statements, prospectuses, statements of additional
information, reports, proxy statements, solicitations for voting instructions,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, 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 literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the requirements of Article VII, the
Fund shall
7
<PAGE>
solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the requirements of Article VII, the
Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with instructions or proxies received in timely fashion
from such Contract owners;
(b) vote Fund shares attributable to Contract owners for
which no instructions have been received in the same proportion as
Fund shares of such Series for which instructions have been
received in timely fashion; and
(c) vote Fund shares held by the Company on its own
behalf or on behalf of the Account that are not attributable to
Contract owners in the same proportion as Fund shares of such
Series for which instructions have been received in timely
fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Fund shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company decided to print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contractowners.)
The Company is responsible for the cost of printing and distributing Fund
prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section 817(h)
of the
8
<PAGE>
Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements
under the 1933 Act and the Account's Registration Statement under the 1940 Act
from time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the
1933 Act and the 1940 Act from time to time as required in order to effect for
so long as Fund shares are sold the continuous offering of Fund shares as
described in the then currently effective Fund Prospectus. The Fund shall
register and qualify Fund shares for sale to the extent required by applicable
securities laws of the various states.
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
6.6. (a) When appropriate in order to inform the Fund of any
applicable state-mandated investment restrictions with which the
Fund must comply, the Company shall arrange with the Fund to amend
Schedule 3, pursuant to the requirements of Article XI.
(b) Should the Fund become aware of any restrictions
which may be appropriate for inclusion in Schedule 3, the Company
shall be informed immediately of the substance of those
restrictions.
ARTICLE VlI. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of the Fund
(the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist the
Board in carrying out its responsibilities under Section 6e-3(T) of the 1940
Act, by providing all information reasonably necessary for the Board to consider
any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested Board
Members,
9
<PAGE>
determines that a material irreconcilable conflict exists, the Board shall give
prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to
the Company and a reasonable opportunity for the Company to appear
before it and present its case, determines that the Company is
responsible for said conflict, and if the Company agrees with that
determination, the Company shall, at its sole cost and expense,
take whatever steps are necessary to remedy the material
irreconcilable conflict. These steps could include: (i)
withdrawing the assets allocable to some or all of the affected
Accounts from the Fund and reinvesting such assets in a different
investment vehicle, or submitting the question of whether such
segregation should be implemented to a vote of all affected
Contractowners and, as appropriate, segregating the assets of any
particular group (i.e., variable annuity Contractowners, variable
life insurance policyowners, or variable Contractowners of one or
more Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected Contractowners the
option of making such a change; and (ii) establishing a new
registered mutual fund or management separate account; or (iii)
taking such other action as is necessary to remedy or eliminate
the material irreconcilable conflict.
(b) If the Company disagrees with the Board's
determination, the Company shall file a written protest with the
Board, reserving its right to dispute the determination as between
just the Company and the Fund and to seek reimbursement from the
Fund for the reasonable costs and expenses of resolving the
conflict . After reserving that right the Company, although
disagreeing with the Board that it (the Company) was responsible
for the conflict, shall take the necessary steps, under protest,
to remedy the conflict, substantially in accordance with paragraph
(a) just above, for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45
days after the Board's determination the Company elects to press
the dispute, it shall so notify the Board in writing. The parties
shall then attempt to resolve the matter amicably through
negotiation by individuals from each party who are authorized to
settle the matter. If the matter has not been amicably resolved
within 60 days from the date of the Company's notice of its intent
to press the dispute, then before either party shall undertake to
litigate the dispute it shall be submitted to non-binding
arbitration conducted expeditiously in accordance with the CPR
Rules for Non-Administered Arbitration of Business Disputes, by a
sole arbitrator; PROVIDED, HOWEVER, that if one party has
requested the other party to seek an amicable resolution and the
other party has failed to participate, the requesting party may
initiate arbitration before expiration of the 60-day period set
out just above.
If within 45 days of the commencement of the process to select
an arbitrator the parties cannot agree upon the arbitrator, then
he or she will be selected from the CPR Panels of Neutrals. The
arbitration shall be governed by the United States
10
<PAGE>
Arbitration Act, 9 U.S.C. Sec. 1-16. The place of arbitration
shall be Fort Wayne, Indiana. The Arbitrator is not empowered to
award damages in excess of compensatory damages.
(d) If the Board shall determine that the Fund or
another was responsible for the conflict, then the Board shall
notify the Company immediately of that determination. The Fund
shall assure the Company that it (the Fund) or that other
Participating Insurance Company as applicable, shall, at its sole
cost and expense, take whatever steps are necessary to eliminate
the conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall
constitute a waiver of any right of action which the Company may
have against other Participating Insurance Companies for
reimbursement of all or part of the costs and expenses of
resolving the conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contractowner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company shall withdraw (without charge or penalty) the Account's investment in
the Fund, if the Fund so elects.
7.4. For purposes of this Article, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable conflict. However, in no event will the
Fund be required to establish a new funding medium for any variable contract,
nor will the Company be required to establish a new funding medium for any
Contract, if in either case an offer to do so has been declined by a vote of a
majority of affected Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless the Fund and each person who controls or is associated with
the Fund (other than another Participating Insurance Company) 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, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid with the prior written consent of the Company 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, 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
11
<PAGE>
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 Fund (or a
person authorized in writing to do so on behalf of the Fund) 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 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 Fund 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
Article I; or
(f) arise as a result of the Company's providing the
Fund with inaccurate information, which causes the Fund 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.
12
<PAGE>
8.2. INDEMNIFICATION BY THE FUND. The Fund 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, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Fund 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, 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 the Company to the Fund for
use in the Fund Registration Statement, Fund Prospectus (or any
amendment or supplement thereto) or sales literature for 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 Fund
(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 the Fund or persons under their control) or
wrongful conduct of the Fund 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 Contract's
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 Fund to the Company (or a person authorized in
writing to do so on behalf of the Fund); or
(d) arise as a result of any failure by the Fund 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)
13
<PAGE>
to comply with the diversification requirements specified in
Sections 2.4 and 6.1 in Article VI 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 Contracts Prospectuses); or
(e) arise out of any material breach by the Fund of this
Agreement.
This indemnification will be in addition to any liability which the Fund 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.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII 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 Article VIII ("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 Article VIII, 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 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 Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of law.
14
<PAGE>
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the SEC
may grant, and the terms hereof shall be limited, interpreted and construed in
accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance
written notice to the other parties; or
(b) at the option of the Company if shares of the Fund
are not available to meet the requirements of the Contracts as
determined by the Company. Prompt notice of the election to
terminate for such cause shall be furnished by the Company.
Termination shall be effective ten days after the giving of notice
by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to
the sale of the Contracts, the operation of the Account, the
administration of the Contracts or the purchase of Fund shares;
(d) at the option of the Company upon institution of
formal proceedings against the Fund, the investment advisor or any
sub- investment advisor, by the NASD, the SEC, or any state
securities or insurance commission or any other regulatory body;
or
(e) upon requisite vote of the Contract owners having an
interest in the Fund (unless otherwise required by applicable law)
and written approval of the Company, to substitute the shares of
another investment company for the corresponding shares of the
Fund in accordance with the terms of the Contracts; or
(f) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance with
applicable Federal and/or state law; or
(g) 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 Product owners or
(ii) the interests of the Participating Insurance Companies
investing in the Fund; or
15
<PAGE>
(h) 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; or
(i) 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; or
(j) at the option of the Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes
that the Contracts may fail to so qualify; or
(k) at the option of the Fund if the Fund shall
determine, in its 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 the Fund; or
(l) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that: (1)
the Fund shall have suffered a material adverse change in its
business or financial condition; or (2) the Fund 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; or
(m) automatically upon the assignment of this Agreement
(including, without limitation, any transfer of the Contracts or
the Accounts to another insurance company pursuant to an
assumption reinsurance agreement) unless the non-assigning party
consents thereto or unless this Agreement is assigned to an
affiliate of the Company or the Fund, as the case may be.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1,
no termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to the other party of its
intent to terminate, which notice shall set forth the basis for such
termination. Furthermore:
(a) In the event that any termination is based upon the
provisions of Article VII or the provisions of Section 10.1(a) of
this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such
prior written notice shall be
16
<PAGE>
given at least ninety (90) days before the effective date of
termination, or sooner if required by law or regulation.
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 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 as provided in paragraph (b) below, 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 reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts.
(b) If Fund shares continue to be made available after
such termination, the provisions of this Agreement shall remain in
effect except for Section 10.1(a) and thereafter either the Fund
or the Company may terminate the Agreement, as so continued
pursuant to this Section 10.3, 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.
(c) The parties agree that this Section 10.3 shall not
apply to any termination made pursuant to Article VII, and the
effect of such Article VII termination shall be governed by the
provisions set forth or incorporated by reference therein.
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance policies
to be issued by the Company through new or existing Separate Accounts investing
in the Fund. The provisions of this Agreement shall be equally applicable to
each such separate account and each such class of contracts or policies, unless
the context otherwise requires. Any such amendment must be signed by the parties
and must bear an effective date for that amendment.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party(ies) at the address of such party(ies) set
forth below or at such other address as such party(ies) may from time to time
specify in writing to the other party.
17
<PAGE>
If to the Fund:
Lincoln National Social Awareness Fund, Inc.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Steven M. Kluever
ARTICLE XIII. MISCELLANEOUS
13.1. 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.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. 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.
13.4. Each party hereto 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.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Amended and Restated Fund Participation Agreement, as of its
effective date, hereby supersedes any and all prior agreements to purchase
shares between Lincoln Life and the Fund.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized officer on the date
specified below.
LINCOLN NATIONAL SOCIAL AWARENESS FUND, INC.
Signature:
----------------------------------------------------------
Name: Kelly D. Clevenger
---------------------------------------------------------------
Title: President
--------------------------------------------------------------
LINCOLN NATIONAL LIFE INSURANCE CO. (Company)
Signature:
----------------------------------------------------------
Name: Stephen H. Lewis
---------------------------------------------------------------
Title: Senior Vice President, Lincoln National Life Insurance Company
--------------------------------------------------------------
19
<PAGE>
Amendment to
Schedule 2
----------
Lincoln National Social Awareness Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of October 15, 1999
MULTI FUND INDIVIDUAL VARIABLE ANNUITY
eANNUITY
MULTI FUND VARIABLE LIFE
GVA I, II, III
VUL I
LINCOLN VUL
GROUP MULTI FUND
SVUL I
LINCOLN SVUL
LINCOLN CVUL
MULTI FUND - NON-REGISTERED
DIRECTOR
LINCOLN VUL-DB-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule 2 to be executed in its name and behalf by its duly authorized officer
on the date specified below.
LINCOLN NATIONAL SOCIAL AWARENESS
FUND, INC.
Date: By:
---------------------- ----------------------------
Kelly D. Clevenger
President and Chairman
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: By:
---------------------- ----------------------------
Stephen H. Lewis
Senior Vice President
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Amendment to
Schedule 1
----------
Lincoln National Social Awareness Fund, Inc.
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of May 1, 1999
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S
LINCOLN NATIONAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 33
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53
<PAGE>
Amendment to
Schedule 2
----------
Lincoln National Social Awareness Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of May 1, 1999
MULTI FUND INDIVIDUAL VARIABLE ANNUITY
eANNUITY
MULTI FUND VARIABLE LIFE
GVA I, II, III
VUL I
LINCOLN VUL
GROUP MULTI FUND
SVUL I
LINCOLN SVUL
LINCOLN CVUL
MULTI FUND - NON-REGISTERED
DIRECTOR
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1 and 2 to be executed in its name and behalf by its duly authorized
officer on the date specified below.
LINCOLN NATIONAL SOCIAL AWARENESS
FUND, INC.
Date: By:
---------------------- ----------------------------
Kelly D. Clevenger
President and Chairman
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: By:
---------------------- ----------------------------
Stephen H. Lewis
Senior Vice President
<PAGE>
SCHEDULE 1
Lincoln National Social Awareness Fund, Inc.
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of October 1, 1998
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q
LINCOLN NATIONAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 33
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule 1 to be executed in its name and behalf by its duly
authorized officer on the date specified below.
Date: 10/1/98 Lincoln National Social Awareness Fund, Inc.
----------------------
By: /s/ Kelly D. Clevenger
-----------------------------------------
Kelly D. Clevenger,
President
Date: 10/1/98 The Lincoln National Life Insurance Company
----------------------
By: /s/ Stephen H. Lewis
-----------------------------------------
Stephen H. Lewis,
Senior Vice President
<PAGE>
SCHEDULE 2
Lincoln National Social Awareness Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of October 1, 1998
Multi Fund Variable Annuity
eAnnuity
Multi Fund Variable Life
GVA I, II, III
Group Multi Fund
Multi Fund - Non-registered
Director
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule A to be executed in its name and behalf by its duly
authorized officer on the date specified below.
Date: 10/1/98 Lincoln National Social Awareness Fund, Inc.
----------------------
By: /s/ Kelly D. Clevenger
-----------------------------------------
Kelly D. Clevenger,
President
Date: 10/1/98 The Lincoln National Life Insurance Company
----------------------
By: /s/ Stephen H. Lewis
-----------------------------------------
Stephen H. Lewis,
Senior Vice President
<PAGE>
SCHEDULE 3
Lincoln National Social Awareness Fund, Inc.
State-mandated Investment Restrictions
Applicable to the Fund
As of July 1, 1998
The California Department of Insurance has established the following Guidelines
for an underlying portfolio of a Separate Account:
BORROWING. The borrowing limit for any FUND is 33 1/3 percent of total assets.
Entering into a reverse repurchase agreement shall be considered "borrowing" as
that term is used herein.
FOREIGN INVESTMENTS - DIVERSIFICATION
The diversification guidelines to be followed by international and global FUNDS
are as follows:
a. An international FUND or a global FUND is sufficiently diversified if
it is invested in a minimum of three different countries at all times,
and has invested no more than 50 percent of total assets in any one
second-tier country and no more than 25 percent of total assets in any
one third-tier country. First-tier countries are: Germany, the United
Kingdom, Japan, the United States, France, Canada, and Australia.
Second-tier countries are all countries not in the first or third tier.
Third-tier countries are countries identified as "emerging" or
"developing" by the International Bank for Reconstruction and
Development (World Bank) or International Finance Corporation.
b. A regional FUND is sufficiently diversified if it is invested in a
minimum of three countries. The name of the fund must accurately
describe the FUND.
c. The name of the single country FUND must accurately describe the FUND.
d. An index FUND must substantially mirror the index.
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FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 18th day of September, 1998, by and between
NEUBERGER&BERMAN ADVISERS MANAGEMENT TRUST ("TRUST"), a Delaware business trust,
ADVISERS MANAGERS TRUST ("MANAGERS TRUST"), a New York common law trust,
NEUBERGER&BERMAN MANAGEMENT INCORPORATED ("N&B MANAGEMENT"), a New York
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 and MANAGERS TRUST are registered with the Securities and
Exchange Commission ("SEC") under the Investment Company Act of 1940, as amended
("40 Act") as open-end, diversified management investment companies; and
WHEREAS, TRUST is organized as a series fund comprised of several
portfolios ("Portfolios"), the currently available of which are listed on
Appendix A hereto; and
WHEREAS, MANAGERS TRUST is organized as a series fund, comprised of
several portfolios ("Series"), the currently operational of which are listed on
Appendix A hereto; and
WHEREAS, each Portfolio of TRUST will invest all of its net investable
assets in a corresponding Series of MANAGERS TRUST; 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 of such life
insurance companies ("Participating Insurance Companies") and also offers its
shares to certain qualified pension and retirement plans; and
WHEREAS, TRUST has received an order from the SEC, dated May 5,1995 (File
No. 812-9164), 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 annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies and certain qualified
pension and retirement plans (the "Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
separate accounts ("Separate Accounts") to offer Variable Contracts and is
desirous of having one or more Portfolios of the TRUST as one or more of the
underlying funding vehicles for such Variable Contracts; and
WHEREAS, N&B MANAGEMENT is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940, as amended, and as a
broker-dealer under the Securities Exchange Act of 1934, as amended; and
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WHEREAS, N&B MANAGEMENT is the administrator and distributor of the
shares of each Portfolio of TRUST and investment manager of the corresponding
Series of MANAGERS TRUST; 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 net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, MANAGERS TRUST and N&B MANAGEMENT agree as follows:
Article 1. 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 in Appendix B for investment
of proceeds from Variable Contracts allocated to the designated Separate
Accounts, such shares to be offered as provided in TRUST's Prospectus.
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 LIFE
COMPANY and receipt by such designee shall constitute receipt by TRUST; provided
that TRUST receives notice of such order by 9:30 a.m. New York time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which TRUST calculates its net asset
value pursuant to the rules of the SEC.
1.3 TRUST agrees to redeem for cash, 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. For purposes of this Section 1.3,
LIFE COMPANY shall be the designee of TRUST for receipt of requests for
redemption from LIFE COMPANY and receipt by such designee shall constitute
receipt by TRUST; provided that TRUST receives notice of such request for
redemption by 9:30 a.m. New York time on the next following Business Day.
1.4 TRUST shall furnish, on or before the 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. TRUST shall notify
LIFE COMPANY of the number of shares so issued as payment of such dividends and
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<PAGE>
distributions. LIFE COMPANY reserves the right to elect to receive any such
income dividends or capital gain distributions in cash.
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 6:00 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 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 by TRUST or N&B MANAGEMENT
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 9:30 am. 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. TRUST shall provide
written confirmations of all purchase or redemption orders of TRUST shares to
LIFE COMPANY by 2:00 p.m. New York time on the Business Day that such purchase
or redemption orders are received by the TRUST 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 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 wire the redemption
proceeds to LIFE COMPANY on the day the order is transmitted by LIFE COMPANY,
unless DOING SO WOULD require TRUST to dispose of portfolio securities or
otherwise incur additional costs, but in such event proceeds shall be wired to
LIFE COMPANY within seven days and TRUST shall 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 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 administered or distributed by N&B MANAGEMENT, TRUST shall so apply
such proceeds the same Business Day that LIFE COMPANY transmits such order to
TRUST.
3
<PAGE>
1.8 Notwithstanding Section 1.7, TRUST reserves the right to suspend
the right of redemption or postpone the date of payment or satisfaction upon
redemption consistent with Section 22(e) of the 40 Act and any rules thereunder.
1.9 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 certain qualified pension and
other retirement plans, all in accordance with the requirements of Section
817(h) of the Internal Revenue Code of 1986, as amended ("Code") and Treasury
Regulation 1.817-5. Shares of the Portfolios of TRUST will not be sold directly
to the general public.
1.10 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the shares of any Portfolio 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 TRUST, acting in good faith and
in light of its fiduciary duties under federal and any applicable state laws,
deemed necessary and in the best interests of the shareholders of such
Portfolios.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and wan-ants 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.
2.2 LIFE COMPANY represents and wan-ants 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 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 any applicable state insurance law suitability requirement.
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,
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.
4
<PAGE>
2.5 LIFE COMPANY represents and warrants that it shall deliver such
prospectuses, statements of additional information, proxy statements and
periodic reports of the Trust as may be required to be delivered under
applicable federal or state law and interpretations of federal and state
securities regulators thereunder in connection with the offer and sale of the
Variable Contracts.
2.6 TRUST represents and warrants that the Portfolio shares offered
and sold pursuant to this Agreement will be registered under the '33 Act and
sold in accordance with all applicable federal and state 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 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.
2.7 TRUST 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 or might not
so comply and will immediately take all reasonable steps to adequately diversify
the Portfolio to achieve compliance within the grace period afforded by
Regulation 1.8175.
2.8 TRUST represents and warrants that each Portfolio invested in by
the Separate Account is currently qualified as a "regulated investment company"
under Subchapter M of the Code, that it will make every effort to maintain such
qualification and will notify LIFE COMPANY immediately upon having a reasonable
basis for believing it has ceased to so qualify or might not so qualify in the
future.
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 to which an issuer is subject on the issuance and transfer of its
shares.
3.2 TRUST will bear the printing costs (or duplicating costs with
respect to the statement of additional information) and mailing costs associated
with the delivery of the following TRUST (or individual Portfolio) documents,
and any supplements thereto, to existing Variable Contract owners of LIFE
COMPANY:
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(i) prospectuses and statements of additional information;
(ii) annual and semi-annual reports; and
(iii) proxy materials.
LIFE COMPANY will submit any bills for printing, duplicating
and/or mailing costs, relating to the TRUST (or individual Portfolio) documents
described above, to TRUST for reimbursement by TRUST. LIFE COMPANY shall monitor
such costs and shall use its best efforts to control these costs. LIFE COMPANY
will provide TRUST on a semi-annual basis, or more frequently as reasonably
requested by TRUST, with a current tabulation of the number of existing Variable
Contract owners of LIFE COMPANY whose Variable Contract values are invested in
TRUST. This tabulation will be sent to TRUST in the form of a letter signed by a
duly authorized officer of LIFE COMPANY attesting to the accuracy of the
information contained in the letter. If requested by LIFE COMPANY, the TRUST
shall provide such documentation (including a final copy of the TRUST's
prospectus as set in type or in camera-ready copy) and other assistance as is
reasonably necessary in order for LIFE COMPANY to print together in one document
the current prospectus for the Variable Contracts issued by LIFE COMPANY and the
current prospectus for the TRUST. For purposes of Us Article 111, if LIFE
COMPANY so requests, TRUST will provide a separate prospectus for each TRUST
Portfolio used in a particular Separate Account, provided such prospectus is
contained in the TRUST's currently effective registration statement. Should LIFE
COMPANY wish to print any of these documents in a format different from that
provided by TRUST, LIFE COMPANY shall provide Trust with sixty (60) days' prior
written notice and LIFE COMPANY shall bear the cost associated with any format
change.
3.3 TRUST will provide, at its expense, LIFE COMPANY with the following
TRUST (or individual Portfolio) documents, and any supplements thereto, with
respect to prospective Variable Contract owners of LIFE COMPANY:
(i) camera-ready copy of the current prospectus for printing by
the LIFE COMPANY;
(ii) camera-ready copies of the individual Portfolio
prospectuses filed as part of the TRUST's registration
statement;
(iii) a copy of the statement of additional information suitable
for duplication;
(iv) camera-ready copy of proxy material suitable for printing;
and
(v) camera-ready copy of the annual and semi-annual reports for
printing by the LIFE COMPANY.
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3.4 TRUST will provide LIFE COMPANY with at least one complete copy of
all prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to the Portfolios within 20 days
after the filing of each such document with the SEC or other regulatory
authority. LIFE COMPANY will provide TRUST with at least one complete copy of
all prospectuses, statements of additional information, annual and semi-annual
reports, proxy statements, exemptive applications and all amendments or
supplements to any of the above that relate to a Separate Account and the TRUST
within 20 days after the filing of each such document with the SEC or other
regulatory authority.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST
and N&B MANAGEMENT, each piece of sales literature or other promotional material
in which TRUST, MANAGERS TRUST or N&B MANAGEMENT is named, at least ten (10)
Business Days prior to its intended use. No such material will be used if TRUST,
MANAGERS TRUST or N&B MANAGEMENT objects to its use in writing within five (5)
Business Days after receipt of such material.
4.2 TRUST and N&B MANAGEMENT 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 five (5) 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, prospectus or offering statement for such Variable
Contracts, as such registration statement, prospectus or offering statement 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.
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.
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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.
rules, the '40 Act or the '33 Act.
Article V. POTENTIAL CONFLICTS
5.1 The Board of Trustees of TRUST and MANAGERS TRUST (the "Boards")
will monitor TRUST and MANAGERS TRUST, respectively, (collectively the "Funds"),
for the existence of any material irreconcilable conflict between the interests
of the Variable Contract owners of Participating Insurance Company Separate
Accounts investing in the Funds. A material irreconcilable conflict may arise
for a variety of reasons, including: (a) state insurance regulatory authority
action; (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 the investments of the Funds are being managed; (e) a difference
in voting instructions given by variable annuity and variable life insurance
contract owners or by contract owners of different Participating Insurance
Companies; or (f) a decision by a Participating Insurance Company to disregard
voting instructions of Variable Contract owners.
5.2 LIFE COMPANY will report any potential or existing conflicts to
the Boards. LIFE COMPANY will provide each appropriate Board with all
information reasonably necessary for it to consider any issues raised in
carrying out its responsibilities under the Conditions set forth in the notice
issued by the SEC for the Funds on April 12, 1995 (the "Notice") (Investment
Company Act Release No. 21003), which LIFE COMPANY has reviewed. LIFE COMPANY
will inform each appropriate Board whenever Variable Contract owner voting
instructions are disregarded by LIFE COMPANY. These responsibilities will be
carried out with a view only to the interests of the Variable Contract owners.
5.3 If a majority of the Board of a Fund or a majority of its
disinterested trustees or directors, determines that a material irreconcilable
conflict exists, affecting the LIFE COMPANY, LIFE COMPANY, at its expense and to
the extent reasonably practicable (as determined by a
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majority of disinterested trustees or directors), will take any steps necessary
to remedy or eliminate the material irreconcilable conflict consistent with the
terms and conditions set forth in the Notice.
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 the relevant Fund, to withdraw its
Separate Account's investment in such Fund, 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 5.3, a majority of the disinterested
members of the applicable Board shall determine whether or not any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the relevant Fund or N&B MANAGEMENT (or any other investment adviser of the
Funds) be required to establish a new funding medium for any Variable Contract.
5.4 Any 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.
5.5 No less than annually, LIFE COMPANY shall submit to the Boards
such reports, materials or data as such Boards may reasonably request so that
the Boards may fully carry out the obligations imposed upon them by these
Conditions. Such reports, materials, and data shall be submitted more frequently
if deemed appropriate by the applicable Boards, provided that such request shall
not be unreasonable.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners participating in registered Separate Accounts so long
as the SEC continues to interpret the '40 Act as requiring pass-through voting
privileges for such Variable Contract owners. This condition will apply to
UIT-Separate Accounts investing in TRUST and to managed separate accounts
investing in MANAGERS TRUST to the extent a vote is required with respect to
matters relating to MANAGERS TRUST. Accordingly, LIFE COMPANY, where applicable,
will vote shares of a Fund held in its 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
registered Separate Accounts that participates in any Fund calculates voting
privileges in a manner consistent with other participants as defined in the
Conditions set forth in the Notice ("Participants"). The obligation to calculate
voting privileges in a manner consistent with all other registered Separate
Accounts investing in a Fund will be a contractual obligation of all
Participants under the agreements governing participation in the Funds. Each
Participant will vote shares held in a given registered Separate Account for
which it has not
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received timely voting instructions, as well as shares it owns, in the same
proportion as its votes those shares in that 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
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 Order,
then TRUST, MANAGERS TRUST and/or the Participants, 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, MANAGERS TRUST, N&B MANAGEMENT and each of their
Trustees, directors, officers, employees and agents and each person, if any, who
controls TRUST or MANAGERS TRUST or N&B MANAGEMENT within the meaning of Section
15 of the '33 Act (collectively, the "Indemnified Parties" for purposes of this
Article VII) 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 (including reasonable
legal and other expenses), to which the Indemnified Parties may become subject
under any statute, regulation, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect thereof)
or settlements are related to the offer, 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 untruestatements of any material fact contained in
the Registration Statement orprospectus 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 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 as a result of untrue statements or
representations (other than statements or representations
contained in the registration statement, Sprospectus or
sales literature. of TRUST not supplied by LIFE COMPANY,
10
<PAGE>
or persons under its control) or wilful misfeasance, bad
faith or 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 to TRUST
for inclusion therein by or on behalf of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to
substantially provide 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 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 as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under this Agreement or to
TRUST, whichever is applicable.
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 reasonably 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
11
<PAGE>
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 N&B MANAGEMENT. N&B MANAGEMENT agrees 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" for the purposes of this Article VII) against any and all losses,
claims, damages, liabilities (including amounts paid in settlement with the
written consent of N&B MANAGEMENT which consent shall not be unreasonably
withheld) or 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
offer, sale or acquisition of TRUST's shares or the Variable Contracts and:
(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 famished to N&B MANAGEMENT
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 as a result of 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
N&B MANAGEMENT or persons under its control) or wilful
misfeasance, bad faith or negligence of TRUST or N&B
MANAGEMENT or persons under their 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
12
<PAGE>
misleading, if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to LIFE COMPANY for
inclusion therein by or on behalf of TRUST; or
(d) arise as a result of (i) a failure by TRUST to
substantially provide theservices 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 and the regulations thereunder; or (iii) a failure
by a Portfolio(s) invested in by the Separate Account to
qualify as a "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 N&B MANAGEMENT in
this Agreement or arise out of or result from any other
material breach of this Agreement by N&B MANAGEMENT.
7.5 N&B MANAGEMENT shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
to which an Indemnified Party would otherwise be subject by reason of such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
LIFE COMPANY.
7.6 N&B MANAGEMENT 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 N&B MANAGEMENT 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 N&B MANAGEMENT of
any such claim shall not relieve N&B MANAGEMENT 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, N&B MANAGEMENT shall be entitled to participate
at its own expense in the defense thereof. N&B MANAGEMENT also shall be entitled
to assume the defense thereof, with counsel satisfactory to the party named in
the action. After notice from N&B MANAGEMENT to such party of N&B MANAGEMENT's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and N&B MANAGEMENT
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.
13
<PAGE>
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:
(a) At the option of LIFE COMPANY or TRUST at any time from the
date hereof upon 90 days' 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 pursuant to this Section
8.2(b) 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 N&B MANAGEMENT by the
SEC, or any other regulatory body, the expected or
anticipated ruling, judgment or outcome of which would, in
LIFE COMPANY's reasonable judgment, materially impair
TRUST's ability to meet and perform TRUST's obligations and
duties hereunder or N&B MANAGEMENT's ability to manage any
Portfolio. Prompt notice of such 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, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the National
Association of Securities Dealers, Inc., or any other
regulatory body, the expected or anticipated ruling,
judgment or outcome of which would, in TRUST's reasonable
judgment, 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;
14
<PAGE>
(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 TRUSTs breach of any
material provision of this Agreement which breach has not
been cured to the satisfaction of LIFE COMPANY within ten
days after written notice of such breach is delivered to
TRUST;
(h) At the option of TRUST, 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, if the Variable Contracts are not
registered (unless an exemption from registration is
available), 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, with respect to a Portfolio,
upon the vote of Variable Contract Owners and written
approval of LIFE COMPANY to substitute shares of another
investment company for the shares of any Portfolio in
accordance with the terms of the Variable Contracts,
provided LIFE COMPANY has given TRUST forty-five (45) days'
notice of the date of such substitution;
(k) In the event this Agreement is assigned without the prior
written consent of LIFE COMPANY, TRUST, MANAGERS TRUST and
N&B MANAGEMENT, termination shall be effective immediately
upon such occurrence without notice;
(1) At the option of LIFE COMPANY if a Portfolio fails to
satisfy the diversification requirements set forth in
Section 2.7 hereof and does not cure such failure within
the grace period afforded by Regulation 1.817-5.
Termination shall be effective immediately upon notice.
8.3 Notwithstanding any termination of this Agreement pursuant to Section 8.2
hereof, TRUST will continue to make available additional TRUST shares (limited
to shares of the Portfolios designated in Appendix B), as provided below, at the
option of LIFE COMPANY for so
15
<PAGE>
long as LIFE COMPANY 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 LIFE COMPANY so elects for TRUST to make
additional TRUST shares available, the owners of the Existing Contracts or LIFE
COMPANY, whichever shall have legal 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. In
the event of a termination of this Agreement pursuant to Section 8.2 hereof,
LIFE COMPANY, as promptly as is practicable under the circumstances, shall
notify TRUST and N&B MANAGEMENT whether LIFE COMPANY elects for TRUST to
continue to make TRUST shares available after such termination. If TRUST shares
continue to be made available after such termination, the provisions of this
Agreement shall remain in effect. The parties agree that this Section 8.3 shall
not apply to any terminations of this Agreement by the TRUST, MANAGERS TRUST or
N&B MANAGEMENT pursuant to Sections 8.2(f),(h),(i) or (k) hereof.
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, MANAGERS TRUST or N&B MANAGEMENT:
Neuberger&Berman Management Incorporated
605 Third Avenue
New York, NY 10 15 8-0006
Attention: Ellen Metzger, General Counsel
If to LIFE COMPANY:
The Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, IN 46802
Attention: Kelly D. Clevenger
16
<PAGE>
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. However, the laws of the
State of New York will not apply to the terms or conditions of any type of
insurance contracts described herein.
10.5 The parties agree that the assets and liabilities of each Series
are separate and distinct from the assets and liabilities of each other Series.
No Series shall be liable or shall be charged for any debt, obligation or
liability of any other Series. No Trustee, officer or agent shall be personally
liable for such debt, obligation or liability of any Series or Portfolio and no
Portfolio or other investor, other than the Portfolio or other investors
investing in the Series which incurs a debt, obligation or liability, shall be
liable therefor.
10.6 Each party shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
National Association of Securities Dealers, Inc. 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.
17
<PAGE>
10.8 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by TRUST,
MANAGERS TRUST, N&B MANAGEMENT and the LIFE COMPANY.
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.
NEUBERGER&BERMAN
ADVISERS MANAGEMENT TRUST
By:
Name:
Title:
ADVISERS MANAGERS TRUST
By:
Name:
Title:
NEUBERGER&BERMAN
MANAGEMENT INCORPORATED
By:
Name:
Title:
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By:
Name:
Title:
18
<PAGE>
APPENDIX A
<TABLE>
<CAPTION>
Neuberger&Berman Advisers Corresponding Series of
Management Trust and its Series (Portfolios Advisers Managers Trust (Series)
- ------------------------------------------- --------------------------------
<S> <C>
Balanced Portfolio AMT Balanced Investments
Growth Portfolio AMT Growth Investments
Guardian Portfolio AMT Guardian Investments
International Portfolio AMT International Investments
Limited Maturity Bond Portfolio AMT Limited Maturity Bond Investments
Liquid Asset Portfolio AMT Liquid Asset Investments
Mid-Cap Growth Portfolio AMT Mid-Cap Growth Investments
Partners Portfolio AMT Partners Investments
Socially Responsive Portfolio AMT Socially Responsive Investments
</TABLE>
19
<PAGE>
APPENDIX B
<TABLE>
<CAPTION>
Separate Accounts Selected Portfolios
- ----------------- -------------------
<S> <C>
Lincoln National Variable Annuity Partners
Account C Mid-Cap Growth
Lincoln National Variable Annuity Partners
Account L
Partners
Lincoln Life Variable Annuity Account Q Mid-Cap Growth
Lincoln National Variable Annuity Mid-Cap Growth
Account 37
Partners
Lincoln National Variable Annuity
Account 3 8
</TABLE>
20
<PAGE>
AMENDMENT TO THE
FUND PARTICIPATION AGREEMENT
This AMENDMENT, dated as of May 1, 2000, between THE LINCOLN NATIONAL
LIFE INSURANCE COMPANY, a life insurance company organized under the laws of the
State of Indiana ("LIFE COMPANY"), and NEUBERGER BERMAN ADVISERS MANAGEMENT
TRUST, a Delaware business trust ("TRUST"), ADVISERS MANAGERS TRUST, a New York
common law trust ("MANAGERS TRUST"), and NEUBERGER BERMAN MANAGEMENT INC., a New
York corporation ("NB MANAGEMENT"), is made to the Fund Participation Agreement,
dated as of September 18, 1998, among LIFE COMPANY, TRUST, MANAGERS TRUST and NB
MANAGEMENT (the "Agreement"). Terms defined in the Agreement are used herein as
therein defined.
WHEREAS, the parties wish to amend Appendix B to the Agreement to add
new Separate Accounts.
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the parties agree as follows:
1. Appendix B of the Agreement is hereby deleted and replaced with new
Appendix B attached hereto.
2. Except as modified hereby, all other terms and conditions of the Agreement
shall remain in full force and effect.
3. This Amendment may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same Amendment.
NEUBERGER BERMAN NEUBERGER BERMAN
ADVISERS MANAGEMENT TRUST MANAGEMENT INC.
By: By:
------------------------------- -------------------------------
Name: Peter E. Sundman Name: Daniel J. Sullivan
Title: President Title: Senior Vice President
1
<PAGE>
ADVISERS MANAGERS TRUST THE LINCOLN NATIONAL
LIFE INSURANCE
COMPANY
By: By:
------------------------------- -------------------------------
Name: Peter E. Sundman Name: Steven M. Kluever
Title: President Title: Second Vice President
2
<PAGE>
APPENDIX B
Separate Accounts Selected Portfolios
- ----------------- -------------------
Lincoln National Variable Annuity Partners
Account C Mid-Cap Growth
Lincoln National Variable Annuity Partners
Account L Mid-Cap Growth
Lincoln Life Variable Annuity Partners
Account Q Mid-Cap Growth
Lincoln National Variable Annuity Mid-Cap Growth
Account 37
Lincoln National Variable Annuity Partners
Account 38
Lincoln National Variable Annuity Partners
Account 53 Mid-Cap Growth
Lincoln National Flexible Partners
Premium Life Account M Mid-Cap Growth
Lincoln National FlexiblePremium Partners
Variable Life Account R Mid-Cap Growth
Lincoln National FlexiblePremium Partners
Variable Life Account S Mid-Cap Growth
3
<PAGE>
Exhibit 10(a)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent Auditors"
in the Post Effective Amendment No. 7 to the Registration Statement (Form N-4
No. 333-5827) and the related Statement of Additional Information appearing
therein and pertaining to Lincoln National Variable Annuity Account L, and to
the use therein of our reports dated (a) January 31, 2000, with respect to the
statutory-basis financial statements of The Lincoln National Life Insurance
Company, and (b) March 24, 2000, with respect to the financial statements of
Lincoln National Variable Annuity Account L.
/s/ Ernst & Young LLP
Fort Wayne, Indiana
April 24, 2000
<PAGE>
PC Docs 12752 3/8/99
ORGANIZATIONAL CHART OF THE
LINCOLN NATIONAL INSURANCE HOLDING COMPANY SYSTEM
All the members of the holding company system are corporations, with
the exception of, Delaware Distributors, L.P and Founders CBO, L.P.
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National Management Corporation |
| | 100% - Pennsylvania - Management Company |
|
|--| City Financial Partners Ltd. |
| | 100% - England/Wales - Distribution of life|
| | assurance & pension products |
|
|--| LNC Administrative Services Corporation |
| | 100% - Indiana - Third Party Administrator |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| The Financial Alternative, Inc. |
| | | 100% - Utah- Insurance Agency |
| |
| |--| Financial Alternative Resources, Inc. |
| | | 100% - Kansas - Insurance Agency |
| |
| |--| Financial Choices, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| |
| | | Financial Investment Services, Inc. |
| |--| (fka Financial Services Department, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| |
| | | Financial Investments, Inc. |
| |--| (fka Insurance Alternatives, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| |
| |--| The Financial Resources Department, Inc. |
| | | 100% - Michigan - Insurance Agency |
| |
| |--| Investment Alternatives, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| |
| |--| The Investment Center, Inc. |
| | | 100% - Tennessee - Insurance Agency |
| |
| |--| The Investment Group, Inc. |
| | | 100% - New Jersey - Insurance Agency |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Personal Financial Resources, Inc. |
| | | 100% - Arizona - Insurance Agency |
| |
| |--| Personal Investment Services, Inc. |
| | 100% - Pennsylvania - Insurance Agency |
|
|--| LincAm Properties, Inc. |
| | 50% - Delaware - Real Estate Investment |
|
| | Lincoln Life and Annuity Distributors, Inc. |
|--| (fka Lincoln Financial Group, Inc.) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Lincoln Financial Advisors Corporation |
| | | (fka LNC Equity Sales Corporation) |
| | | 100% - Indiana - Broker-Dealer |
| |
| | |Corporate agencies: Lincoln Life and Annuity Distributors, |
| | | Inc. ("LLAD")has subsidiaries of which LLAD owns from |
| | | 80%-100% of the common stock (see Attachment #1). These |
| | | subsidiaries serve as the corporate agency offices for the |
| | | marketing and servicing of products of The Lincoln National |
| | | Life Insurance Company. Each subsidiary's assets are less |
| | | than 1% of the total assets of the ultimate controlling |
| | | person. |
| |
| |--| Professional Financial Planning, Inc. |
| | 100% - Indiana - Financial Planning Services |
|
|--| Lincoln Life Improved Housing, Inc. |
| | 100% - Indiana |
|
|
|--| Lincoln National (China) Inc. |
| | 100% - Indiana - China Representative Office |
|
|
|--| Lincoln National Intermediaries, Inc. |
| | 100% - Indiana - Reinsurance Intermediary |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | |
| | |--|Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding Company|
| | | |
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | |
| | | |--| Delaware International Advisers Ltd.|
| | | | | 81.1% - England - Investment Advisor |
| | |
| | |--| Delaware Management Trust Company |
| | | | 100% - Pennsylvania - Trust Service|
| | | |
| | | |__| Delaware International Holdings, Ltd. |
| | | | | 100% - Bermuda - Mktg & Admin Services|
| | | | |
| | | | |--| Delaware International Advisers, Ltd.|
| | | | | 18.9% - England - Investment Advisor |
| | | |
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | |
| | | | |--| Delaware Management Company, Inc. |
| | | | | | 100% - Delaware - Holding Company |
| | | | | | ________________________________________
| | | | | |--|Delaware Management Business Trust |
| | | | | | |100% - Delaware - Investment Advisor |
| | | | | | |consists of: |
| | | | | | |Delaware Management Company Series |
| | | | | | | and Delaware Investment Advisers
Series |
| | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | |98%-Delaware-MutualFund Distrib. |
| | | | | | |& Broker/Dealer |
| | | | | | |1%Equity-Delaware Capital |
| | | | |Management, Inc. |
| | | | |1% Equity-Delaware Distributors, |
| | | | |Inc.(G.P) |
| | | | | |
| | | | | |--| Founders Holdings, Inc. |
| | | | | | | 100% - Delaware - General
| | | | | | | Partner |
| | | | | |
| | | | | |--| Founders CBO, L.P. |
| | | | | | |1%-Delaware-Investment |
| | | | | | | Partnership |
| | | | | | |99% held by outside |
| | | | | | |investors |
| | | | | |
| | | | | |--|Founders CBO Corporation|
| | | | |100%-Delaware-Co-Issuer |
| | | | |with Founders CBO |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | |
| | |--|Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding Company|
| | | |
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | |
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | |
| | | | |--| Delaware Distributors, Inc.
| | | | | | | 100% - Delaware - General Partner |
| | | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | |98%-Delaware-Mutual Fund Distributor & |
| | | | | | |Broker/Dealer |
| | | | | |1% Equity-Delaware Capital |
| | | | | |Management, Inc. |
| | | | | |1% Equity-Delaware Distributors, Inc.|
| | | | | |(G.P) |
| | | | | |
| | | | |--| Delaware Capital Management, Inc. |
| | | | | |(fka Delaware Investment Counselors, Inc.)|
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & |
Broker/Dealer |
| | | | | | |1% Equity-Delaware Capital
| | | | | | | Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, |
| | | | | | | Inc. |
| | | | |--| Delaware Service Company, Inc. |
| | | | |100%-Delaware-Shareholder Services & |
| | | | |Transfer Agent |
| | | | | |
| | | | |__| Retirement Financial Services, Inc. |
| | | | | |(fka Delaware Investment & Retirement
| | | | | | Services,Inc.) |
| | | | | | 100% - Delaware - Registered Transfer
| | | | | | Agent & I/A |
| | |
| | |--| Lynch & Mayer, Inc. |
| | | | 100% - Indiana - Investment Adviser |
| | | |
| | | |--| Lynch & Mayer Securities Corp. |
| | | | 100% - Delaware - Securities Broker |
| | |
| | | | Vantage Global Advisors, Inc. |
| | |--| (fka Modern Portfolio Theory Associates, Inc.)|
| | | | 100% - Delaware - Investment Adviser |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| | | Lincoln Investment Management, Inc. |
| |--| (fka Lincoln National Investment Management Company) |
| | | 100% - Illinois - Mutual Fund Manager and |
| | | Registered Investment Adviser |
|
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| |
| |--|AnnuityNet, Inc. |
| | | 100% - Indiana - Distribution of annuity products|
| | |
| | |--| AnnuityNet Insurance Agency, Inc. |
| | | | 100% - Indiana - Insurance Agency |
| |
| |--|Lincoln National Insurance Associates, Inc.|
| | | (fka Cigna Associates, Inc.) |
| | | 100% - Connecticut - Insurance Agency |
| | |
| | |--|Lincoln National Insurance Associates of Alabama, Inc. |
| | | | 100% - Alabama - Insurance Agency |
| | |
| | | | Lincoln National Insurance Associates of Massachusetts,|
| | | | Inc. (fka Cigna Associates of Massachusetts, Inc.) |
| | |--| 100% - Massachusetts - Insurance Agency |
| |
| |--|Sagemark Consulting, Inc. |
| | | (fka Cigna Financial Advisors, Inc.) |
| | | 100% - Connecticut - Broker Dealer |
| |
| |--| First Penn-Pacific Life Insurance Company |
| | | 100% - Indiana |
| |
| |--| Lincoln Life & Annuity Company of New York |
| | | 100% - New York |
| |
| |--| Lincoln National Aggressive Growth Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Bond Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Capital Appreciation Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Equity-Income Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| | | Lincoln National Global Asset Allocation Fund, Inc. |
| |--| (fka Lincoln National Putnam Master Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| |
| | | Lincoln National Growth and Income Fund, Inc. |
| |--| (fka Lincoln National Growth Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Health & Casualty Insurance Company |
| | | 100% - Indiana |
| |
| |--| Lincoln Re, S.A. |
| | | 1% Argentina - General Business Corp |
| | | (Remaining 99% owned by Lincoln National |
| | | Reassurance Company) |
| |
| |--| Lincoln National International Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Managed Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Money Market Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Social Awareness Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Special Opportunities Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Reassurance Company |
| | 100% - Indiana - Life Insurance |
| |
| |--| Lincoln Re, S.A. |
| | | 99% Argentina - General Business Corp |
| | | (Remaining 1% owned by Lincoln National Health|
| | | & Casualty Insurance Company) |
| |
| |--| Special Pooled Risk Administrators, Inc. |
| | 100% - New Jersey - Catastrophe Reinsurance |
| | Pool Administrator |
|
|--| Lincoln National Management Services, Inc. |
| | 100% - Indiana - Underwriting and Management Services |
|
|--| Lincoln National Realty Corporation |
| | 100% - Indiana - Real Estate |
|
|--| Lincoln National Reinsurance Company (Barbados) Limited |
| | 100% - Barbados |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National Reinsurance Company Limited |
| | (fka Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
| |
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 90% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 10% owned by Old Fort Ins. Co. Ltd.) |
| |
| | | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
| |--| 51% - Mexico - Reinsurance Underwriter |
| | (Remaining 49% owned by Lincoln National Corp.) |
|
|--| Lincoln National Risk Management, Inc. |
| | 100% - Indiana - Risk Management Services |
|
|--| Lincoln National Structured Settlement, Inc. |
| | 100% - New Jersey |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Allied Westminster & Company Limited |
| | | (fka One Olympic Way Financial Services Limited) |
| | | 100% - England/Wales - Sales Services |
| |
| |--| Culverin Property Services Limited |
| | | 100% - England/Wales - Property Development Services |
| |
| |--| HUTM Limited |
| | | 100% - England/Wales - Unit Trust Management (Inactive) |
| |
| |--| ILI Supplies Limited |
| | | 100% - England/Wales - Computer Leasing |
| |
| |--| Lincoln Financial Advisers Limited |
| | | (fka: Laurentian Financial Advisers Ltd.) |
| | | 100% - England/Wales - Sales Company |
| |
| |--| Lincoln Financial Group PLC |
| | | (fka: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | |
| | |--| Lincoln ISA Management Limited |
| | | | (fka Lincoln Unit Trust Management Limited; |
| | | | Laurentian Unit Trust Management Limited) |
| | | | 100% - England/Wales - Unit Trust Management |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln Financial Group PLC |
| | | (fka: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | |
| | |--| Lincoln Milldon Limited |
| | | |(fka: Laurentian Milldon Limited) |
| | | | 100% - England/Wales - Sales Company |
| | |
| | |--| Laurtrust Limited |
| | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | |
| | |--| Lincoln Management Services Limited |
| | | |(fka: Laurentian Management Services Limited) |
| | | | 100% - England/Wales - Management Services |
| | | |
| | | |--|Laurit Limited |
| | | | |100% - England/Wales - Data Processing Systems |
| |
| |--| Liberty Life Pension Trustee Company Limited |
| | | 100% - England/Wales - Corporate Pension Fund (Dormat) |
| |
| |--| LN Management Limited |
| | | 100% - England/Wales - Administrative Services (Dormat) |
| | |
| | |--| UK Mortgage Securities Limited |
| | | | 100% - England/Wales - Inactive |
| |
| |--| Liberty Press Limited |
| | | 100% - England/Wales - Printing Services |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln General Insurance Co. Ltd. |
| | | 100% - Accident & Health Insurance |
| |
| |--|Lincoln Assurance Limited |
| | | 100% ** - England/Wales - Life Assurance |
| | | |
| | | |--|Barnwood Property Group Limited |
| | | | |100% - England/Wales - Property Management Co|
| | | | |
| | | | |--| Barnwood Developments Limited |
| | | | | | 100% England/Wales - Property Development|
| | | | |
| | | | |--| Barnwood Properties Limited |
| | | | | | 100% - England/Wales - Property Investment |
| | | |
| | | |--|IMPCO Properties G.B. Ltd. |
| | | | |100% - England/Wales - Property Investment
| | | | |(Inactive) |
| | | |
| | |--| Lincoln Insurance Services Limited |
| | | | 100% - Holding Company |
| | | |
| | | |--| British National Life Sales Ltd.|
| | | | | 100% - Inactive |
| | | |
| | | |--| BNL Trustees Limited |
| | | | | 100% - England/Wales - Corporate Pension |
| | | | | Fund (Inactive) |
| | | |
| | | |--| Chapel Ash Financial Services Ltd. |
| | | | | 100% - Direct Insurance Sales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| | |
| |--| Lincoln Unit Trust Managers Limited |
| | | 100% - England/Wales - Investment Management |
| | |
| |--| LIV Limited (fka Lincoln Investment Management Ltd.)|
| | | 100% - England/Wales - Investment Management Services |
| | |
| | |--| CL CR Management Ltd. |
| | | 50% - England/Wales - Administrative Services |
| |
| |--| Lincoln Independent Limited |
| | |(fka: Laurentian Independent Financial Planning Ltd.) |
| | | 100% - England/Wales - Independent Financial Adviser |
| | |
| |--| Lincoln Investment Management Limited |
| | |(fka: Laurentian Fund Management Ltd.) |
| | | 100% - England/Wales - Investment Management |
| |
| |--| LN Securities Limited |
| | | 100% - England/Wales - Nominee Company |
| |
| |--| Niloda Limited |
| | | 100% - England/Wales - Investment Company |
| |
| |--| Lincoln National Training Services Limited |
| | | 100% - England/Wales - Training Company |
| |
| |--| Lincoln Pension Trustees Limited |
| | | 100% - England/Wales - Corporate Pension Fund |
| |
| |--| Lincoln Independent (Jersey) Limited |
| | | (fka Lincoln National (Jersey) Limited) |
| | | 100% - England/Wales - Dormat |
| |
| |--| Lincoln National(Guernsey) Limited |
| | | 100% - England/Wales - Dormat |
| |
| |--| Lincoln SBP Trustee Limited |
| | | 100% - England/Wales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
| | Linsco Reinsurance Company |
|--| (fka Lincoln National Reinsurance Company) |
| | 100% - Indiana - Property/Casualty |
|
|
|--| Old Fort Insurance Company, Ltd. |
| | 100% ** - Bermuda |
| |
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 10% - England/Wales - Life/Accident/Health Underwriter |
| | (Remaining 90% owned by Lincoln Natl. Reinsurance Co.) |
| |
| | | Solutions Holdings, Inc. |
| |--| 100% - Delaware - General Business Corporation |
| | |
| | |--|Solutions Reinsurance Limited |
| | | | 100% - Bermuda - Class III Insurance Co|
|
| | Seguros Serfin Lincoln, S.A. |
|--| 49% - Mexico - Insurance |
|
| | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
|--| 49% - Mexico - Reinsurance Underwriter |
| | (Remaining 51% owned by Lincoln Natl. Reinsurance Co.) |
|
|--| Underwriters & Management Services, Inc. |
| 100% - Indiana - Underwriting Services |
Footnotes:
* The funds contributed by the Underwriters were, and continue to be subject
to trust agreements between American States Insurance Company, the grantor,
and each Underwriter, as trustee.
** Except for director-qualifying shares
# Lincoln National Corporation has subscribed for and paid for 100 shares of
Common Stock (with a par value of $1.00 per share) at a price of $10 per
share, as part of the organizing of the fund. As such stock is further
sold, the ownership of voting securities by Lincoln National Corporation
will decline and fluctuate.
<PAGE>
ATTACHMENT #1
LINCOLN LIFE AND ANNUITY DISTRIBUTORS, INC.
CORPORATE AGENCY SUBSIDIARIES
1) Lincoln Financial Group, Inc. (AL)
2) Lincoln Financial and Insurance Services Corporation (Walnut Creek, CA)
3) California Fringe Benefit and Insurance Marketing Corporation
DBA/California Fringe Benefit Company (Walnut Creek, CA)
4) Colorado-Lincoln Financial Group, Inc. (Denver, CO)
5) Lincoln National Financial Services, Inc. (Lake Worth, FL)
6) CMP Financial Services, Inc. (Chicago, IL)
7) Lincoln Financial Group of Northern Indiana, Inc. (Fort Wayne, IN)
8) Financial Planning Partners, Ltd. (Mission, KS)
9) The Lincoln National Financial Group of Louisiana, Inc. (Shreveport,
LA)
10) Benefits Marketing Group, Inc. (D.C. & Chevy Chase, MD)
11) Lincoln Financial Services and Insurance Brokerage of New England, Inc.
(fka: Lincoln National of New England Insurance Agency, Inc.)
(Worcester, MA)
12) Financial Consultants of Michigan, Inc. (Troy, MI)
13) Lincoln Financial Group of Missouri, Inc. (fka: John J. Moore &
Associates, Inc.) (St. Louis, MO)
14) Beardslee & Associates, Inc. (Clifton, NJ)
15) Lincoln Financial Group, Inc. (fka: Resources/Financial, Inc.
(Albuquerque, NM)
16) Lincoln Cascades, Inc. (Portland, OR)
17) Lincoln Financial Group, Inc. (Salt Lake City, (UT)
<PAGE>
Summary of Changes to Organizational Chart:
JANUARY 1, 1995-DECEMBER 31, 1995
SEPTEMBER 1995
a. Lincoln National (Jersey) Limited was incorporated on September 18, 1995.
Company is dormat and was formed for tax reasons per Barbara Benoit,
Assistant Corporate Secretary at Lincoln UK.
JANUARY 1, 1996-DECEMBER 1, 1996
MARCH 1996
a. Delaware Investment Counselors, Inc. changed its name to Delaware Capital
Management, Inc. effective March 29, 1996.
AUGUST 1996
a. Lincoln National (Gernsey) Limited was incorporated on August 9, 1996;
company is dormat and was formed for tax reasons.
SEPTEMBER 1996
a. Morgan Financial Group, Inc. changed its name to Lincoln National Sales
Corporation of Maryland effective September 23, 1996.
OCTOBER 1996
a. Addition of Lincoln National (India) Inc., incorporated as an Indiana
corporation on October 17, 1996.
NOVEMBER 1996
a. Lincoln National SBP Trustee Limited was bought "off the shelf" and was
incorporated on November 26, 1996; it was formed to act ast Trustee for
Lincoln Staff Benefits Plan.
DECEMBER 1996
a. Addition of Lincoln National Investments, Inc., incorporated as an Indiana
corporation on December 12, 1996.
JANUARY 1, 1997-DECEMBER 31, 1997
JANUARY 1997
a. Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and Vantage Global
Advisors, Inc. were transferred via capital contribution to Lincoln
National Investments, Inc. effective January 2, 1997.
b. Lincoln National Investments, Inc. changed its name to Lincoln National
Investment Companies, Inc. effective January 24, 1997.
c. Lincoln National Investment Companies, Inc. changed its named to Lincoln
National Investments, Inc. effective January 24, 1997.
JANUARY 1997 CON'T
<PAGE>
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (fka Laurentian
Financial Group PLC); Lincoln Milldon Limited (fka Laurentian Milldon
Limited); Lincoln Management Services Limited (fka Laurentian Management
Services Limited).
FEBRUARY 1997
a. Removal of Lincoln National Financial Group of Philadelphia, Inc. which was
dissolved effective February 25, 1997.
MARCH 1997
a. Removal of Lincoln Financial Services, Inc. which was dissolved effective
March 4, 1997.
APRIL 1997
a. Acquisition of Dougherty Financial Group, Inc. on April 30, 1997. Company
then changed its name to Delvoy, Inc. The acquisition included the mutual
fund group of companies as part of the Voyager acquisition. The following
companies all then were moved under the newly formed holding company,
Delvoy, Inc. effective April 30, 1997: Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc., Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.
b. Acquisition of Voyager Fund Managers, Inc. and Voyager Fund Distributors,
Inc. on April 30, 1997; merger is scheduled for May 31, 1997 for Voyager
Fund Managers, Inc. into Delaware Management Company, Inc. and Voyager Fund
Distributors, Inc. is to merge into Delaware Distributors, L.P.
c. Removal of Aseguradora InverLincoln, S.A. Compania de Seguros y Reaseguros,
Grupo Financiero InverMexico. Stock was sold to Grupo Financiero
InverMexico effective April 18, 1997.
MAY 1997
a. Name change of The Richard Leahy Corporation to Lincoln National Financial
Institutions Group, Inc. effective May 6, 1997.
b. Voyager Fund Managers, Inc. merged into Delaware Management Company, Inc.
effective May 30, 1997 at 10:00 p.m. with Delaware Management Company, Inc.
surviving.
c. On May 31, 1997 at 2:00 a.m., Voyager Fund Distributors, Inc. merged into a
newly formed company Voyager Fund Distributors (Delaware), Inc.,
incorporated as a Delaware corporation on May 23, 1997. Voyager Fund
Distributors (Delaware), Inc. then merged into Delaware Distributors, L.P.
effective May 31, 1997 at 2:01 a.m. Delaware Distributors, L.P. survived.
JUNE 1997
a. Removal of Lincoln National Sales Corporation of Maryland -- company
dissolved June 13, 1997.
b. Addition of Lincoln Funds Corporation, incorporated as a Delaware
corporation on June 10, 1997 at 2:00 p.m.
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on June
30, 1997.
<PAGE>
JULY 1997
a. LNC Equity Sales Corporation changed its name to Lincoln Financial Advisors
Corporation effective July 1, 1997.
b. Addition of Solutions Holdings, Inc., incorporated as a Delaware
corporation on July 27, 1997.
SEPTEMBER 1997
a. Addition of Solutions Reinsurance Limited, incorporated as a Bermuda
corporation on September 29, 1997.
OCTOBER 1997
a. Removal of the following companies: American States Financial Corporation,
American States Insurance Company, American Economy Insurance Company,
American States Insurance Company of Texas, American States Life Insurance
Company, American States Lloyds Insurance Company, American States
Preferred Insurance Company, City Insurance Agency, Inc. and Insurance
Company of Illinois -- all were sold 10-1-97 to SAFECO Corporation.
b. Liberty Life Assurance Limited was sold to Liberty International Holdings
PLC effective 10-6-97.
c. Addition of Seguros Serfin Lincoln, S.A., acquired by LNC on 10-15-97.
DECEMBER 1997
a. Addition of City Financial Partners Ltd. as a result of its acquisition by
Lincoln National Corporation on December 22, 1997. This company will
distribute life assurance and pension products of Lincoln Assurance
Limited.
b. Removal of Lynch & Mayer Asia, Inc. which was dissolved December 24, 1997.
JANUARY 1998
a. Addition of Cigna Associates, Inc., Cigna Financial Advisors, Inc. and
Cigna Associates of Massachusetts, Inc., acquired by The Lincoln National
Life Insurance Company on January 1, 1998. Cigna Associates of
Massachusetts is 100% owned by Cigna Associates, Inc.
b. Removal of Lincoln National Mezzanine Corporation and Lincoln National
Mezzanine Fund, L.P. Lincoln National Mezzanine Corporation was dissolved
on January 12, 1998 and Lincoln National Mezzanine Fund, L.P. was cancelled
January 12, 1998.
c. Corporate organizational changes took place in the UK group of companies on
January 21, 1998: Lincoln Insurance Services Limited and its subsidiaries
were moved from Lincoln National (UK) PLC to Lincoln Assurance Limited;
Lincoln General Insurance Co. Ltd. was moved from Lincoln Insurance
Services Limited to Lincoln National (UK) PLC.
d. Addition of AnnuityNet, Inc., incorporated as an Indiana corporation on
January 16, 1998 and a wholly-owned subsidiary of The Lincoln National Life
Insurance Company.
JUNE 1998
<PAGE>
a. Name Change of CIGNA Financial Advisors, Inc. to Sagemark Consulting, Inc.
effective June 1, 1998.
b. Name Change of CIGNA Associates, Inc. to Lincoln National Insurance
Associates, Inc. effective June 1, 1998.
c. Addition of Lincoln National Insurance Associates of Alabama, Inc.,
incorporated as a wholly-owned subsidiary of Lincoln National Insurance
Associates, Inc. as an Alabama domiciled corporation.
d. Dissolution of LUTM Nominees Limited effective June 10, 1998.
e. Dissolution of Cannon Fund Managers Limited June 16, 1998.
f. Dissolution of P.N. Kemp Gee & Co. Ltd. June 2, 1998.
JULY 1998
a. Name change of CIGNA Associates of Massachusetts, Inc. to Lincoln National
Insurance Associates of Massachusetts, Inc. effective July 22, 1998.
SEPTEMBER 1998
a. Removal of Lincoln Financial Group of Michigan, Inc., voluntarily dissolved
September 15, 1998.
b. Name change of Lincoln Financial Group, Inc. to Lincoln Life and Annuity
Distributors, Inc. on September 29, 1998.
c. Removal of Lincoln European Reinsurance S.A. -- company dissolved September
30, 1998.
d. Removal of Lincoln Funds Corporation -- company voluntarily dissolved
September 30, 1998.
OCTOBER 1998
a. Addition of AnnuityNet Insurance Agency, Inc., incorporated as an Indiana
corporation October 2, 1998., a wholly-owned subsidiary of AnnuityNet, Inc.
b. Removal of Lincoln National (India) Inc., voluntarily dissolved October 26,
1998.
DECEMBER 1998
a. Removal of The Insurers' Fund, Inc., voluntarily dissolved December 10,
1998.
b. Addition of Lincoln National Management Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Lincoln National Corporation,
incorporated on December 17, 1998.
JANUARY 1999
Lincoln Unit Trust Management changed its name on January 5, 1999 to Lincoln ISA
Management Limited.
FEBRUARY 1999
Removal of Lincoln Southwest Financial Group, Inc. -- company's term of
existence expired July 18, 1998.
<PAGE>
BOOKS AND RECORDS
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT L
RULES UNDER SECTION 31 OF THE INVESTMENT COMPANY ACT OF 1940
Records to Be Maintained by Registered Investment Companies, Certain Majority-
Owned Subsidiaries Thereof, and Other Persons Having Transactions with
Registered Investment Companies.
Reg. 270.31a-1. (a) Every registered investment company, and every underwriter,
broker, dealer, or investment advisor which is a majority-owned subsidiary of
such a company, shall maintain and keep current the accounts, books, and other
documents relating to its business which constitute the record forming the basis
for financial statements required to be filed pursuant to Section 30 of the
Investment Company Act of 1940 and of the auditor's reports relating thereto.
<TABLE>
<CAPTION>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
<S> <C> <C> <C>
Annual Reports Finance Eric Jones Permanently, the first two
To Shareholders years in an easily accessible
place
Semi-Annual Finance Eric Jones Permanently, the first two
Reports years in an easily accessible
place
Form N-SAR Finance Eric Jones Permanently, the first two
years in an easily accessible
place
</TABLE>
(b) Every registered investment company shall maintain and keep current the
following books, accounts, and other documents:
Type of Record
- --------------
(1) Journals (or other records of original entry) containing an itemized daily
record in detail of all purchases and sales of securities (including sales and
redemptions of its own securities), all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash and all other debits and
credits. Such records shall show for each such transaction the name and
quantity of securities, the unit and aggregate purchase or sale price,
commission paid, the market on which effected, the trade date, the settlement
date, and the name of the person through or from whom purchased or received or
to whom sold or delivered.
<TABLE>
<CAPTION>
Purchases and Sales Journals
- ----------------------------
<S> <C> <C> <C>
Daily reports CSRM Kathleen Adamson Permanently, the first two
of securities (Portland) years in an easily accessible
transactions Finance Eric Jones place
Portfolio Securities
- --------------------
C-Port Purchase/ Finance Eric Jones Permanently, the first two
Sales Reports years in an easily accessible
place
</TABLE>
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Receipts and Deliveries of Securities (units)
- ---------------------------------------------
Not Applicable.
Portfolio Securities.
- --------------------
Not Applicable.
Receipts and Disbursements of Cash and other Debits and Credits.
- ---------------------------------------------------------------
Daily Journals CSRM (Portland) Kathleen Adamson Permanently, the
Finance Eric Jones first two years in
an easily
accessible place
(2) General and auxiliary ledgers (or other record) reflecting all asset,
liability, reserve, capital, income and expense accounts, including:
(i) Separate ledger accounts (or other records) reflecting the
following:
(a) Securities in transfer;
(b) Securities in physical possession;
(c) Securities borrowed and securities loaned;
(d) Monies borrowed and monies loaned (together with a record of the
collateral therefore and substitutions in such collateral);
(e) Dividends and interest received;
(f) Dividends receivable and interest accrued.
Instructions. (a) and (b) shall be stated in terms of securities quantities
only; (c) and (d) shall be stated in dollar amounts and securities quantities as
appropriate; (e) and (f) shall be stated in dollar amounts only.
General Ledger
- --------------
LNL trial Finance Eric Jones Permanently, the
Balance (5000 first two years
series) in an easily
accessible place
Securities in Transfer
- ----------------------
Not Applicable.
Securities in Physical Possession
- ---------------------------------
Not Applicable.
Securities Borrowed and Loaned
- ------------------------------
Not Applicable.
Monies Borrowed and Loaned
- --------------------------
Not Applicable.
Dividends and Interest Received
- -------------------------------
LNL Trial Finance Eric Jones Permanently, the
Balance (5000 first two years
series) in an easily
accessible place
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Dividends Receivable and Interest Accrued
- -----------------------------------------
<PAGE>
LNL Trial Finance Eric Jones Permanently, the
Balance (5000 first two years
series) in an easily
accessible place
(ii) Separate ledger accounts (or other records) for each portfolio security,
showing (as of trade dates), (a) the quantity and unit and aggregate price for
each purchase, sale, receipt, and delivery of securities and commodities for
such accounts, and (b) all other debits and credits for such accounts.
Securities positions and money balances in such ledger accounts (or other
records) shall be brought forward periodically but not less frequently than at
the end of fiscal quarters. Any portfolio security, the salability of which is
conditioned, shall be so noted. A memorandum record shall be available setting
forth, with respect to each portfolio security accounts, the amount and
declaration, ex-dividend, and payment dates of each dividend declared thereon.
Ledger Account for each portfolio Security
- ------------------------------------------
Daily Report Finance Eric Jones Permanently, the
Of Securities first two years
Transactions (Daily in an easily
Trade File) accessible place
(iii) Separate ledger accounts (or other records) for each broker-dealer, bank
or other person with or through which transactions in portfolio securities are
affected, showing each purchase or sale of securities with or through such
persons, including details as to the date of the purchase or sale, the quantity
and unit and aggregate prices of such securities, and the commissions or other
compensation paid to such persons. Purchases or sales effected during the same
day at the same price may be aggregated.
Not Applicable.
(iv) Separate ledger accounts (or other records), which may be maintained by a
transfer agent or registrar, showing for each shareholder of record of the
investment company the number of shares of capital stock of the company held.
in respect of share accumulation accounts (arising from periodic investment
plans, dividend reinvestment plans, deposit of issued shares by the owner
thereof, etc.), details shall be available as to the dates and number of shares
of each accumulation, and except with respect to already issued shares deposited
by the owner thereof, prices of each such accumulation.
Shareholder Accounts
- --------------------
Master file Finance Eric Jones Permanently, the
Record (Daily CSRM (Portland) Kathleen Adamson first two years
Trade File & Leg in an easily
Syst Client Rpt) accessible place
(3) A securities record or ledger reflecting separately for each portfolio
security as of trade date all "long" and "short" positions carried by the
investment company for its own account and showing the location of all
securities long and the off-setting position to all securities short. The
record called for by this paragraph shall not be required in circumstances
under which all portfolio securities are maintained by a bank or banks or a
member or members of a national securities exchange as custodian under a
custody agreement or as agent for such custodian.
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Not Applicable
(4) Corporate charters, certificates of incorporation or trust agreements, and
bylaws, and minute books of stockholders' and directors' or trustees' meetings;
and minute books of directors' or trustees' committee and advisory board or
advisory committee meetings.
Corporate Documents
- -------------------
Memorandum Legal Janet Lindenberg Permanently, the
Establishing SA first two years
in an easily
accessible place
(5) A record of each brokerage order given by or in behalf of the investment
company for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such record shall include the name of the broker, the
terms and conditions of the order and of any modification or cancellation
thereof, the time of entry or cancellation, the price at which executed, and the
time of receipt of report of execution. The record shall indicate the name of
the person who placed the order in behalf of the investment company.
Order Tickets
- -------------
UIT applica- CSRM (Portland) Kathleen Adamson Six years, the
tions and Finance Eric Jones first two years
daily reports in an easily
of securities accessible place
transactions
(6) A record of all other portfolio purchase or sales showing details
comparable to those prescribed in paragraph 5 above.
Commercial Paper
- ----------------
Not Applicable.
(7) A record of all puts, calls, spreads, straddles, and other options in which
the investment company has any direct or indirect interest or which the
investment company has granted or guaranteed; and a record of any contractual
commitments to purchase, sell, receive or deliver securities or other property
(but not including open orders placed with broker-dealers for the purchase or
sale of securities, which may be cancelled by the company on notices without
penalty or cost of any kind); containing at least an identification of the
security, the number of units involved, the option price, the date of maturity,
the date of issuance, and the person to whom issued.
Record of Puts, Calls, Spreads, Etc.
- ------------------------------------
Not Applicable.
(8) A record of the proof of money balances in all ledger accounts (except
shareholder accounts), in the form of trial balances. Such trial balances shall
be prepared currently at least once a month.
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Trial Balance
- -------------
LNL Trial Finance Eric Jones Permanently, the first
Balance (5000 two years in an easily
series) accessible place
(9) A record for each fiscal quarter, which shall be completed within 10 days
after the end of such quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio
securities to named brokers or dealers and the division of brokerage
commissions or other compensation on such purchase and sale orders among named
persons were made during such quarter. The record shall indicate the
consideration given to (a) sales of shares of the investment company by brokers
or dealers, (b) the supplying of services or benefits by brokers or dealers to
the investment company, its investment advisor or principal underwriter or any
persons affiliated therewith, and (c) any other considerations other than the
technical qualifications of the brokers and the dealers as such. The record
shall show the nature of their services or benefits made available, and shall
describe in detail the application of any general or specific formula or other
determinant used in arriving at such allocation of purchase and sales orders
and such division of brokerage commissions or other compensation. The record
shall also include the identifies of the person responsible for the
determination of such allocation and such division of brokerage commissions or
other compensation.
Not Applicable.
(10) A record in the form of an appropriate memorandum identifying the person or
persons, committees, or groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee or group, a record
shall be kept in the names of its members who participated in the authorization.
There shall be retained a part of the record required by this paragraph any
memorandum, recommendation, or instruction supporting or authorizing the
purchase or sale of portfolio securities. The requirements of this paragraph
are applicable to the extent they are not met by compliance with the
requirements of paragraph 4 of this Rule 31a1(b).
Advisory Legal Products and Six years, the first two
Agreements Distribution, years in an easily
LNL Law Division accessible place
(11) Files of all advisory material received from the investment advisor, any
advisory board or advisory committee, or any other persons from whom the
investment company accepts investment advice publications distributed generally.
Not Applicable.
(12) The term "other records" as used in the expressions "journals (or other
records of original entry)" and "ledger accounts (or other records)" shall be
construed to include, where appropriate, copies of voucher checks,
confirmations, or similar documents which reflect the information required by
the applicable rule or rules in appropriate sequence and in permanent form,
including similar records developed by the use of automatic data processing
systems.
Correspondence CSRM (Portland) Kathleen Adamson Six years, the first two
years in an easily
accessible place
<PAGE>
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Proxy State- CSRM (Portland) Kathleen Adamson Six years, the first two
ments and years in an easily
Proxy Cards accessible place
Pricing Sheets Finance Eric Jones Permanently, the first two
years in an easily
accessible place
Bank State- Treasurers Rusty Summers Six years, the first two
ments years in an easily
accessible place
March 24, 2000
<PAGE>
POWER OF ATTORNEY
I undersigned officer of The Lincoln National Life Insurance Company, hereby
revoke all powers of attorney authorizing any person to act as attorney-in-fact
relative to Lincoln National Variable Annuity Account L (Group Variable Annuity
II), which were previously executed by me and do hereby severally constitute and
appoint Kelly D. Clevenger, Jeffrey K. Dellinger, and Steven M. Kluever, my true
and lawful attorneys-in-fact, with full power in each of them to sign for me, in
my name and in the capacities indicated below, any and all amendments to
Registration Statement No. 333-5827 filed with the Securities and Exchange
Commission under the Securities Act of 1933, on behalf of the Company in its own
name or in the name of one of its Separate Accounts, hereby ratifying and
confirming my signature as it may be signed by any of my attorneys-in-fact to
any such amendment to that Registration Statement. The power of attorney was
signed on April 30, 1999.
Signature Title
- --------- -----
/s/ Todd R. Stephenson Senior Vice President, Chief Financial Officer
- ------------------------- and Assistant Treasurer
Todd R. Stephenson (Principal Financial Officer)
STATE OF INDIANA )
) ss.
COUNTY OF ALLEN )
Subscribed and sworn to before me this
30th day of April, 1999
/s/ Kimberly J. DeLong
-------------------------------------
Notary public
Commission Expires: 1-29-2007
---------
<PAGE>
POWER OF ATTORNEY
I undersigned officer of The Lincoln National Life Insurance Company, hereby
revoke all powers of attorney authorizing any person to act as attorney-in-fact
relative to Lincoln National Variable Annuity Account L (Group Variable Annuity
II), which were previously executed by me and do hereby severally constitute and
appoint Kelly D. Clevenger, Jeffrey K. Dellinger, and Steven M. Kluever, my true
and lawful attorneys-in-fact, with full power in each of them to sign for me, in
my name and in the capacities indicated below, any and all amendments to
Registration Statement No. 333-5827 filed with the Securities and Exchange
Commission under the Securities Act of 1933, on behalf of the Company in its own
name or in the name of one of its Separate Accounts, hereby ratifying and
confirming my signature as it may be signed by any of my attorneys-in-fact to
any such amendment to that Registration Statement. The power of attorney was
signed on April 29, 1999.
Signature Title
- --------- -----
/s/ Keith J. Ryan Vice President and Controller
- --------------------------- (Principal Accounting Officer)
Keith J. Ryan
STATE OF INDIANA)
)ss:
COUNTY OF ALLEN ) Subscribed and sworn to before me this
29th day of April, 1999.
/s/ Janet L. Lindenberg
---------------------------------------
Notary public
Commission Expires: 7-10-2001
---------
<PAGE>
POWER OF ATTORNEY
I undersigned officer of The Lincoln National Life Insurance Company, hereby
revoke all powers of attorney authorizing any person to act as attorney-in-fact
relative to Lincoln National Variable Annuity Account L (Group Variable
Annuity II), which were previously executed by me and do hereby severally
constitute and appoint Kelly D. Clevenger, Jeffrey K. Dellinger, and Steven M.
Kluever, my true and lawful attorneys-in-fact, with full power in each of them
to sign for me, in my name and in the capacities indicated below, any and all
amendments to Registration Statement No. 333-5827 filed with the Securities and
Exchange Commission under the Securities Act of 1933, on behalf of the Company
in its own name or in the name of one of its Separate Accounts, hereby ratifying
and confirming my signature as it may be signed by any of my attorneys-in-fact
to any such amendment to that Registration Statement. The power of attorney was
signed on January 6, 2000.
Signature Title
- --------- -----
/s/ Jon A. Boscia President and Director
- -------------------------- (Principal Executive Officer)
Jon A. Boscia
STATE OF PENNSYLVANIA )
)ss:
COUNTY OF PHILADELPHIA)
Subscribed and sworn to before me this
6th day of January, 2000.
Judith M. Callihan
----------------------------------------
Notary public
Commission Expires: Oct. 18, 2003
