<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 22, 1996
REGISTRATION NO. 33-_____
REGISTRATION NO. 811-____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
___________
FORM N-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 /X/
(GROUP VARIABLE ANNUITY III)
Pre-Effective Amendment No. / /
Post-Effective Amendment No. / /
AND/OR
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940 / /
Amendment No. 2 /X/
___________
LINCOLN LIFE & ANNUITY
VARIABLE ANNUITY ACCOUNT L
(Exact Name of Registrant)
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
(Name of Depositor)
120 Madison Street, 17th Floor
Syracuse, New York 13202
(Address of Depositor's Principal Executive Offices)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE: _______________
JOHN L. STEINKAMP, ESQUIRE
VICE PRESIDENT & ASSOCIATE GENERAL COUNSEL
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
1300 SOUTH CLINTON STREET, P.O. BOX 1110
FORT WAYNE, IN 46801
(Name and Complete Address of Agent for Service)
Copy to:
Frederick R. Bellamy, Esquire
Sutherland, Asbill & Brennan
1275 Pennsylvania Avenue, N.W.
Washington, D.C. 20004-2404
Approximate date of proposed public offering: As soon as practicable after the
effective date of this Registration Statement.
Variable Annuity Contracts -- Registration of an indefinite amount of securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940. The amount of
the filing fee is $500.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
CROSS REFERENCE SHEET
SHOWING LOCATION OF INFORMATION IN PROSPECTUS
FORM N-4 PROSPECTUS CAPTION
- - - -------- ------------------
1. Cover Page . . . . . . . . . . . . . Cover Page
2. Definitions. . . . . . . . . . . . . Definitions
3. Synopsis or Highlights . . . . . . . Summary
4. Condensed Financial Information. . . Condensed Financial Information
5. General Description of Registrant, Lincoln Life, the Variable
Depositor and Portfolio Companies. . Investment Division and the Funds
6. Deductions and Expenses. . . . . . . Deductions and Charges
7. General Description of Variable Contract Provisions; Other Contract
Annuity Contracts. . . . . . . . . . Provisions
8. Annuity Period . . . . . . . . . . . Annuity Period
9. Death Benefit. . . . . . . . . . . . Contract Provisions, Death Benefits
10. Purchases and Contract Values. . . . Contract Provisions
11. Redemptions. . . . . . . . . . . . . Contract Provisions, Withdrawals
12. Taxes. . . . . . . . . . . . . . . . Federal Income Tax Considerations
13. Legal Proceedings. . . . . . . . . . Not Applicable
14. Table of Contents of the Statement Contents of Statement of
of Additional Information . . . . . Additional Information
CROSS REFERENCE SHEET
SHOWING LOCATION OF INFORMATION IN STATEMENT OF ADDITIONAL INFORMATION
FORM N-4 STATEMENT OF ADDITIONAL INFORMATION
- - - -------- CAPTION
-----------------------------------
15. Cover Page . . . . . . . . . . . . . Cover Page
16. Table of Contents. . . . . . . . . . Table of Contents
17. General Information and History. . . Prospectus-Lincoln Life, The
Variable Investment Division
and the Funds
18. Services . . . . . . . . . . . . . . Not Applicable
19. Purchase of Securities Being
Offered . . . . . . . . . . . . . . Not Applicable
20. Underwriters . . . . . . . . . . . . Distribution of the Contracts
21. Calculation of Yield Quotations
of Money Market Sub Accounts. . . . Not Applicable
22. Annuity Payments . . . . . . . . . . Determination of Variable Annuity
Payment
23. Financial Statements . . . . . . . . Financial Statements
CROSS REFERENCE SHEET
SHOWING LOCATION OF INFORMATION IN PART C-OTHER INFORMATION
24(a) Financial Statements and Exhibits. Not Applicable
24(b) Exhibits . . . . . . . . . . . . . Exhibits
25. Directors and Officers of the Directors and Officers of the
Depositor . . . . . . . . . . . . . Depositor
26. Persons Controlled by or Under
Common Control with the Depositor
or Registrant . . . . . . . . . . . Organizational Chart
27. Number of Contract Owners. . . . . . Number of Contract Owners
28. Indemnification. . . . . . . . . . . Indemnification
29. Principal Underwriters . . . . . . . Principal Underwriters
<PAGE>
30. Location of Accounts and Records . . Location of Accounts and Records
31. Management Services. . . . . . . . . Management Services
32. Undertakings . . . . . . . . . . . . Undertakings
<PAGE>
LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
Group Variable Annuity Contracts
Lincoln Life & Annuity
Variable Annuity Account L
120 Madison Street, 17th Floor
Syracuse, New York 13202
GROUP VARIABLE ANNUITY III
================================================================================
PROSPECTUS
================================================================================
_________ __, 1996
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN
WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO
MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS.
THIS PROSPECTUS IS VALID ONLY WHEN ACCOMPANIED BY THE CURRENT PROSPECTUS
OF THE APPLICABLE UNDERLYING FUNDS WHICH SHOULD BE RETAINED FOR FUTURE
REFERENCE.
INVESTMENT IN THE CONTRACTS INVOLVES INVESTMENT RISK, INCLUDING MARKET
FLUCTUATION AND POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
This prospectus describes group annuity contracts ("Contracts") offered by
Lincoln Life & Annuity Company of New York ("Lincoln Life"), a subsidiary of
The Lincoln National Life Insurance Company. The Contracts are designed to
enable Participants and Employers to accumulate funds for retirement programs
meeting the requirements of the following Sections of the Internal Revenue
Code of 1986, as amended (the "Code"): 401(a), 403(b), 408 and 457 and other
related Sections as well as for programs offering non-qualified annuities. A
Participant is an employee or other person affiliated with the Contractholder
on whose behalf a Participant Account is maintained under the terms of the
Contract.
The Contracts permit Contributions to be deposited in the Guaranteed
Interest Division, which is part of Lincoln Life's General Account, and in
certain Sub-Accounts in Lincoln Life's Lincoln Life & Annuity Variable
Annuity Account L ("Variable Investment Division"). Contributions to the
Guaranteed Interest Division earn interest at a guaranteed rate declared by
Lincoln Life. Contributions to the Variable Investment Division will increase
or decrease in dollar value depending on the investment performance of the
underlying funds in which the Sub-Accounts invest.
Currently, the Variable Investment Division consists of the nine
Sub-Accounts listed below: Next to each listed Sub-Account is the name of
the fund (the "Fund") in which the Sub-Account invests. For more information
about the investment objectives, policies and risks of the Funds please refer
to the prospectus for each of the Funds.
Index Account.................................. Dreyfus Stock Index Fund
Growth I Account............................... Fidelity's Variable Insurance
Products Fund: Growth Portfolio
Asset Manager Account.......................... Fidelity's Variable
Insurance Products Fund II:
Asset Manager Portfolio
Growth II Account.............................. Twentieth Century's TCI
Portfolios, Inc.: TCI Growth
Balanced Account............................... Twentieth Century's TCI
Portfolios, Inc.: TCI Balanced
International Stock Account.................... T. Rowe Price International
Series, Inc.
Socially Responsible Account.................. Calvert Responsibly Invested
Balanced Portfolio
Equity-Income Account.......................... Fidelity's Variable Insurance
Products Fund: Equity-Income
Portfolio
Small Cap Account.............................. Dreyfus Variable Investment
Fund: Small Cap Portfolio
This prospectus is intended to provide information regarding the Contracts
offered by Lincoln Life that you should know before investing. Please read
and retain this prospectus for future reference. A Statement of Additional
Information ("SAI"), dated __________ __, 1996, has been filed with the
Securities and Exchange Commission and is incorporated by this reference into
this Prospectus. If you would like a free copy write to Lincoln Life &
Annuity Company of New York 120 Madison Street, 17th Floor, Syracuse, New
York 13202 or call 1-800-_____-_____. A table of contents for the SAI
appears on the last page of this Prospectus.
<PAGE>
TABLE OF CONTENTS
PAGE
----
DEFINITIONS....................................................................3
SUMMARY (Including Fee Table and Performance Information)......................6
CONDENSED FINANCIAL INFORMATION...............................................10
FINANCIAL STATEMENTS..........................................................11
LINCOLN LIFE, THE VARIABLE INVESTMENT DIVISION AND THE FUNDS..................11
CONTRACT PROVISIONS...........................................................14
DEDUCTIONS AND CHARGES........................................................21
ANNUITY PERIOD................................................................23
FEDERAL INCOME TAX CONSIDERATIONS.............................................25
VOTING RIGHTS.................................................................31
OTHER CONTRACT PROVISIONS.....................................................31
GUARANTEED INTEREST DIVISION..................................................32
TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION.....................35
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<PAGE>
DEFINITIONS
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.
ACCUMULATION UNIT VALUE: The dollar value of an Accumulation Unit in each Sub-
Account on any Valuation Date.
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), annuitization, imposition of charges,
payment of a Death Benefit or a combination thereof.
ANNUITANT: The person receiving annuity payments under the terms of the
Contract.
ANNUITY COMMENCEMENT DATE: The date on which Lincoln Life makes the first
annuity payment to the Annuitant as required by the Retired Life Certificate.
ANNUITY CONVERSION AMOUNT: The amount applied toward the purchase of an
annuity.
ANNUITY PERIOD: The period concurrent with or following the Accumulation
Period, during which an Annuitant's annuity payments are made.
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.
BUSINESS DAY: A day on which the New York Stock Exchange is customarily open
for business.
CONTRIBUTIONS: All amounts deposited under a Contract, including any amount
transferred from another contract or Trustee.
CONTRACT: A Group Variable Annuity contract issued by Lincoln Life to the
Contractholder.
CONTRACTHOLDER: The party named as the Contractholder on the group annuity
contract issued by Lincoln Life. The Contractholder may be an Employer, a
retirement plan trust, an association or any other entity allowed under the
law.
DIVISION(S): The Guaranteed Interest Division and/or the Variable Investment
Division.
EMPLOYER: The organization specified in the Contract which offers the Plan
to its employees.
FUNDS: The underlying funds in which the Sub-Accounts invest. Funds are
investment vehicles which offer their shares only to insurance companies'
separate accounts.
GENERAL ACCOUNT: All assets of Lincoln Life other than those in the Variable
Investment Division or any other separate account.
GROSS WITHDRAWAL AMOUNT: The amount by which a Participant's Account is
reduced when a withdrawal occurs, including any applicable Annual
Administration Charge.
-3-
<PAGE>
GUARANTEED ANNUITY: An annuity for which Lincoln Life guarantees the amount
of each payment for as long as the annuity is payable.
GUARANTEED INTEREST DIVISION: The Division maintained by Lincoln Life for
the Contracts 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 the Contract. Amounts allocated to the Guaranteed
Interest Division are part of the General Account.
LINCOLN LIFE: Lincoln Life & Annuity Company of New York.
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.
NET WITHDRAWAL AMOUNT: The amount paid when a withdrawal occurs.
PARTICIPANT: An employee or other person affiliated with the Contractholder
on whose behalf an Account is maintained under the terms of the Contract.
PARTICIPANT 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.
PARTICIPATION ANNIVERSARY: For each Participant, a date at one year
intervals from the Participant's Participation Date. If an anniversary
occurs on a non-Business Day, it is treated as occurring on the next Business
Day.
PARTICIPATION DATE: A date assigned to each Participant corresponding to the
date on which the first Contribution on behalf of that Participant is
received by Lincoln Life. A Participant will receive a new Participation
Date if such Participant makes a Total Withdrawal, as defined in this
prospectus, and Contributions on behalf of the Participant are resumed under
any 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.
PAYOUT ANNUITY: A series of payments paid under the terms of a Contract to a
person. A Payout Annuity may be either a Guaranteed Annuity or a Variable
Annuity or a combination Guaranteed and Variable Annuity.
PLAN: The retirement program offered by an Employer to its employees for
which a Contract is used to accumulate funds.
RECEIPT: Receipt by Lincoln Life at its service office in Portland, Maine.
SUB-ACCOUNT: An account established in the Variable Investment Division
which invests in shares of a corresponding Fund.
VALUATION DATE: A Business Day. Accumulation Units and Annuity Units are
computed as of the close of trading on the New York Stock Exchange.
-4-
<PAGE>
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.
VARIABLE ANNUITY: An annuity with payments that increase or decrease in
accordance with the investment results of the selected Sub-Accounts.
VARIABLE INVESTMENT DIVISION: The Division which is maintained by Lincoln
Life for these Contracts and other Lincoln Life contracts for which Lincoln
Life does not guarantee the principal amount or investment results. The
Variable Investment Division is the Lincoln Life & Annuity Variable Annuity
Account L which is a group of assets segregated from the General Account
whose income, gains and losses, realized or unrealized, are credited to or
charged against the Variable Investment Division without regard to other
income, gains or losses of Lincoln Life. The Variable Investment Division
currently consists of nine Sub-Accounts. Additional Sub-Accounts may be
added in the future.
-5-
<PAGE>
SUMMARY
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Lincoln Life is a life insurance company founded in New York on
___________ __, 1996. Lincoln Life is a subsidiary of The Lincoln National
Life Insurance Company.
CONTRACTS OFFERED
The Group Variable Annuity Contracts offered by this prospectus are
available to Employers and other entities to provide a way to accumulate
funds for retirement and to provide Payout Annuities. Lincoln Life offers
Contracts designed to enable Participants and Employers to accumulate funds
for retirement programs meeting the requirements of the following Sections of
the Internal Revenue Code of 1986, as amended (the "Code"): 401(a), 403(b),
408, 457 and other related Sections as well as for programs offering
non-qualified annuities.
HOW CONTRIBUTIONS ARE MADE
Contributions under the Contract are deposited by the Contractholder.
Depending upon the type of Plan offered, Contributions may consist of salary
reduction Contributions, Employer Contributions or Participant post-tax
Contributions. Contributions are forwarded by the Contractholder to Lincoln
Life and allocated among the two Divisions in accordance with information
provided by the Contractholder. See "Contract Provisions, Contributions
under the Contract."
DIVISIONS OFFERED
Contributions may be allocated to the Guaranteed Interest Division or to
the Variable Investment Division or to both Divisions. The Variable
Investment Division currently consists of nine Sub-Accounts. A
Contractholder may choose to offer between zero and nine of the Sub-Accounts
to its Participants under a Contract. The Sub-Accounts invest their assets
in shares of a corresponding Fund. For a full description of the Funds, see
the prospectuses for the Funds.
TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
During the Accumulation Period, a Participant or a Contractholder under
certain Plans may make transfers between and among Divisions and
Sub-Accounts. Certain Plans may limit the transfers in dollar amount, type of
Contribution, or frequency. Certain Plans may require Contractholder
approval for a transfer. See "Transfers between Divisions and Sub-Accounts."
WITHDRAWALS AND DISTRIBUTIONS
During the Accumulation Period, a Participant may withdraw any part of
their Account balance subject to the restrictions imposed by the Code and
regulations thereof and by the applicable Plan. With respect to Section
401(a) Plans and Plans subject to Title I of the Employee Retirement Income
Security Act of 1974 (ERISA), the Contractholder must authorize Lincoln Life
to process a withdrawal request by a Participant. Withdrawal requests under
Section 457 Plans must also be authorized by the Contractholder. With
respect to withdrawal requests by Participants under Plans not subject to
Title I of ERISA, certain Contracts may require that the Participants must
certify to Lincoln Life that an eligible event under the Code has occurred.
Withdrawal and Distribution requests must be in writing and in a form
acceptable to Lincoln Life.
-6-
<PAGE>
Certain Plans are also subject to the distribution requirements under
Section 401(a)(9) of the Code including the incidental death benefit
requirements of Section 401(a)(9)(G). Certain transfers from one Qualified
Plan contract to another Qualified Plan contract are not subject to
withdrawal restrictions under the Code. Withdrawals and distributions may
have tax consequences, including possibly a 10% Federal Excise Tax for
premature distributions. See "Federal Income Tax Considerations."
DEATH BENEFITS
The Contracts provide for a Death Benefit for a Participant who dies
during the Accumulation Period. See "Contract Provisions, Death Benefits."
PAYOUT ANNUITIES
As permitted by the applicable Plan, a Contractholder or a Participant
who requests a withdrawal or a Beneficiary of a deceased Participant may
elect to convert all or part of the Participant's Account balance or the
Death Benefit, as appropriate, to a Payout Annuity. Lincoln Life offers both
Guaranteed and Variable Annuities or a combination Guaranteed and Variable
Annuity. The range of annuity options available includes life annuities and
annuities for a specific time period as well as others described more fully
in this prospectus. See "Annuity Period."
FREE-LOOK PROVISION
A Participant under a Section 403(b) or 408 Plan and certain
Non-qualified Plans has ten days, in most cases, from the date the
Participant receives an Active Life Certificate to notify Lincoln Life in
writing that the Participant does not choose to participate under the
Contract and to receive a return of funds. See "Free-Look Period."
FEE TABLE
The following table and examples, prescribed by the SEC, are included to
assist Contractholders and Participants in understanding the transaction and
operating expenses imposed directly or indirectly under the Contracts. The
standardized tables and examples assume the highest deductions possible under
the Contracts, whether or not such deductions actually would be made from a
Participant's Account.
CONTRACT RELATED TRANSACTION EXPENSES(1)
Sales Load Imposed on Purchases: 0%
ANNUAL ADMINISTRATION CHARGE(2) $25
SEPARATE ACCOUNT ANNUAL EXPENSES
(as a percentage of average daily net assets)
Mortality and Expense Risk Charge: 1.20%
Other Charges: 0.00%
Total Separate Account
Annual Expenses: 1.20%
-7-
<PAGE>
FUND EXPENSES (3)
(as a percentage of average daily net assets)
<TABLE>
<CAPTION>
Index(4) G-I AMgr(5) G-II Bal Int'l Soc Res(6) Eql SmCap
-------- --- ------- ---- --- ----- ---------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Management Fees: .27 .61 .71 1.0 1.0 1.05 .70 .51 .75
Other Expenses .12 .09 .__ .13 .10 .08
(after expense
reimbursements):
Total Fund Expenses: .39 .70 .__ 1.0 1.0 1.05 .83 .61 .83
</TABLE>
Example #1: Assuming total withdrawal of the Participant's Account balance
at the end of the period shown. (7)
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
Index G-I AMgr G-II Bal Int'l Soc Res Eql SmCap
----- --- ---- ----- --- ----- ------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year
3 Years
</TABLE>
Example #2: Assuming annuitization of the Participant's Account at the end of
the period shown.
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
Index G-I AMgr G-II Bal Int'l Soc Res Eql SmCap
----- --- ---- ---- --- ----- ------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year
3 Years
</TABLE>
Example #3: Assuming persistency of the Participant's Account through the
periods shown.
A $1,000 investment would be subject to the expenses shown, assuming 5%
annual return on assets.
<TABLE>
<CAPTION>
Index G-I AMgr G-II Bal Int'l Soc Res Eql SmCap
----- --- ---- ---- --- ----- ------- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Year
3 Years
</TABLE>
For purposes of these examples, the effect of the Annual Administration Charge
has been computed based on an estimated aggregate amount of Annual
Administration Charges collected equal to $___________ and an estimated
Participant's Account equal to $__________.
- - - ---------------------
(1) The examples do not take into account any deduction for premium taxes which
may be applicable.
(2) The Employer has the option of paying the Annual Administration Charge on
behalf of the Participants under a Contract. In such a situation, the
projected expenses would be lower than those indicated in the examples.
This charge is not imposed during the Annuity Period. In certain
situations the Annual
-8-
<PAGE>
Administrative Charge may be reduced or eliminated. See "Deductions &
Charges - Annual Administrative Charge".
(3) Until complete order instructions are received, initial Contributions may
be allocated temporarily to Fidelity's Variable Insurance Products Fund:
Money Market Portfolio ("VIPF Money Market Portfolio"). Management fees for
this fund are 0.24%. Other expenses are 0.09%. Total Fund Expenses are
0.33%. The Mortality and Expense Risk Charge is not assessed.
(4) Total Fund Operating Expenses, excluding brokerage commissions and
transaction fees, are guaranteed not to exceed .40% of the Dreyfus Stock
Index Fund, Inc.'s average daily net assets. To the extent these Fund
expenses exceed .40% of the Fund's average daily net assets, The Dreyfus
Corporation, the Fund's administrator, will bear such excess expense. In
the absence of such reimbursement, the Other Expenses and Total Fund
Expenses for fiscal year ending December 31, 1995 would have been _________
and ________ respectively.
(5) A portion of the brokerage commissions the Fund paid was used to reduce its
expenses. Without this reduction, total operating expenses would have
been: Asset Manager-0.79%.
(6) "Other Expenses" reflect an indirect fee of 0.02%. Net Fund Operating
Expenses after reduction for fees paid indirectly would be 0.81%.
(7) The Contracts are designed for retirement planning. Withdrawals prior to
retirement or the Annuity Commencement Date are not consistent with the
long-term purposes of the Contracts and the applicable tax laws.
The fee table and examples reflect expenses and charges of the Sub-Accounts
and the expenses of the applicable Fund for the year ended December 31, 1995.
However, the examples should not be considered a representation of past or
future expenses and charges of the Sub-Accounts or the Funds. Similarly, the
assumed 5% annual rate of return is not an estimate or a guarantee of future
investment performance. See "Deductions and Charges" in this prospectus and the
discussion of Fund Management in the prospectus for each of the Funds for
further information.
PERFORMANCE INFORMATION
The Variable Investment Division may advertise or use in sales literature
information concerning the investment performance of the various Sub-Accounts.
No performance presentation should be considered as representative of future
investment results. Actual performance is a function not only of the investment
management of the underlying Funds and market forces, but of the time and
frequency of Contributions, the charges and fees imposed under the Contract, the
fees and expenses of the Funds, and transfers made by a Participant, among other
factors.
The investment performance of the Sub-Accounts may be advertised in
comparison with the performances of other variable annuities, other investment
companies (such as mutual funds), and recognized indices (such as the Dow Jones
Industrial Average, Standard & Poor's 500 Composite Stock Price Index, NASDAQ
Index, Consumer Price Index), and data published by Lipper Analytical Services,
Inc., Morningstar, and Variable Annuity Research and Data Service or comparable
services. Performance of the Sub-Accounts may also be compared with performance
of other types of investments. Some advertisements may also include published
editorial comments and performance rankings by independent organizations and
publications that monitor the performance of separate accounts and mutual funds.
-9-
<PAGE>
The Sub-Accounts may advertise average annual total return performance
information according to the SEC standardized formula. Average annual total
return shows the average annual percentage increase, or decrease, in the value
of a hypothetical $1,000 contribution allocated to a Sub-Account from the
beginning to the end of each specified period of time. The SEC standardized
formula gives effect to all applicable charges under the Contracts. This method
of calculating performance further assumes that (i) a $1,000 contribution was
allocated to a Sub-Account, (ii) no transfers or additional payments were made
and (iii) the withdrawal of the investment occurs at the end of the period.
Premium taxes are not included in this calculation. The Sub-Accounts may also
advertise this total return performance as described above on a cumulative
basis.
The Sub-Accounts may present total return information computed on a
calendar year basis. The Sub-Accounts may also present total return
information over specified periods of time (computed on an average annual or
cumulative basis) assuming that no administrative charge will be deducted.
The Sub-Accounts may present hypothetical examples that apply the total
return to a hypothetical initial investment. The Sub-Accounts may also
present total return information based on different amounts of periodic
investments. For additional performance information, please refer to the
Statement of Additional Information.
PUBLISHED RATINGS
From time to time, in advertisements or in reports to Contractholders,
Lincoln Life may reflect endorsements. Endorsements are often in the form of
a list of organizations, individuals or other parties which recommend Lincoln
Life or the Contracts. The endorser's name will be used only with the
endorser's consent. It should be noted that the list of endorsements may
change from time to time.
Also, from time to time, the rating of Lincoln Life as an Insurance
company by A.M. Best may be referred to in advertisements or in reports to
Contractholders. Each year the A.M. Best Company reviews the financial
status of thousands of Insurers, culminating in the assignment of Best's
Ratings. These ratings reflect their current opinion of the relative
financial strength and operating performance of an insurance company in
comparison to the norms of the life/health insurance Industry. Best's
ratings range from A++ to F.
In addition, the claims-paying ability of Lincoln Life as measured by the
Standard and Poor's Rating Group may be referred to in advertisements or in
reports to Contractholders. A Standard and Poor's insurance claims-paying
ability rating is an assessment of an operating insurance company's financial
capacity to meet the obligations of its insurance policies in accordance with
their terms. Standard and Poor's ratings range from AAA to CCC.
From time to time Lincoln Life may refer to Moody's Investors Service
rating of Lincoln Life. Moody's Investors Service financial strength ratings
indicate an insurance company's ability to discharge policyholder obligations
and claims and are based on an analysis of the insurance company and its
relationship to its parent, subsidiaries, and affiliates. Moody's Investors
Service ratings range from Aaa to C.
These ratings are opinions of an operating insurance company's financial
capacity to meet the obligations of its insurance contracts in accordance
with their terms. Claims-paying ability ratings do not refer to an insurer's
ability to meet non-contract obligations (i.e., debt/commercial paper). Lincoln
Life's ratings should not be considered as bearing on the investment
performance of assets held in the Variable Investment Division or the safety
(or lack thereof) for an investment in the Variable Investment Division.
CONDENSED FINANCIAL INFORMATION
No condensed financial information for the Variable Investment Division
is presented because, as of the date of this Prospectus, the Variable
Investment Division had not yet commenced operations.
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FINANCIAL STATEMENTS
The financial statements of Lincoln Life may be found in the Statement of
Additional Information. As of the date of this Prospectus, the Variable
Investment Division had not yet commenced operations. Accordingly, it has no
financial statements.
LINCOLN LIFE, THE VARIABLE INVESTMENT
DIVISION AND THE FUNDS
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Lincoln Life is a life insurance company chartered under New York law on
June 6, 1996. Lincoln Life's principal executive offices are located at 120
Madison Street, 17th Floor, Syracuse, New York 13202. Lincoln Life's
telephone number is (___) ___-_____. Lincoln Life is licensed to sell
variable contracts in New York.
Lincoln Life is a subsidiary of The Lincoln National Life Insurance
Company. The Lincoln National Life Insurance Company was incorporated under
the laws of Indiana on June 12, 1905. The Lincoln National Life Insurance
Company is principally engaged in offering life insurance policies and
annuity policies, and ranks among the ten largest United States stock life
insurance companies in terms of assets and life insurance in force.
The Lincoln National Life Insurance Company is wholly owned by Lincoln
National Corporation ("LNC"), a publicly held insurance holding company
incorporated under Indiana law on January 5, 1968. The principal offices of
both The Lincoln National Life Insurance Company and LNC are located at 1300
South Clinton Street, Fort Wayne, Indiana 46801. Through subsidiaries, LNC
engages primarily in the issuance of life insurance and annuities, property
casualty insurance, and other financial services. Administrative services
necessary for the operation of the Variable Investment Division and the
Contracts are currently provided by The Lincoln National Life Insurance
Company. See "Deductions and Charges - Annual Administration Charge."
LNC EQUITY SALES CORPORATION
LNC Equity Sales Corporation ("LNC Equity"), a registered broker-dealer,
is the principal underwriter of the Contracts. As such, LNC Equity will be
offering the Contracts and performing all duties and functions that are
necessary and proper for distribution of the Contracts. LNC Equity has also
entered into sales agreements with independent broker-dealers for the sale of
the Contracts. Lincoln Life may pay sales commissions to broker-dealers up
to an amount equal to ___% of Contributions under a Contract. LNC Equity's
principal business address is 1300 South Clinton Street, Fort Wayne, Indiana
46802.
THE VARIABLE INVESTMENT DIVISION
On July 24, 1996, the Board of Directors of Lincoln Life authorized the
establishment of the Variable Investment Division in accordance with New York
Insurance Laws. Under New York law, funds in the Variable Investment
Division are owned by Lincoln Life and Lincoln Life is not, nor can Lincoln
Life be, a trustee with respect to those funds. The Variable Investment
Division is registered with the Securities and Exchange Commission ("SEC") as
a unit investment trust under the Investment Company Act of 1940 ("1940
Act"). Registration with the SEC does not involve supervision of the
management or investment practices or policies of either the Variable
Investment Division or Lincoln Life by the SEC.
The Variable Investment Division currently consists of nine Sub-Accounts.
The Sub-Accounts invest in shares of the Funds. Therefore, the investment
experience of the Sub-Accounts depends on the performance of the Funds.
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The Variable Investment Division is a segregated investment account,
meaning that its assets may not be charged with liabilities resulting from
any other business Lincoln Life may conduct. The income, gains and losses,
realized or unrealized, from assets allocated to each Sub-Account of the
Variable Investment Division are credited to or charged against that
Sub-Account, without regard to other income, gains or losses in Lincoln
Life's general account or any other separate account or Sub-Account. The
Contract provides that the assets of the Variable Investment Division may not
be charged with liabilities arising out of any other business of Lincoln
Life. Lincoln Life may accumulate in the Variable Investment Division
proceeds from charges under the Contract and other amounts in excess of the
Variable Investment Division assets representing Contract reserves and
liabilities. Lincoln Life is the issuer of the Contracts and the obligations
set forth therein, other than those of the Contractholder or the Participant,
are obligations of Lincoln Life.
THE FUNDS
The nine Sub-Accounts invest directly in nine corresponding Funds. Each
of these Funds was formed as an investment vehicle for insurance company
separate accounts.
Information about each of the Funds, including their investment
objectives and investment management, is contained below. Additional
information about the Funds, their investment policies, risks, fees and
expenses and all other aspects of their operations, can be found in the
prospectuses for the Funds, which should be read carefully before investing.
THERE IS NO ASSURANCE THAT ANY FUND WILL ACHIEVE ITS STATED OBJECTIVES.
Additional copies of the Funds' prospectuses, as well as their Statements of
Additional Information, can be obtained directly from each of the Funds
without charge by writing to the particular Funds at the addresses noted on
the front of the prospectus. Shares of the Funds are sold not only to the
Sub-Accounts but also to variable annuity and variable life separate accounts
of other insurance companies and qualified retirement plans. For a
disclosure of possible conflicts involved in the Sub-Accounts investing in
Funds that are so offered, see the applicable Fund prospectus.
DREYFUS STOCK INDEX FUND
Dreyfus Stock Index Fund is an open-end, non-diversified management
investment company known as an index fund. Its goal is to provide investment
results that correspond to the price and yield performance of publicly traded
common stocks in the aggregate, as represented by the Standard & Poor's 500
Composite Stock Price Index. The Fund is neither sponsored by nor affiliated
with Standard & Poor's Corporation. The Fund sells its shares to the Index
Account at net asset value, without the imposition of a sales charge.
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, acts as the Fund manager and Mellon Equity Associates, an affiliate of
Dreyfus located at 500 Grant Street, Pittsburgh, Pennsylvania 15258, is the
Fund index manager.
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
The Calvert Responsibly Invested Balanced Portfolio is a series of Acacia
Capital Corporation (the "Fund"), an open-end management investment company
whose investment advisor is Calvert Asset Management Company, Inc. located at
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
The Calvert Responsibly Invested Balanced Portfolio seeks total return
above the rate of inflation through an actively managed, non-diversified
portfolio of common and preferred stocks, bonds, and money market instruments
which offer income and growth opportunity and which satisfy the social
concern criteria established for the Portfolio. Shares of the Fund are
offered only to insurance companies for allocation to certain of their
variable accounts.
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DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, diversified management
investment company that is intended to be a funding vehicle for variable
annuity contracts and variable life insurance policies to be offered by the
separate accounts of various life insurance companies.
THE SMALL CAP PORTFOLIO: The Portfolio seeks to maximize capital
appreciation. The Small Cap Portfolio seeks out companies that The Dreyfus
Corporation believes have the potential for significant growth. Under normal
market conditions, the Portfolio will invest at least 65% of its total assets
in companies with market capitalization of less than $750 million, at the
time of purchase, both domestic and foreign where there is a belief that new
or innovative products or services should enhance prospects for growth in
future earnings. The Portfolio may also invest in special situations such as
corporate restructurings, mergers or acquisitions.
The Dreyfus Corporation, located at 200 Park Avenue, New York, New York
10166, serves as the Fund's investment adviser.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND
The Variable Insurance Products Fund was designed to provide investment
vehicles for variable annuity and variable life insurance contracts of
various life insurance companies.
EQUITY-INCOME PORTFOLIO: The Portfolio seeks reasonable income by normally
investing at least 65% of its total assets in income-producing common or
preferred stock and the remainder in debt securities.
GROWTH PORTFOLIO: The Portfolio seeks to achieve capital appreciation. The
Portfolio normally purchases common stocks, although its investments are not
restricted to any one type of security. Capital appreciation may also be
found in other types of securities, including bonds and preferred stocks.
MONEY MARKET PORTFOLIO: The Portfolio seeks to obtain as high a level of
current income as is consistent with preserving capital and providing
liquidity. For more information regarding the Portfolio, into which initial
Contributions are invested pending Lincoln Life's receipt of a complete
order, please see the "Initial Contributions" section.
Fidelity Management & Research Company ("FMR") is the manager of the
Equity-Income Portfolio, the Growth Portfolio and the Money Market Portfolio
and is located at 82 Devonshire Street, Boston, Massachusetts 02109.
FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II
Variable Insurance Products Fund II is designed to provide investment
vehicles for variable annuity and variable life insurance contracts.
ASSET MANAGER PORTFOLIO: The Portfolio seeks high total return with reduced
risk over the long term by allocating its assets among domestic and foreign
stocks, bonds and short-term fixed income instruments.
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FMR is the manager of the Portfolio and is located at 82 Devonshire
Street, Boston, Massachusetts 02109.
TWENTIETH CENTURY'S TCI PORTFOLIOS, INC.
TCI Portfolios, Inc. is a fund which offers its shares only to life
insurance companies to fund the benefits of variable annuity or variable life
insurance contracts. The Portfolios are managed by Investors Research
Corporation which also manages the Twentieth Century family of mutual funds.
Investors Research Corporation has its principal place of business at
Twentieth Century Tower, 4500 Main Street, Kansas City, Missouri 64111.
Lincoln Life may perform certain administrative services that would
otherwise be performed by Twentieth Century Services, Inc., and Investors
Research may pay Lincoln Life for such services.
TCI GROWTH: The Portfolio seeks capital growth by investing in common stocks
(including securities convertible into common stocks) and other securities
that meet certain fundamental and technical standards of selection and, in
the opinion of the fund's management, have better than average potential for
appreciation.
TCI BALANCED: The Portfolio 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 appreciation and the balance in bonds and other
fixed income securities.
T. ROWE PRICE INTERNATIONAL SERIES, INC.
T. Rowe Price International Series is a fund which offers its shares only
to life insurance companies to fund the benefits of variable annuity and
variable life contracts. It is managed by Rowe Price-Fleming International,
Inc., one of America's largest international no load mutual fund managers
with approximately $20.0 billion under management as of December 31, 1995
from its offices in Baltimore, London, Tokyo and Hong Kong.
The International Stock Portfolio seeks long-term growth of capital
through investments primarily in common stocks of established, non-U.S.
companies.
CONTRACT PROVISIONS
GENERAL
These Contracts were designed for Employers and other entities to enable
Participants and Employers to accumulate funds for retirement programs
meeting the requirements of the following Sections of the Internal Revenue
Code of 1986, as amended (the "Code"): 401(a), 403(b), 408, 457 and other
related Sections as well as for programs offering non-qualified annuities.
An Employer, Association or trustee in some circumstances, may enter into a
Contract with Lincoln Life by filling out an application and returning it to
Lincoln Life. Upon Lincoln Life's acceptance of the application,
Contractholders 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, Lincoln Life will issue to
each Participant a separate Active Life Certificate that describes the basic
provisions of the Contract to each Participant.
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CONTRIBUTIONS UNDER THE CONTRACT
Generally, under the Contracts, Contributions are forwarded by the
Contractholders to Lincoln Life 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
depending upon the Divisions available under the Contract and/or the Division
in which the Contributions are deposited. Contributions to the Guaranteed
Interest Division become part of Lincoln Life's General Account and are
guaranteed a minimum rate of interest. Contributions to the Variable
Investment Division increase or decrease in value daily to reflect the
investment experience of the Sub-Accounts in which the Contributions are
invested.
Contributions by Participants may be in any amount unless there is a
minimum amount set by the Contractholder or Plan. A Contract may require the
Contractholder to contribute a minimum annual amount on behalf of all
Participants. Annual Contributions under Qualified Plans may be subject to
maximum limits imposed by the Code. Annual Contributions under non-qualified
plans may be limited by the terms of the Contract. In the Statement of
Additional Information see "Tax Law Considerations" for a discussion of these
limits. Subject to any restrictions imposed by the Plan or the Code,
transfers from other contracts and qualified rollover Contributions will be
accepted.
Contributions must be in United States funds. All withdrawals and
distributions under this Contract will be in U.S. funds. If a bank or other
financial institution does not honor the check or other payment method
constituting a Contribution, Lincoln Life will treat the Contribution as
invalid. All allocation and subsequent transfers resulting from the invalid
Contributions shall be reversed and the party responsible for the invalid
Contribution shall reimburse Lincoln Life for any losses or expenses
resulting from the invalid Contribution.
INITIAL CONTRIBUTIONS
The initial Contribution for a Participant will be credited to the
Participant's Account no later than two Business Days after it is received by
Lincoln Life at its service office if it is preceded or accompanied by a
completed enrollment form containing all the information necessary for
processing the Participant's Contribution. If Lincoln Life does not receive
a complete enrollment form, Lincoln Life will notify the Contractholder or
the Participant that Lincoln Life does not have the necessary information to
process the Contribution. If the necessary information is not provided to
Lincoln Life within five (5) Business Days after Lincoln Life first receives
the initial Contribution, Lincoln Life will return the initial Contribution
less any withdrawal(s) by the Participant or by the Contractholder, unless
the Participant or the Contractholder specifically consents to Lincoln Life
retaining the Contribution until the enrollment form is made complete.
Notwithstanding the above, when the Contract includes language regarding
the "Pending Allocation Account", the following shall apply: Where state
approval has been obtained, if Lincoln Life receives Contributions which are
not accompanied by a properly completed Enrollment Form, Lincoln Life will
notify the Contractholder of that fact and deposit the Contributions to the
Pending Allocation Account, unless such Contributions are designated to
another Account in accordance with the Plan. Within two Business Days of
receipt of a properly completed Enrollment Form, the Participant's Account
balance in the Pending Allocation Account will be transferred in accordance
with the allocation percentages elected on the Enrollment Form. All future
Contributions will also be allocated in accordance with these percentages
until such time as the Participant may notify Lincoln Life of a change. If a
properly completed Enrollment Form is not received after three monthly
notices have been sent, the Participant's Account balance in the Pending
Allocation Account will be refunded to the Contractholder within 105 days of
the date of the initial Contribution. The Pending Allocation Account invests
in Fidelity's Variable Insurance Products Fund Money Market Portfolio and is
not available as an investment option under the group annuity
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contract. Mortality & Expense Risk Charges and the Annual Administration
Charge do not apply to this Account. These charges will be applicable upon
receipt of a properly completed Enrollment Form and the Participant's
contract Participation Date will be the date money was deposited in the
Pending Allocation Account.
ALLOCATION OF CONTRIBUTIONS
A Participant must designate in writing, subject to the Plan, the percent
of their Contribution which will be allocated to each Division and to each
Sub-Account available under their Contract. The Contributions allocation
percentage to the Guaranteed Investment Division or any Sub-Account can be in
any whole percent. Participants, whose Employer offers two or more Lincoln
Life contracts for the same type of Qualified or Non-qualified Plans, may
allocate Contributions to a maximum of ten Sub-Accounts and the Guaranteed
Interest Division. Participants, subject to the terms of the Plan, may
change the allocation of Contributions by notifying Lincoln Life in writing
or by telephone in accordance with procedures published by Lincoln Life.
Telephone requests for allocation changes follow the same verification of
identity rules as for Transfers. (See "Telephone Transfers.") When Lincoln
Life receives a notice in writing, the form must be acceptable to Lincoln
Life. Upon receipt by Lincoln Life, the change will be effective for all
Contributions received concurrently with the allocation change form and for
all future Contributions, unless a later date is requested. Changes in the
allocation of future Contributions have no effect on amounts a Participant
may have already contributed. Such amounts, however, may be transferred
between Divisions and Sub-Accounts pursuant to the requirements described in
"Transfers between Divisions and Sub-Accounts." Allocations of Employer
Contributions may be restricted by the applicable plan.
SUBSEQUENT CONTRIBUTIONS
The Contractholder will forward Contributions to Lincoln Life specifying
the amount being contributed on behalf of each Participant. The
Contractholder must send 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
the Variable Investment Division in accordance with the Contractholder's or
the Participant's written instructions as described above in "Allocation of
Contributions."
INVESTMENT OF CONTRIBUTIONS
Contributions are invested as of the date of receipt at Lincoln Life's
service office, provided that they are received prior to 4:00 p.m. (Eastern
Time) on a Business Day and allocation information is provided in a form
acceptable to Lincoln Life in accordance with procedures established by
Lincoln Life. If the Contribution is not received prior to 4:00 p.m.
(Eastern Time), Lincoln Life will invest the Contribution on the next
Business Day. Contributions on behalf of a Participant which are allocated to
the Variable Investment Division will be credited with Accumulation Units as
of that date. A Participant's interest in the Variable Investment Division
during the Accumulation Period is represented by the value of the
Accumulation Units credited to the Participant's Account balance in the
Variable Investment Division. The number of Accumulation Units credited to a
Participant's Account in a Sub-Account is calculated by dividing the
Contribution allocated to the Sub-Account by the dollar value of an
Accumulation Unit next determined after receipt of the Contribution. The
number of Accumulation Units purchased will not vary as a result of any
subsequent fluctuations in the Accumulation Unit Value. The Accumulation
Unit Value, of course, fluctuates with the investment performance of the
underlying Fund and also reflects deductions and charges made against the
Variable Investment Division.
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DETERMINATION OF ACCUMULATION UNIT VALUE
Lincoln Life determines the Accumulation Unit Value of each Sub-Account
on each Valuation Date. Accumulation Unit Values are determined by
multiplying the Net Investment Factor for the current Valuation Period by the
Accumulation Unit Value as of the end of the immediately preceding Valuation
Period.
Lincoln Life uses a Net Investment Factor to measure the daily
fluctuations in value of a Sub-Account. The Net Investment Factor for any
Valuation Period is determined as follows:
(a) The net asset value per share of the underlying Fund as of the end
of a Valuation Period is added to the amount per share of any dividends or
capital gain distributions paid by the Fund during that Valuation Period;
(b) The amount in (a) above is then divided by the net asset value per
share of the underlying Fund as of the end of the immediately preceding
Valuation Period;
(c) The result of (a) divided by (b) is then multiplied by one minus
the annual mortality and expense risk charge to the n/365th power where n
equals the number of calendar days since the immediately preceding
Valuation Date.
The above calculation will be adjusted by the amount per share of any
taxes which are incurred by Lincoln Life because of the existence of the
Variable Investment Division.
The Participant's Account balance is equal to the sum of the
Participant's Account balances in both the Variable Investment Division and
the Guaranteed Interest Division.
TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
During the Accumulation Period, transfers may be made of all or part of a
Participant's Account balance in any Division or Sub-Account to another
Sub-Account or Division subject to the limitations described below and in the
applicable Plan. Transfers will not change the allocation of future
Contributions to the Divisions and Sub-Accounts. Lincoln Life does not
require that any minimum amount be transferred. To effect a transfer,
Lincoln Life must receive a written transfer request in a form acceptable to
Lincoln Life. During any one calendar year a Participant may make one
transfer or withdrawal from the Guaranteed Interest Division to the Variable
Investment Division in an amount not to exceed 20% of the Guaranteed Interest
Division Account balance.
Transfers to or from the Variable Investment Division are made using the
Accumulation Unit Value next computed following Lincoln Life's receipt of the
written transfer request.
TELEPHONE TRANSFERS BETWEEN DIVISIONS AND SUB-ACCOUNTS
Lincoln Life may accept telephone transfers from Participants when this
is allowed by the Contractholder. In order to prevent unauthorized or
fraudulent transfers, Lincoln Life will require a Participant to provide
certain identifying information before Lincoln Life will act upon their
instructions. Lincoln Life may also assign the Participant a Personal
Identification Number (PIN) to serve as identification. Lincoln Life will
not be liable for following telephone instructions it reasonably believes are
genuine. Telephone transfer requests may be recorded and written
confirmation of all transfer requests will be mailed to the Participant or
Contractholder on the next Business Day. Telephone transfers will be
processed on the Business Day that they are received when they are received
at the Lincoln Life service office before 4:00 P.M. Eastern Time. If the
Participant or Contractholder
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determines that a transfer has been made in error, the Participant or
Contractholder must notify Lincoln Life within 30 days of the confirmation
notice date. See "Contract Provisions, Transfers between Divisions and
Sub-Accounts."
WITHDRAWALS
During the Accumulation Period, withdrawals may be made from either or
both Divisions of all or part of the Participant's Account balance in a
Division or Sub-Account remaining after deductions for any applicable (1)
Annual Administration Charge (imposed on Total Withdrawals), (2) premium
taxes, and (3) outstanding loan including loan security. Annuity Conversion
Amounts are not considered withdrawals. See "Annuity Period, Annuities:
General."
All withdrawal requests must indicate the amount to be withdrawn and be
submitted in a form acceptable to Lincoln Life. If the request does not
specify the Sub-Accounts and/or the Divisions from which the withdrawal is to
be made, the withdrawal will be made pro rata based on balances in the
Sub-Accounts and the Guaranteed Investment Division. Lincoln Life does not
require that any minimum amount be withdrawn. Telephone withdrawal requests
are not permitted.
Withdrawals from the Variable Investment Division are made by reducing
the Participant's number of Accumulation Units in the applicable Sub-Account.
In determining the number of Accumulation Units to be reduced, Lincoln Life
uses the Accumulation Unit Value next computed after Lincoln Life's receipt
of the written withdrawal request.
Payment of all Variable Investment Division withdrawal amounts generally
will be made within seven days after receipt by Lincoln Life of the
withdrawal request in a form acceptable to Lincoln Life. See "Market
Emergencies."
During any one calendar year a Participant may make one transfer or
withdrawal from the Guaranteed Interest Division to the Variable Investment
Division in an amount not to exceed 20% of the Guaranteed Interest Division
Account balance.
TOTAL WITHDRAWALS
A Total Withdrawal can only be made by a Participant who has no
outstanding loans under the Contract. A Total Withdrawal of a Participant's
Account will occur when (a) the Participant or Contractholder requests the
liquidation of the Participant's entire Account balance, or (b) the amount
requested results in a remaining Participant's Account balance of less than
or equal to the Annual Administration Charge, in which case the request is
treated as if it were a request for liquidation of the Participant's entire
Account balance.
Any Active Life Certificate must be surrendered to Lincoln Life when a
Total Withdrawal occurs. If a Contractholder resumes Contributions on behalf
of a Participant after a Total Withdrawal, the Participant will receive a new
Participation Date and Active Life Certificate.
A Participant refund under the free-look provisions is not considered a
Total Withdrawal.
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PARTIAL WITHDRAWALS
A Partial Withdrawal of a Participant's Account will occur when less than
a Total Withdrawal is made from a Participant's Account.
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 eligible for a Systematic
Withdrawal Option ("SWO") under the Contract. Payments are made only from
the Guaranteed Interest Division. 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
withdrawn on a periodic basis. A Participant must have a vested pre-tax
account balance of at least $10,000 in the Guaranteed Interest Division in
order to select the SWO. A Participant may transfer amounts from the
Variable Investment Division to the Guaranteed Interest Division in order to
support SWO payments. These transfers, however, are subject to the transfer
restrictions described in this Prospectus and/or imposed by any applicable
Plan. A one-time fee of up to $30 may 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 applicable fees and charges, is
available in the Contracts and Active Life Certificates as well as from
Lincoln Life.
MAXIMUM CONSERVATION OPTION
Under certain Contracts Participants who are at least age 70 1/2 may
request that Lincoln Life calculate and pay to them the minimum annual
distribution required by Sections 401(a)(9), 403(b)(10), 408 or 457(d) of the
Code. The Participant must complete forms as required by Lincoln Life in
order to elect this option. Lincoln Life will base its calculation solely on
the Participant's Account value with Lincoln Life. Participants who select
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 subject to the limitations
under Section 403(b)(11) of the Code and regulations thereof and in any
applicable Plan document. That section provides that salary reduction
Contributions deposited and earnings credited on any salary reduction
Contributions after December 31, 1988 may only be withdrawn 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, such
amounts will be subject to the same withdrawal restrictions as are applicable
to post-1988 salary reduction Contributions under the Contracts. For more
information on these provisions see "Federal Income Tax Considerations."
Withdrawal requests for a Participant under Section 401(a) Plans, Section
457(b) Plans and Plans subject to Title I of ERISA must be authorized by the
Contractholder on behalf of a Participant. All withdrawal requests will
require the Contractholder's written authorization and written documentation
specifying the portion of the Participant's Account balance which is
available for distribution to the Participant. Withdrawal requests for
Section 457(f) Plans must be requested by the Contractholder.
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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 and non-457 Plans, the Participant must certify to Lincoln
Life that one of the permitted distribution events listed in the Code has
occurred (and provide supporting information, if requested) and that Lincoln
Life may rely on such representation in granting such withdrawal request.
See "Federal Income Tax Considerations." A Participant should consult their
tax adviser as well as review the provisions of their Plan before requesting
a withdrawal.
In addition to the restrictions noted above, a Plan and applicable law
may contain additional withdrawal or transfer restrictions.
Withdrawals may have Federal tax consequences. In addition, early
withdrawals, as defined under Section 72(q) and 72(t) of the Code, may be
subject to a ten percent excise tax.
DEATH BENEFITS
The payment of death benefits will be governed by the provisions of the
applicable Plan and the Code. In the event of the death of a Participant
during the Accumulation Period, Lincoln Life will pay the Beneficiary, if one
is living, or the Plan the greater of the following amounts:
(1) The Net Contributions, or
(2) The Participant's Account balance less any outstanding loan
(including principal and due and accrued interest),
PROVIDED THAT, if Lincoln Life is not notified of the Participant's death
within six months of such death, the Beneficiary will receive the Death Benefit
amount described in paragraph (2).
A Beneficiary may elect to have the Death Benefit (1) paid as a lump sum,
(2) converted to a Payout Annuity or (3) as a combination of a lump sum payment
and a Payout Annuity.
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 and an election of a form of Death Benefit (as
described below). Payment of a lump sum election generally will be made
within seven days following such calculation. Payment of an annuity option
will be paid in accordance with the provisions regarding annuities. See
"Annuity Period." If no election is made within sixty days following Lincoln
Life's receipt of satisfactory notice of the Participant's death, the Death
Benefit will be paid in the form of a lump sum payment and will be calculated
as of the end of the Valuation Period during which that sixtieth day occurs
(and payment generally will be made within seven days after such calculation
date).
Satisfactory proof of death may consist of: a copy of a certified death
certificate; a copy of a certified decree of a court of competent
jurisdiction as to the finding of death; a written statement by a medical
doctor who attended the deceased at the time of death; or any other proof
satisfactory to Lincoln Life.
Notwithstanding the above, under qualified annuities, 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 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 Code provides 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.
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If the Beneficiary is the surviving spouse of the deceased Participant,
distributions generally are not required under the Code to begin earlier than
December 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 commence, then, for purposes of determining the date
distributions to the Beneficiary 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 Income Tax
Considerations.
If there is no living named Beneficiary on file with Lincoln Life at the
time of a Participant's death and unless the Plan directs otherwise, Lincoln
Life will pay the Death Benefit to the Participant's estate in the form of a
lump sum payment, upon receipt of satisfactory proof of the Participant's
death, but only if such proof of death is received by Lincoln Life no later
than the end of the fourth calendar year following the year of the
Participant's death. In such case, valuation of the Death Benefit will occur
as of the end of the Valuation Period during which due proof of death is
received by Lincoln Life, and the lump sum Death Benefit generally will be
paid within seven days of that date.
DEDUCTIONS AND CHARGES
CHARGES AGAINST THE VARIABLE INVESTMENT DIVISION
Certain charges will be assessed as a percentage of the value of the net
assets of the Variable Investment Division to compensate Lincoln Life for
risks assumed in connection with the Contracts.
MORTALITY AND EXPENSE RISK CHARGES
Lincoln Life deducts from the net assets of the Variable Investment
Division a daily charge of 1.20% on an annual basis.
This charge is assessed both during the Accumulation Period and the
Annuity Period although, during the Annuity Period, Lincoln Life will bear no
mortality risk with respect to the Annuity Options that do not involve life
contingencies. This amount is intended to compensate Lincoln Life for certain
Mortality and Expense Risks Lincoln Life assumes in operating the Variable
Investment Division and for providing services to the Participant. The 1.2%
total charge consists of .25% for the Expense Risk and .95% for the Mortality
Risk. The relative proportion of these charges, consistent with industry
practice, is estimated and, therefore, may change based on Lincoln Life's
experience in administering the Contracts. However, the total charge may not
be altered.
The Expense Risk is the risk that Lincoln Life's actual expenses in
issuing and administering the Contract will be more than Lincoln Life
estimated. The Mortality Risk borne by Lincoln Life arises from the chance
that Lincoln Life's actuarial estimate of mortality rates during the Annuity
Period, as guaranteed in the Contract, may prove erroneous and that an
Annuitant may live longer than expected. This contractual guarantee assures
that neither an Annuitant's own longevity nor an improvement in life
expectancy generally will have any adverse effect under the Contracts. In
addition, Lincoln Life bears the Mortality Risk because it guarantees to pay
a Death Benefit that may be higher than the Participant's Account balance
upon the death of the Participant prior to the Annuity Period.
Lincoln Life may ultimately realize a profit from these charges to the
extent they are not needed to meet the actual expenses incurred.
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CHARGES AGAINST THE CONTRACTS
The charges that Lincoln Life assesses in connection with the Contracts are
described below.
ANNUAL ADMINISTRATION CHARGE
Lincoln Life provides many administrative functions in connection with
the Contracts, including receiving and allocating Contributions in accordance
with the Contracts, making annuity payments when they become due, and
preparing and filing all reports required to be filed by the Variable
Investment Division. In addition, Lincoln Life provides Participants with
Account statements and accounting services that keep track of pre-tax monies,
employee and Employer monies, vested Account balances and rollover or
transferred monies.
In consideration for these administrative services, Lincoln Life
currently deducts $25 (or the balance of the Participant's Account if less)
per year from each Participant's Account balance on the last Business Day of
the month in which a Participation Anniversary occurs. This charge is
deducted only during the Accumulation Period. This Annual Administration
Charge is also withdrawn from a Participant's Account balance if and when a
Participant's Account is totally withdrawn. The charge may be increased or
decreased (subject to appropriate regulatory approvals), but Lincoln Life
does not anticipate a profit from this charge.
The Annual Administration Charge may be reduced or waived for those
Participants who are participating under another Lincoln Life contract which
imposes an Annual Administration Charge or where Lincoln Life's interest
costs or expenses are reduced due to the terms of the Contract, economies of
scale or administrative assistance provided by the Contractholder. In
addition, the Employer has the option of paying the Annual Administration
charge on behalf of the Participants under a Contract.
Under certain Contracts, the Contractholder may also choose to have the
Annual Administration Charge paid only by those Participants in the Variable
Investment Division. Contracts offering this provision will typically have a
declared interest rate in the Guaranteed Interest Division which is lower
than under contracts not offering this provision. For contracts offering
this provision, the Annual Administration Charge will be deducted as
described in this section.
PREMIUM TAXES
Certain states require that a premium tax be paid on contributions to a
variable annuity contract. Others assess a premium tax at the time of
annuitization. Lincoln Life will deduct a charge for any applicable premium
tax from the Participant's Account balance either (1) at the time of a Total
Withdrawal of a Participant's Account balance; (2) on the Annuity
Commencement Date; (3) at such other date as the taxes are assessed. Various
states levy a premium tax, currently ranging from 0.5% to 4.0%, on variable
annuity contracts.
MISCELLANEOUS
The Variable Investment Division purchases shares from the Funds at net
asset value. The net asset value reflects investment management fees and
other expenses that have already been deducted from the assets of the Funds.
The Funds' investment management fees, expenses and expense limitations, if
applicable, are more fully described in each prospectus for the Funds.
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ANNUITY PERIOD
GENERAL
To the extent 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 a Payout Annuity.
Payout Annuities are available as either a Guaranteed or Variable Annuity or
a combination of both. Annuity payments from the Guaranteed Interest Division
remain constant throughout the annuity period. Annuity payments from the
Variable Investment Division fluctuate depending upon the investment
experience of the applicable Sub-Accounts. Variable Annuity payments are
based upon Annuity Unit Values. See "Annuity Payments" below and
"Determination of Variable Annuity Payments" in the Statement of Additional
Information for further information.
The Annuity Commencement Date marks the date on which Lincoln Life makes
the first annuity payment to an Annuitant. For Plans subject to Section
401(a)(9)(B) of the 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 Contractholder may select any Annuity Commencement
Date for the Annuitant which is then reflected in the Retired Life
Certificate. However, since an annuity payment is considered a distribution
under the Code, selection of an Annuity Commencement Date may be affected by
the distribution restrictions under the Code and the minimum distribution
requirements under Section 401(a)(9) of the Code. See "Federal Income Tax
Considerations." The selection of an Annuity Commencement Date, the annuity
option, the amount of the Payout Annuity and whether the amount is to be paid
as a Guaranteed or a Variable Annuity must be made by the Participant in
writing, in a form satisfactory to Lincoln Life, and received by Lincoln Life
at least 30 days in advance of the Annuity Commencement Date. After the
Annuity Commencement Date an Annuitant may not change either their annuity
option or the type (i.e., variable or guaranteed) of Payout Annuity for any
amount applied toward the purchase of an annuity.
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 Payment Calculation Date. The initial Annuity Payment Calculation
Date will be the first day of the calendar month next following the Annuity
Commencement Date for a Guaranteed Annuity and 10 Business Days prior to the
first day of the calendar month next following the Annuity Commencement Date
for a Variable Annuity. For Guaranteed Annuities, the Annuity Payment
Calculation Date is the first day of a calendar month. For Variable
Annuities, the Annuity Payment Calculation Date is the date 10 Business Days
prior to the first day of a calendar month; the 10 Business Days being
necessary to calculate the amount of the Payout Annuity payments and to mail
the checks in advance of their first-of-month due dates.
If the Participant's Account balance or the Beneficiary's Death Benefit
is less than $2,000.00 or if the amount of the first scheduled payment is
less than $20.00, Lincoln Life may, at its option, cancel the annuity and pay
the Participant or Beneficiary the entire amount in a lump sum.
PAYOUT ANNUITY PAYMENTS
The amount of each annuity payment will depend upon the Annuity
Conversion Amount applied to an annuity option, the form of the annuity
option selected and the age of the Participant at the Annuity Commencement
Date. Unless otherwise notified, Lincoln Life will apply the Participant's
Account balance in the Guaranteed Interest Division toward a Guaranteed
Annuity and the Participant's Account balance in the Variable Investment
Division toward a Variable Annuity.
The payment amount for a Guaranteed Annuity is determined by dividing the
Participant'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 the Contract.
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The initial payment amount for a Variable Annuity is determined by
dividing the Participant's Annuity Conversion Amount(s) in the applicable
Sub-Account(s) as of the initial Annuity Payment Calculation Date by the
applicable Annuity Conversion Factor as defined in the Contract. The amounts
of subsequent payments vary depending on the investment experience of the
Sub-Account(s) and the interest rate option selected by the Contractholder or
Annuitant. The payment amounts will not be affected by Lincoln Life's
mortality or expense experience and will not be reduced by an Annual
Administration Charge. For additional information on the determination of
subsequent payment amounts, refer to the Statement of Additional Information,
"Determination of Variable Annuity Payments."
PAYOUT ANNUITY OPTIONS
Lincoln Life offers a range of annuity options including, but not limited
to, the following:
LIFE ANNUITY
Payments are made monthly during the lifetime of the Annuitant, and the
annuity terminates with the last payment preceding death.
LIFE ANNUITY WITH PAYMENTS GUARANTEED FOR 10, 15 OR 20 YEARS
Payments are made monthly during the lifetime of the Annuitant with a
monthly payment guaranteed to the Beneficiary for the remainder of the
selected number of years, if the Annuitant dies before the end of the period
selected. Payments under this annuity option are smaller than a Life Annuity
without a guaranteed payment period.
JOINT AND SURVIVOR ANNUITIES
Payments are made monthly during the joint lifetime of the Annuitant and
a designated second person.
PAYMENTS GUARANTEED FOR 10, 15 OR 20 YEARS
Annuity payments are guaranteed monthly for the selected number of years.
While there is no right to make any total or partial withdrawals during the
Annuity Period, an Annuitant who has selected this annuity option as a
Variable Annuity or a surviving Beneficiary may request at any time during
the payment period that the present value of any remaining installments be
paid in one lump sum.
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
Participant's designated Beneficiary. If the Beneficiary is someone other
than the Participant's spouse, the present value of payments to be made to
the Participant must be more than 50% of the present value of the total
payments to be made to the Participant and the Beneficiary.
In the event that an Annuitant dies before the end of a designated
Annuity period, the Beneficiary, if any, or the Annuitant's estate will
receive any remaining payments due under the annuity option in effect.
NOTE CAREFULLY: Under the Life Annuity and Joint and Survivor Annuities
options it would be possible for only one annuity payment to be made if the
Annuitant(s) were to die before the due date of the second annuity payment;
only two annuity payments if the Annuitant(s) were to die before the due date
of the third annuity payment; and so forth.
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FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general discussion of federal income tax
considerations relating to the Contract and is not intended as tax advice.
This discussion is not intended to address the tax consequences resulting
from all of the situations in which a person may be entitled to or may
receive a distribution under the Contract. Any person concerned about these
tax implications should consult a competent tax adviser before initiating any
transaction. This discussion is based upon the Company's understanding of
the present federal income tax laws as they are currently interpreted by the
Internal Revenue Service ("IRS"). No representation is made as to the
likelihood of the continuation of the present federal income tax laws or of
the current interpretation by the IRS. Moreover, no attempt has been made to
consider any applicable state or other tax laws.
The Contract may be purchased on a non-tax qualified basis
("Non-Qualified Contract") or purchased and used in connection with certain
retirement arrangements entitled to special income tax treatment under
section 401(a), 403(b), 408(b) or 457 of the Code ("Qualified Contracts").
The ultimate effect of federal income taxes on the amounts held under a
Contract, on Annuity Payments, and on the economic benefit to the Contract
Owner, the Annuitant, or the Beneficiary may depend on the tax status of the
individual concerned.
In addition, certain requirements must be satisfied in purchasing a
Qualified Contract with proceeds from a tax qualified retirement plan in
order to continue receiving favorable tax treatment. Therefore, you should
consult your legal counsel and tax adviser regarding the suitability of the
Contract for your situation, the applicable requirements and the tax
treatment of the rights and benefits of the Contract. This summary assumes
that Qualified Contracts are purchased with proceeds from retirement plans
that qualify for the intended special Federal income tax treatment.
All dollar amounts and percentages stated below are subject to change
according to Federal law. For additional Federal Income Tax Consideration,
please refer to the Statement of Additional Information.
NON-QUALIFIED CONTRACTS
In general, under non-qualified annuity contracts, an individual may make
Contributions to the Contracts which are not tax-deductible. A participant
is generally not taxed on increases in the value of a contract until a
distribution occurs. This can be in the form of a lump sum payment received
by requesting all or part of the cash value (i.e., withdrawals) or as Annuity
Payouts. For this purpose, the assignment or pledge of, or the agreement to
assign or pledge, any portion of the value of a contract will be treated as a
distribution. A transfer of ownership of a contract, or designation of an
annuitant (or other beneficiary) who is not also the participant, may also
result in tax consequences. The taxed portion of a distribution (in the form
of a lump sum payment or an annuity) is taxed as ordinary income. For
Contributions made after February 28, 1986, a participant who is not a
natural person (for example, a corporation) will, subject to limited
exceptions, be taxed on any increase in the contract's cash value over the
investment in the contract during the taxable year, even if no distribution
occurs. The following discussion applies to contracts owned by or on behalf
of participants who are natural persons.
WITHDRAWALS. In the case of a withdrawal, generally amounts received are
first treated as taxable income to the extent that the cash value of the
contract immediately before the withdrawal exceeds the investment in the
contract at that time. Any additional amount withdrawn is not taxable. The
investment in the contract generally equals the portion, if any, of any
contributions paid by or on behalf of a participant under a contract which is
not excluded from the participant's gross income.
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ANNUITY PAYOUTS. Even though the tax consequences may vary depending on
the form of Annuity Payout selected under the contract, the recipient of an
Annuity Payout generally is taxed on the portion of such payout that exceeds
the investment in the contract. For variable Annuity Payouts the taxable
portion is determined by a formula that establishes a specific dollar amount
of each payout that is not taxed. The dollar amount is determined by
dividing the investment in the contract by the total number of expected
periodic payouts. For fixed Annuity Payouts, there generally is no tax on
the portion of each payout that represents the same ratio that the investment
in the contract bears to the total expected value of payouts for the term of
the annuity; the remainder of each payout is taxable. For individuals whose
annuity starting date is after December 31, 1986, the entire distribution
will be fully taxable once the recipient is deemed to have recovered the
dollar amount of the investment in the contract.
EXCISE TAX. There may be imposed an excise tax on distributions equal to
10% of the amount treated as taxable income. The excise tax is not imposed
in certain circumstances, which generally are distributions:
1. Received on or after the participant attains age 59 1/2;
2. Made as a result of the participant's death or disability
3. Received in substantially equal installments as a life annuity (subject
to special recapture rules if the series of payouts is subsequently
modified);
4. Allocable to the investment in the contract before August 14, 1982;
5. Under a qualified funding asset in a structured settlement;
6. Under an Immediate Annuity contract as defined in the Code; and/or
7. Under a contract purchased in connection with the termination of
certain retirement plans.
MULTIPLE CONTRACTS. All non-qualified annuity contracts entered into after
October 21, 1988, and issued by the same insurance company (or its affiliates)
to the same participant during any calendar year will be treated as a single
contract for tax purposes.
DIVERSIFICATION. Section 817(h) of the Code provides that separate account
investments (or the investments of a mutual fund the shares of which are owned
by separate accounts of insurance companies) underlying a non-qualified annuity
contract must be "adequately diversified" in accordance with treasury
regulations in order for the contract to qualify as an annuity contract under
section 72 of the Code. The Variable Investment Division, through the Fund,
intends to comply with the diversification requirements prescribed in the
regulations.
REQUIRED DISTRIBUTIONS. In addition to the requirements of section 817(h),
the Code (section 72(s)) provides that non-qualified annuity contracts issued
after January 18, 1985, will not be treated as annuity contracts for purposes of
section 72 unless the contract provides that (a) if any Participant dies on or
after the annuity starting date but prior to the time the entire interest in the
contract has been distributed, the remaining portion of such interest must be
distributed at least as rapidly as under the method of distribution in effect at
the time of the Participant's death; and (B) if any Participant dies prior to
the annuity starting date, the entire interest must be distributed within five
years after the death of the Participant. These requirements are considered
satisfied if any portion of the Participant's interest that is payable to or for
the benefit of a "designated beneficiary" is distributed over that designated
beneficiary's life, or a period not extending beyond the designated
beneficiary's life expectancy, and if that distribution begins within one year
of the Participant's death. The "designated beneficiary" must be a natural
person. Contracts issued after January 18, 1985 contain provisions intended to
comply with these Code requirements, although regulations interpreting these
requirements have yet to be issued. The Company intends to review such
provisions and modify them, if necessary, to assure that they comply with the
requirements of section 72(s) when clarified by regulation or otherwise.
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QUALIFIED CONTRACTS
IN GENERAL. The Qualified Contract is designed for use with several
types of retirement plans. The tax rules applicable to participants and
beneficiaries in retirement plans vary according to the type of plan and the
terms and conditions of the plan. Special favorable tax treatment may be
available for certain types of contributions and distributions. Adverse tax
consequences may result from contributions in excess of specified limits;
distributions prior to age 59 1/2 (subject to certain exceptions);
distributions that do not conform to specified commencement and minimum
distribution rules; aggregate distributions in excess of a specified annual
amount; and in other specified circumstances.
The Company makes no attempt to provide more than general information
about use of the Contracts with the various types of retirement plans.
Owners and participants under retirement plans as well as annuitants and
beneficiaries are cautioned that the rights of any person to any benefits
under Qualified Contracts may be subject to the terms and conditions of the
plans themselves, regardless of the terms and conditions of the Contract
issued in connection with such a plan. Some retirement plans are subject to
distribution and other requirements that are not incorporated in the
administration of the Contracts. Owners are responsible for determining that
contributions, distributions and other transactions with respect to the
Contracts satisfy applicable law. Purchasers of Contracts for use with any
retirement plan should consult their legal counsel and tax adviser regarding
the suitability of the Contract.
SECTION 401(a) PLANS. Section 401(a) of the Code provides special tax
treatment for pension, profit sharing and stock bonus Plans established by
Employers for their employees. Contributions to a Section 401(a) Plan and
any earnings attributable to such Contributions are currently excluded from
the Participant's income. Section 401(a) Plans are subject to, among other
things, limitations on: maximum Contributions, minimum coverage and
participation, minimum funding, minimum vesting requirements and distribution
requirements. The specific limitations are outlined in the plan document
adopted by the employer.
A Participant who makes a withdrawal from a Section 401(a) program
generally must include that amount in current income. In addition, Section
401(k)(2) of the Code requires that salary reduction Contributions made
and/or earnings credited on any salary reduction Contributions may not be
withdrawn from the Participant's Section 401(k) program prior to the
Participant having (1) attained age 59 1/2, (2) separated from service, (3)
become disabled, (4) died or (5) incurred a hardship. Hardship withdrawals
may not include any income credited after December 31, 1988 that is
attributable to any salary reduction Contributions. In addition, Section 402
of the Code permits tax-free rollovers from Section 401(a) programs to
individual retirement annuities or certain other Section 401(a) programs
under certain circumstances. Qualified distributions eligible for rollover
treatment may be subject to a 20% federal tax withholding depending on
whether or not the distribution is paid directly to an eligible retirement
plan.
SECTION 403(b) PLANS. A Participant who is an employee of a hospital or
other tax-exempt organization described in Section 501(c)(3) or 501(e) of the
Code may exclude from current earnings amounts contributed to a Section
403(b) program. Under the terms of a Section 403(b) program, an Employer may
make Contributions directly to the program on behalf of the Participant, the
Participant may enter into a salary reduction agreement with the
Participant's Employer authorizing the Employer to contribute a percentage of
the Participant's salary to the program and/or the Participant may authorize
the Employer to make after tax Contributions to the program. Currently, the
Code permits employees to defer up to $9,500 of their income through salary
reduction agreements. All Contributions made to the Section 403(b) program
are subject to the limitations described in Code Sections 402(g) regarding
elective deferral amounts, 403(b)(2) regarding the maximum exclusion
allowance, and 415(a)(2) and 415(c) regarding the limitations on annual
additions.
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A Participant who makes a withdrawal from their Section 403(b) program
generally must include that amount in current income. In addition, Section
403(b)(11) of the Code requires that salary reduction Contributions made
and/or earnings credited on any salary reduction Contributions after December
31, 1988 may not be withdrawn from the Participant's Section 403(b) program
prior to the Participant having (1) attained age 59 1/2, (2) separated from
service, (3) become disabled (4) died or (5) incurred a hardship. Hardship
withdrawals may not include any income credited after December 31, 1988 that
is attributable to any salary reduction Contributions. The Internal Revenue
Service has ruled (Revenue Ruling 90-24) that amounts may be transferred
between Section 403(b) investment vehicles as long as the transferred funds
retain withdrawal restrictions at least as restrictive as that of the
transferring investment vehicle. Such transferred amounts are considered
withdrawals under the Contract. In addition, Section 403(b)(8) of the Code
permits tax-free rollovers from Section 403(b) programs to individual
retirement annuities or other Section 403(b) programs under certain
circumstances. Qualified distributions eligible for rollover treatment may
be subject to a 20% federal tax withholding depending on whether or not the
distribution is paid directly to an eligible retirement plan.
SECTION 408 PLANS (IRAs). Under current law, individuals may contribute
and deduct the lesser of $2,000 or 100% of their compensation to an IRA. In
the case of a spousal IRA, the maximum deduction is the lesser of $2,250 or
100% of compensation. The deduction for contributions is phased out for
individuals who are considered active participants under qualified Plans and
whose Adjusted Gross Income attains a certain level. For a single person the
$2,000 deduction is available when the taxpayers Adjusted Gross Income is
$25,000 or less. For each $50 that the taxpayer's Adjusted Gross Income
rises above $25,000, the taxpayer's deductible IRA is reduced by $10. When
the single taxpayer's Adjusted Gross Income is $35,000 or greater, a tax
deduction for an IRA is no longer available. For a married couple filing
jointly, the threshold level is $40,000 rather than $25,000. For a married
person filing separately, the threshold is $0.
In addition, certain amounts distributed from Section 401(a) and 403(b)
Plans may be rolled over to an IRA on a tax-free basis if done in a timely
manner (within 60 days of the Participant's receipt of the distribution).
The limitations on contributions discussed above do not apply to amounts
rolled over to an IRA.
All Participants in an IRA receive an IRA Disclosure. This document
explains the tax rules that apply to IRAs in greater detail.
ELIGIBLE SECTION 457 PLANS. Eligible Section 457 Plans may be
established by state and local governments as well as private tax-exempt
organizations (other than churches). Participants may contribute on a before
tax basis to a deferred compensation Plan of their employer in accordance
with the employer's Plan and Section 457 of the Code. Section 457 places
limitations on the amount of Contributions to these Plans. Generally, the
limitation is one-third of includable compensation or $7,500 whichever is
less. In the Participant's final three years of employment before normal
retirement age, the $7,500 limit is increased to $15,000.
Participants in an Eligible 457 Plan may not receive a withdrawal or
other distribution from their Plan except in the event of separation of
service from the employer, attainment of age 70 1/2, or when faced with an
unforeseen emergency. The Contractholder's Plan may further restrict the
Participant's rights to a withdrawal. In general, all amounts received under
a Section 457 Plan are taxable.
An employee electing to participate in an Eligible Section 457 Plan
should understand that their rights and benefits are governed strictly by the
terms of the Plan, that they are in fact a general creditor of the Employer
under the terms of the Plan, that the Employer is legal owner of any contract
issued with respect to the Plan and that the Employer retains all rights
under the contract issued with respect to the Plan. Depending on the terms
of the particular Plan, the Employer may be entitled to draw on deferred
amounts for purposes unrelated to its Section 457 Plan obligations.
Participants under Eligible Section 457 Plans should look to the terms of
their Plan for any charges in regard to participation other than those
disclosed in this Prospectus.
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SECTION 457(f) PLANS. Section 457(f) Plans may be established by state
and local governments as well as private tax-exempt organizations. Employers
and Participants may contribute on a before-tax basis to a deferred
compensation Plan of their Employer in accordance with the Employer's Plan.
Section 457(f) does not place limitations on the amount of Contributions to
these Plans; however, the Internal Revenue Service may review these plans to
determine if the deferral amount is acceptable to the IRS based on the nature
of the 457(f) Plan.
Participants in 457(f) Plans may not receive a withdrawal or other
distribution from their 457(f) Plans until a distributable event occurs. The
Plan will define such events.
An employee electing to participate in a Section 457(f) Plan should
understand that their rights and benefits are governed strictly by the terms
of the Plan, that they are in fact a general creditor of the Employer under
the terms of the Plan, that the Employer is legal owner of any contract
issued with respect to the Plan and that the Employer retains all rights
under the contract issued with respect to the Plan. Participants under
Section 457(f) Plans should look to the terms of their Plan for any charges
in regard to participating other than those disclosed in this Prospectus.
TAXATION OF QUALIFIED ANNUITIES: GENERAL. In Qualified Plans such as
401(a), 403(b) and 408 and Eligible 457, the Participant is not taxed on the
value in their Accounts until they receive payments from the Account. In
some situations, default or forgiveness of a loan, assignment or other
transactions will result in taxable income. Distributions from all these
Plans are taxed under the rules of Sections 72 and 402 of the Code.
PENALTY TAX FOR PREMATURE DISTRIBUTIONS. Section 72(t) imposes a 10%
excise tax on certain premature distributions for non-qualified and Section
401(a), 403(b) and 408 Plans. The penalty tax will not apply to
distributions made on account of the Participant having (i) attained age
59 1/2; (ii) become disabled; or (iii) died. The penalty tax will also not
apply under 401(a) and 403(b) retirement plans where a Participant separates
from service after age 55. In addition, the penalty does not apply if the
distribution is received as a series of substantially equal periodic payments
made for the life (or life expectancy) of the Participant or the joint lives
(or life expectancies) of the Participant and a designated Beneficiary.
Certain other exceptions may also apply. The 10% excise tax is an additional
tax; it does not apply to any money that the Participant receives as a return
of their cost basis. The 10% excise tax does not apply to Section 457 Plans.
MINIMUM DISTRIBUTIONS. Participants in Plans subject to Code Sections
401(a), 403(b), 408 and Eligible 457 Plans are subject to Minimum
Distribution Rules. For a Participant who attains age 70 1/2 after December
31, 1987, distributions generally must begin by April 1 of the calendar year
following the calendar year in which the Participant attains age 70 1/2. For
a Participant who attains age 70 1/2 before January 1, 1988, distributions
must begin on the April 1 of the calendar year following the later of (1) the
calendar year in which the Participant attains age 70 1/2 or (2) the calendar
year in which the Participant retires. Additional requirements may apply
with respect to certain Plans.
Participants in Eligible 457 Plans are taxed when Plan benefits are
distributed or made available to them. Participants in 457(f) Plans are
taxed when services related to contributions are performed or when
distributions are not subject to a substantial risk of forfeiture.
Distributions under Eligible 457 or 457(f) Plans are taxed as ordinary income.
IN GENERAL. Section 72 of the Code governs taxation of annuities in
general. The Company believes that an Owner who is a natural person
generally is not taxed on increases in the Owner's Account Value until
distribution occurs by withdrawing all or part of such Account Value (e.g.,
withdrawals or Annuity payments under the Annuity Option elected). For this
purpose, the assignment, pledge, or agreement to assign or pledge any portion
of the Account Value (and in the case of a Qualified Contract, any portion of
an interest in the qualified plan) generally will be treated as a
distribution. The taxable portion of a distribution (in the form of a single
sum payment or an annuity) is taxable as ordinary income.
-29-
<PAGE>
The owner of any Contract who is not a natural person generally must
include in income any increase in the excess of the Account Value over the
"investment in the contract" (discussed below) during the taxable year.
There are some exceptions to this rule and prospective Owners that are not
natural persons may wish to discuss these with a competent tax adviser.
The following discussion generally applies to a Contract owned by a
natural person.
WITHDRAWALS. In the case of a withdrawal under a Qualified Contract,
including withdrawals under the Systematic Withdrawal Option, a ratable
portion of the amount received is taxable, generally based on the ratio of
the "investment in the contract" to the individual's total accrued benefit
under the retirement plan. The "investment in the contract" generally equals
the amount of any non-deductible Purchase Payments paid by or on behalf of
any individual. For a Contract issued in connection with qualified plans, the
"investment in the contract" can be zero. Special tax rules may be available
for certain distributions from a Qualified Contract.
With respect to Non-Qualified Contracts, partial withdrawals, including
withdrawals under the Systematic Withdrawal Option, are generally treated as
taxable income to the extent that the Account Value immediately before the
withdrawal exceeds the "investment in the contract" at that time.
Full surrenders of a Non-qualified Contract are treated as taxable income
to the extent that the amount received exceeds the "investment in the
contract".
ANNUITY PAYMENTS. Although the tax consequences may vary depending on
the Annuity payment elected under the Contract, in general, only the portion
of the Annuity payment that represents the amount by which the Account Value
exceeds the "investment in the contract" will be taxed; after the "investment
in the contract" is recovered, the full amount of any additional Annuity
payments is taxable. For Variable Annuity payments, the taxable portion is
generally determined by an equation that establishes a specific dollar amount
of each payment that is not taxed. The dollar amount is determined by
dividing the "investment in the contract" by the total number of expected
periodic payments. However, the entire distribution will be taxable once the
recipient has recovered the dollar amount of his or her "investment in the
contract". For Fixed Annuity payments, in general there is no tax on the
portion of each payment which represents the same ratio that the "investment
in the contract" bears to the total expected value of the Annuity payments
for the term of the payments; however, the remainder of each Annuity payment
is taxable. Once the "investment in the contract" has been fully recovered,
the full amount of any additional Annuity payments is taxable. If Annuity
payments cease as a result of an Annuitant's death before full recovery of
the "investment in the contract," consult a competent tax advisor regarding
deductibility of the unrecovered amount.
RESTRICTIONS UNDER QUALIFIED CONTRACTS. Other restrictions with respect
to the election, commencement, or distribution of benefits may apply under
Qualified Contracts or under the terms of the plans in respect of which
Qualified Contracts are issued.
INVESTOR CONTROL
The Treasury Department has indicated that guidelines may be issued under
which a variable annuity contract will not be treated as an annuity contract
for tax purposes if the contract owner has excessive control over the
investments underlying the contract. The issuance of those guidelines may
require us to impose limitations on your right to control the investment. We
do not know whether any such guidelines would have a retroactive effect.
-30-
<PAGE>
VOTING RIGHTS
Lincoln Life is the legal owner of the shares of the Funds held by the
Variable Investment Division. As such, Lincoln Life is entitled to vote
those Fund shares with respect to issues such as the election of a Fund's
directors, ratification of a Fund's choice of independent auditors and other
matters required by the 1940 Act to be voted on by shareholders.
In those years in which the Funds hold a shareholder meeting, Lincoln
Life will solicit from Contractholders voting instructions with respect to
Fund shares held by the Variable Investment Division. Each Contractholder
will receive a number of votes in proportion to the Contractholder's
investment in the corresponding Sub-Account as of the record date established
by the Fund.
During the Accumulation Period, a Participant has the right to instruct
Contractholders as to the votes attributable to their Participant Account
balance in the Sub-Accounts. Annuitants have similar rights with respect to
the annuity amount attributable to the Sub-Accounts.
Lincoln Life will furnish Contractholders with sufficient Fund proxy
material and voting instruction forms for all Participants who have voting
rights under the Contract. Lincoln Life will vote those Fund shares
attributable to the Contract for which Lincoln Life receives no voting
instructions in the same proportion as Lincoln Life will vote shares for
which Lincoln Life has received instructions. Lincoln Life will vote shares
attributable to amounts Lincoln Life may have in the Variable Investment
Division in the same proportion as votes that Lincoln Life receives from
Contractholders. If the federal securities laws or regulations or any
interpretation of them changes so that Lincoln Life is permitted to vote
shares of the Fund in Lincoln Life's own right or to restrict Participant
voting, Lincoln Life may do so.
Fund shares may be held by separate accounts of insurance companies
unaffiliated with Lincoln Life. Fund shares held by those separate accounts
will be voted, in most cases, according to the instruction of owners of
insurance policies and contracts issued by those other unaffiliated insurance
companies. This will dilute the effect of the voting instructions of the
Contractholders in the Variable Investment Division. Lincoln Life does not
foresee any disadvantage to this. Pursuant to conditions imposed in
connection with regulatory relief, the Fund's Board of Directors has an
obligation to monitor events to identify conflicts that may arise and to
determine what action, if any, should be taken. For further information, see
the prospectuses for the Funds.
OTHER CONTRACT PROVISIONS
RIGHTS RESERVED BY LINCOLN LIFE
Lincoln Life reserves the right, subject to compliance with applicable
law, including approval by the Contractholder or the Participants if required
by law, (1) to create additional Sub-Accounts in the Variable Investment
Division, (2) to combine or eliminate Sub-Accounts in the Variable Investment
Division, (3) to transfer assets from one Sub-Account in the Variable
Investment Division to another, (4) to transfer assets to the General Account
and other separate accounts, (5) to cause the deregistration of the Variable
Investment Division under the Investment Company Act of 1940, (6) to operate
the Variable Investment Division under a committee and to discharge such
committee at any time, and (7) to eliminate any voting rights which the
Contractholder or the Participants may have with respect to the Variable
Investment Division, (8) to amend the Contract to meet state law requirements
or to meet the requirements of the Investment Company Act of 1940 or other
federal securities laws and regulations, (9) to operate the Variable
Investment Division 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, ERISA or the Securities Act of
1933. Participants will be notified if any changes are made that result in a
material change in the underlying investments of the Variable Investment
Division.
-31-
<PAGE>
ASSIGNABILITY
The Contracts are not assignable without Lincoln Life's prior written
consent. In addition, a Participant, a Beneficiary or an Annuitant may not,
unless permitted by law, assign or encumber any payment due under the
Contract.
MARKET EMERGENCIES
While Lincoln Life generally may not suspend the right of redemption or
delay payment from the Variable Investment Division for more than seven days,
the following events may delay payment for more than seven days: (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 or Variable Annuity payment
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.
CONTRACT DEACTIVATION
Under certain Contracts, Lincoln Life may deactivate a Contract by
prohibiting new contributions and/or new Participants after the date of
deactivation. Lincoln Life will give the Contractholder and the
Participants at least 90 days notice of the date of deactivation.
FREE-LOOK PERIOD
Participants under Sections 403(b), 408 and certain Non-qualified Plans
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 the Contract, the Participant may exercise the free-look
right by sending a written notice to Lincoln Life that the Participant does
not wish to participate under the Contract, within 10 days after the date the
Active Life 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 the free-look right in accordance with the
foregoing procedure, Lincoln Life will refund in full the Participant's
aggregate Contributions less aggregate withdrawals made on behalf of the
Participant 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 Participant's written notice is received
by Lincoln Life.
GUARANTEED INTEREST DIVISION
GENERAL
Contributions to the Guaranteed Interest Division become part of Lincoln
Life's General Account. The General Account is subject to regulation and
supervision by the New York 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 THE INTERESTS IN THE GENERAL ACCOUNT AS A SECURITY UNDER THE
SECURITIES ACT OF 1933 AND HAS NOT REGISTERED THE GENERAL ACCOUNT AS AN
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<PAGE>
INVESTMENT COMPANY UNDER THE 1940 ACT. ACCORDINGLY, NEITHER THE GENERAL
ACCOUNT NOR ANY INTERESTS THEREIN ARE SUBJECT TO REGULATION 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 INCLUDED IN THIS
PROSPECTUS WHICH RELATE TO THE GENERAL ACCOUNT AND THE GUARANTEED INTEREST
DIVISION. THESE DISCLOSURES, HOWEVER, MAY BE SUBJECT TO CERTAIN GENERALLY
APPLICABLE PROVISIONS OF THE FEDERAL SECURITIES LAWS RELATING TO THE ACCURACY
AND COMPLETENESS OF STATEMENTS MADE IN PROSPECTUSES. THIS PROSPECTUS IS
GENERALLY INTENDED TO SERVE AS A DISCLOSURE DOCUMENT ONLY FOR ASPECTS OF THE
CONTRACT INVOLVING THE VARIABLE INVESTMENT DIVISION AND CONTAINS ONLY
SELECTED INFORMATION REGARDING THE GUARANTEED INTEREST DIVISION. COMPLETE
DETAILS REGARDING THE GUARANTEED INTEREST DIVISION ARE IN THE CONTRACT.
Amounts contributed to the Guaranteed Interest Division are guaranteed a
minimum interest rate of at least 3.0%. A Participant who makes a
Contribution to the Guaranteed Interest Division is credited with interest
from the day of deposit in the Guaranteed Interest Division.
ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN LINCOLN LIFE'S SOLE
DISCRETION. THE PARTICIPANTS BEAR THE RISK THAT NO INTEREST IN EXCESS OF
3.0% WILL BE DECLARED.
PARTICIPANT'S ACCOUNT BALANCE IN THE GUARANTEED INTEREST DIVISION
The Participant's Account balance in the Guaranteed Interest Division on
any Valuation Date will reflect the amount and frequency of any Contributions
allocated to the Guaranteed Interest Division, plus any transfers from the
Variable Investment Division and interest credited to the Guaranteed Interest
Division, less any withdrawals, Annual Administration Charges and
loan-related charges allocated to the Guaranteed Interest Division and any
transfers to the Variable Investment Division.
TRANSFERS, TOTAL AND PARTIAL WITHDRAWALS
During any one calendar year a Participant may make one withdrawal or
transfer from the Guaranteed Interest Division in any amount not to exceed
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 withdrawal request for five
consecutive calendar years from their Guaranteed Interest Division Account
balance in the following percentage:
YEAR REQUEST RECEIVED BY PERCENTAGE OF GUARANTEED
LINCOLN LIFE INTEREST DIVISION AVAILABLE
------------------------ ---------------------------
1 20%
2 25%
3 33.33%
4 50%
5 100%
The five consecutive withdrawals may not be submitted more frequently
than twelve 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.
In addition, a Participant may withdraw 100% of their Guaranteed Interest
Division Account balance at any time provided that Lincoln Life receives
satisfactory proof of the following events: (a) the Participant has attained
age 59 1/2; (b) the Participant has died; (c) the Participant has incurred a
disability as defined under the Contract;
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<PAGE>
(d) the Participant has separated from service from their Employer, and (e)
the Participant has incurred a financial hardship. A Contractholder has the
option of choosing to eliminate financial hardship as an event entitling the
Participant to a 100% withdrawal from the Contract and also to add a
requirement that the Participant be at least age 55 upon separation from
service to be entitled to a 100% withdrawal from the Guaranteed Interest
Division. Contractholders choosing one or both of these optional provisions
will receive a higher declared interest rate on the Guaranteed Interest
Division than will Contracts without these provisions.
LOANS
During a Participant's Accumulation Period, a Participant, whose Plan
permits loans, may apply for a loan under the Contract by completing a loan
application available from Lincoln Life. Loans are secured by the
Participant's Account balance in the Guaranteed Interest Division. The
amounts and terms of a Participant loan may be subject to the restrictions
imposed under Section 72(p) of the Code, Title I of ERISA, and any applicable
Plans. With respect to Plans subject to Title I of ERISA, the initial amount
of a Participant loan may not exceed the lesser of 50% of the Participant's
vested Account balance in the Guaranteed Interest Division or $50,000 and
must be at least $1,000.00. A Participant in a Plan that is not subject to
ERISA may borrow up to $10,000 of their vested Account balance without regard
to the 50% limitation stated above. A Participant may have only one loan
outstanding at any time and may not establish more than one loan in any six
month period. More information about loans, including interest rates and
applicable fees and charges, is available in the Contracts, Active Life
Certificates, and Annuity Loan Agreement as well as from Lincoln Life.
DEFERRAL PERIODS
If a payment is to be made from the Guaranteed Interest Division, Lincoln
Life may defer the payment for the period permitted by the law of the
jurisdiction in which the Contract is distributed, but in no event, for more
than 6 months after a written election is received by Lincoln Life. During
the period of deferral, interest at the then current interest rate will
continue to be credited to a Participant's Account in the Guaranteed Interest
Division.
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<PAGE>
TABLE OF CONTENTS FOR
STATEMENT OF ADDITIONAL INFORMATION
PAGE
----
DEFINITIONS....................................................................2
DETERMINATION OF ACCUMULATION UNIT VALUES......................................2
DETERMINATION OF VARIABLE ANNUITY PAYMENTS.....................................3
PERFORMANCE CALCULATIONS.......................................................4
TAX LAW CONSIDERATIONS.........................................................8
DISTRIBUTION OF CONTRACTS.....................................................11
INDEPENDENT AUDITORS/ACCOUNTANTS..............................................11
FINANCIAL STATEMENTS..........................................................11
Financial Statements of Lincoln Life..........................................
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<PAGE>
VARIABLE ANNUITY III
STATEMENT OF ADDITIONAL INFORMATION
__________ __, 1996
GROUP ANNUITY CONTRACTS
FUNDED THROUGH THE SUB-ACCOUNTS OF
LINCOLN LIFE & ANNUITY
VARIABLE ANNUITY ACCOUNT L
OF
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
TABLE OF CONTENTS
PAGE
----
Definitions....................................................................2
Determination of Accumulation Unit Values......................................2
Determination of Variable Annuity Payments.....................................3
Performance Calculations.......................................................4
Tax Law Considerations.........................................................8
Distribution of Contracts.....................................................11
Independent Auditors/Accountants..............................................11
Financial Statements..........................................................11
Financial Statements of Lincoln Life
This Statement of Additional Information (SAI) is not a prospectus. It should
be read in conjunction with the prospectus for the Group Annuity Contracts (the
"Contracts"), dated ___________ __, 1996.
A copy of the prospectus to which this SAI relates is available at no charge
by writing to Lincoln Life at Lincoln Life & Annuity Company of New York, 120
Madison Street, 17th Floor, New York 13202; or by calling Lincoln Life at
1-800-__________.
<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 ACCUMULATION UNIT VALUES
As described more fully in the prospectus, Contributions are allocated to the
Divisions in accordance with directions from the Employer. A Participant who
makes Contributions which are allocated to the Variable Investment Division is
credited with Accumulation Units. The following examples illustrate the method
by which Lincoln Life determines the Net Investment Factor (NIF) for the current
Valuation Period and the Accumulation Unit Value as of the end of the current
Valuation Period.
DETERMINATION OF NIF:
(a) Assumed Fund net asset value as of the close of the New York Stock Exchange
on June 1 = 10.45.
(b) Assumed Fund net asset value as of the close of the New York Stock Exchange
on June 2 = 10.56 (no capital gains or dividend distributions or deductions
for taxes).
(c) The NIF for the current Valuation Period = (b) divided by (a) times (1-
annual M & E) to the 1/365th power.
(d) 1.010526 x .999966 = 1.0104916.
DETERMINATION OF ACCUMULATION UNIT VALUE:
The Accumulation Unit Value as of the end of the current Valuation Period is
determined by multiplying the NIF for the current Valuation Period by the
Accumulation Unit Value as of the end of the immediately preceding Valuation
Period.
(a) Assumed Accumulation Unit Value as of the end of the immediately preceding
Valuation Period = 11.125674.
(b) Accumulation Unit Value as of the end of the current Valuation Period =
11.125674 x 1.0104916 (NIF) = 11.2424.
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<PAGE>
The number of Accumulation Units which are credited to the Participant's Account
for each Sub-Account on each Valuation Date equals the amount of Contributions
allocated to the Sub-Account on each Valuation Date divided by the Accumulation
Unit Value rounded to four decimal places. For example,
(a) Participant's assumed Contribution allocated to a Sub-Account on June 2 =
$150.
(b) Number of Accumulation Units credited to Participant = $150 divided by
11.2424 = 13.3423.
DETERMINATION OF VARIABLE ANNUITY PAYMENTS
As stated in the prospectus, the amount of each Variable Annuity payment will
vary depending on the investment experience of the selected Sub-Accounts. The
initial payment amount of the Annuitant's Variable Annuity for each Sub-Account
is determined by dividing his Annuity Conversion Amount in each Sub-Account as
of the initial Annuity Payment Calculation Date ("APCD") by the Applicable
Annuity Conversion Factor as defined as follows:
The Annuity Conversion Factors which are used to determine the initial payments
are based on the 1983 Individual Annuity Mortality Table, set back four (4)
years, and an interest rate in an integral percentage ranging from zero to six
percent (0 to 6.00%) as selected by the Annuitant.
The amount of the Annuitant's subsequent Variable Annuity payment for each Sub-
Account is determined by:
(a) Dividing the Annuitant's initial Variable Annuity payment amount by the
Annuity Unit Value for that Sub-Account selected for his interest rate
option as described above as of his initial APCD; and
(b) Multiplying the resultant number of annuity units by the Annuity Unit
Values for the Sub-Account selected for his interest rate option for his
respective subsequent APCDs.
The Annuity Unit Value for all Sub-Accounts for all interest rate options will
initially be set at ________ dollars ($______). 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>
<S> <C>
1. Annuity Unit Value as of immediately preceding Annuity Payment 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>
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<PAGE>
ILLUSTRATION OF ANNUITY PAYMENTS
<TABLE>
<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 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>
PERFORMANCE CALCULATIONS
STANDARD TOTAL RETURN CALCULATION
The Variable Investment Division may advertise average annual total return
information calculated according to a formula prescribed by the Securities and
Exchange Commission ("SEC"). Average annual total return shows the average
annual percentage increase, or decrease, in the value of a hypothetical
Contribution allocated to a Sub-Account from the beginning to the end of each
specified period of time. The SEC standardized version of this performance
information is based on an assumed Contribution of $1,000 allocated to a Sub-
Account at the beginning of each period and surrender or withdrawal of the value
of that amount at the end of each specified period, giving effect to any charges
and fees applicable under the Contract. This method of calculating performance
further assumes that (i) a $1,000 Contribution was allocated to a Sub-Account
and (ii) no transfers or additional payments were made. Premium taxes are not
included in the term "charges" for purposes of this calculation. Average annual
total return is calculated by finding the average annual compounded rates of
return of a hypothetical Contribution that would compare the Accumulation Unit
value on the first day of the specified period to the ending redeemable value at
the end of the period according to the following formula:
T = (ERV/C) 1/n - 1
Where T equals average annual total return, where ERV (the ending redeemable
value) is the value at the end of the applicable period of a hypothetical
Contribution of $1,000 made at the beginning of the applicable period, where C
equals a hypothetical Contribution of $1,000, and where n equals the number of
years.
NON-STANDARDIZED CALCULATION OF TOTAL RETURN PERFORMANCE
In addition to the standardized average annual total return information
described above, we may present total return information computed on bases
different from that standardized method. The Variable Investment Division may
present total return information computed on the same basis as the standardized
method except that charges deducted from the hypothetical Contribution will not
include any Annual Administration Charge. The total return percentage under
this method will be higher than the resulting percentage from the standardized
method.
The Sub-Accounts also may present total return information calculated by
subtracting a Sub-Account's Accumulation Unit Value at the beginning of a period
from the Accumulation Unit Value of that Sub-Account at the end of the period
and dividing that difference (in that Sub-Account's Accumulation Unit Value) by
the Accumulation Unit Value of that Sub-Account at the beginning of the period.
This computation results in a total growth rate for the specified period which
we annualize in order to obtain the average annual percentage change in the
Accumulation
- 4 -
<PAGE>
Unit Value for the period used. This method of calculating performance does not
take into account the Annual Administration Charge and premium taxes, and
assumes no transfers. Such percentages would be lower if these charges were
included in the calculation.
In addition, the Variable Investment Division may present actual aggregate total
return figures for various periods, reflecting the cumulative change in value of
an investment in the Variable Investment Division for the specified period.
PERFORMANCE INFORMATION
The tables below provide performance information for each Sub-Account for
specified periods ending December 31, 1995. For the periods prior to the date
the Sub-Accounts commenced operations, performance information for the Contracts
will be calculated based on the performance of the fund portfolios and the
assumption that the Sub-Accounts were in existence for the same periods as those
indicated for the fund portfolios, with the level of Contract charges that were
in effect at the inception of the Sub-Accounts (this is referred to as
"hypothetical performance data"). This information does not indicate or
represent future performance.
TOTAL RETURN
Total returns quoted in sales literature or advertisements reflect all aspects
of a Sub-Account's return. Average annual returns are calculated by determining
the growth or decline in value of a hypothetical historical investment in the
Sub-Account over a stated period of time, and then calculating the annually
compounded percentage rate that would have produced the same result if the rate
of growth or decline had been constant over the period. Contractholders and
participants should recognize that average annual returns represent averaged
returns rather than actual year-to-year performance.
The respective underlying funds in which the Sub-Accounts invest had performance
history prior to the Sub-Accounts' inception. Performance information covering
those periods reflects a hypothetical performance as if the funds were part of
the Lincoln Life & Annuity Variable Annuity Account L at that time, using the
charges applicable to the Contracts.
Table 1A below assumes a hypothetical investment of $1,000 at the beginning of
the period via the Sub-Account investing in the applicable fund and withdrawal
of the investment on 12/31/95. The rates thus reflect the mortality and expense
risk charge and a pro rata portion of the Annual Administrative Charge. Table
1B shows the cumulative total return on the same basis.
<TABLE>
<CAPTION>
TABLE 1A -- SUB-ACCOUNT STANDARDIZED "HYPOTHETICAL" AVERAGE ANNUAL TOTAL RETURN
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING
DATE 12/31/95 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C>
Fund VIP II: Asset Manager 09/06/89 15.39 8.55 11.30 9.80
(Asset Manager)
Calvert Responsibly Invested
Balanced Portfolio 09/02/86 27.99 9.17 9.67 8.71
(Socially Responsible)
TCI Balanced 05/01/91 19.58 8.11 N/A 8.44
(Balanced)
VIP Equity-Income 10/09/86 33.07 17.88 19.68 11.81
- 5 -
<PAGE>
(Equity-Income)
Dreyfus Stock Index 09/29/89 35.00 13.21 14.47 10.88
(Index Account)
Fund VIP Growth 10/09/86 33.49 15.75 19.22 13.37
(Growth I)
TCI Growth 11/20/87 29.39 11.21 13.43 11.43
(Growth II)
T. Rowe Price International
Stock 03/31/94 9.60 N/A N/A 5.75
Portfolio (International
Stock)
Dreyfus Small Cap 08/31/90 27.46 31.08 57.75 53.85
(Small Cap)
</TABLE>
<TABLE>
<CAPTION>
TABLE 1B -- SUB-ACCOUNT "HYPOTHETICAL" CUMULATIVE TOTAL RETURN
LIFE
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS OF FUND
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING
DATE 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
Fund VIP II: Asset Manager 09/06/89 3.32 15.39 15.39 27.91 70.83 80.55
(Asset Manager)
Calvert Responsibly Invested
Balanced Portfolio 09/02/86 3.10 27.99 27.99 30.10 58.65 118.01
(Socially Responsible)
TCI Balanced 05/01/91 1.89 19.58 19.58 26.37 N/A 45.99
(Balanced)
VIP Equity-Income 10/09/86 5.40 33.07 33.07 63.80 145.50 180.11
(Equity-Income)
Dreyfus Stock Index 09/29/89 5.35 35.00 35.00 45.08 96.57 90.79
(Index)
Fund VIP Growth 10/09/86 -4.72 33.49 33.49 55.10 140.84 218.38
(Growth I)
TCI Growth 11/20/87 -4.20 29.39 29.39 37.52 87.79 140.68
(Growth II)
T. Rowe Price International
Stock 03/31/94 2.07 9.60 9.60 N/A N/A 10.30
Portfolio (International
Stock)
Dreyfus Small Cap 08/31/90 0.25 27.46 27.46 125.22 877.01 896.50
(Small Cap)
</TABLE>
Tables 2A and 2B show performance information on the same assumptions as Tables
1A and 1B except that Tables 2A and 2B do not reflect deductions of the pro rata
portion of the Annual Administrative Charge because certain Contracts and
Participants are not assessed such a charge.
- 6 -
<PAGE>
<TABLE>
<CAPTION>
TABLE 2A -- SUB-ACCOUNT "HYPOTHETICAL" AVERAGE TOTAL RETURN ASSUMING NO
ANNUAL ADMINISTRATIVE CHARGE
LIFE
FUND 1 YEAR 3 YEARS 5 YEARS OF FUND
INCEPTION ENDING ENDING ENDING ENDING
DATE 12/31/95 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C>
Fund VIP II: Asset Manager 09/06/89 15.57 8.71 11.42 9.92
(Asset Manager)
Calvert Responsibly Invested
Balanced Portfolio 09/02/86 28.24 9.38 9.84 8.84
(Socially Responsible)
TCI Balanced 05/01/91 19.68 8.20 N/A 8.52
(Balanced)
VIP Equity-Income 10/09/86 33.49 18.18 19.88 11.99
(Equity-Income)
Dreyfus Stock Index 09/29/89 35.16 13.33 14.57 10.98
(Index Account)
Fund VIP Growth 10/09/86 33.75 15.95 19.35 13.47
(Growth I)
TCI Growth 11/20/87 29.55 11.33 13.53 11.51
(Growth II)
T. Rowe Price International
Stock 03/31/94 9.86 N/A N/A 6.04
Portfolio (International
Stock)
Dreyfus Small Cap 08/31/90 27.85 31.30 57.82 53.91
(Small Cap)
</TABLE>
<TABLE>
<CAPTION>
TABLE 2B -- SUB-ACCOUNT "HYPOTHETICAL" CUMULATIVE TOTAL RETURN ASSUMING NO
ANNUAL ADMINISTRATIVE CHARGE
LIFE
FUND YEAR TO 1 YEAR 3 YEARS 5 YEARS OF FUND
INCEPTION QUARTER DATE ENDING ENDING ENDING ENDING
DATE 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
<S> <C> <C> <C> <C> <C> <C> <C>
Fund VIP II: Asset Manager 09/06/89 3.50 15.57 15.57 28.46 71.74 81.82
(Asset Manager)
Calvert Responsibly Invested
Balanced Portfolio 09/02/86 3.35 28.24 28.24 30.85 59.90 120.51
(Socially Responsible)
TCI Balanced 05/01/91 1.99 19.68 19.68 26.68 N/A 46.50
(Balanced)
VIP Equity-Income 10/09/86 5.82 33.49 33.49 65.06 147.61 184.31
(Equity-Income)
Dreyfus Stock Index 09/29/89 5.51 35.16 35.16 45.56 97.36 91.90
(Index)
Fund VIP Growth 10/09/86 -4.46 33.75 33.75 55.88 142.14 221.00
(Growth I)
- 7 -
<PAGE>
TCI Growth 11/20/87 -4.04 29.55 29.55 38.00 88.59 142.11
(Growth II)
T. Rowe Price International
Stock 03/31/94 2.33 9.86 9.86 N/A N/A 10.83
Portfolio (International
Stock)
Dreyfus Small Cap 08/31/90 0.64 27.85 27.85 126.38 878.94 898.82
(Small Cap)
</TABLE>
Table 3 below shows total return information on a calendar year basis using the
same assumptions as Tables 2A and 2B. The rates of return shown reflect the
mortality and expense risk charge. Similar to Tables 2A and 2B, Table 3 does
not reflect deduction of the pro rata portion of the Annual Administrative
Charge because certain Contracts and Participants are not assessed such a
charge.
<TABLE>
<CAPTION>
TABLE 3 -- SUB-ACCOUNT "HYPOTHETICAL" CALENDAR YEAR ANNUAL RETURN ASSUMING NO
ANNUAL ADMINISTRATIVE CHARGE*
1987 1988 1989 1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Asset Manager na na na 5.45 21.11 10.53 19.60 -7.20 15.57
Socially Responsible 5.51 10.42 19.53 2.94 15.02 6.33 6.72 -4.39 28.24
Balanced na na na na na -7.17 6.38 -0.58 19.68
Equity-Income -2.30 21.25 15.95 -16.29 29.88 15.50 16.89 5.80 33.49
Index na na na -4.69 28.29 5.82 8.02 -0.32 35.16
Growth I 2.43 14.21 29.95 -12.78 43.78 8.00 17.94 -1.21 33.75
Growth II na -3.41 27.17 -2.40 40.18 -2.52 8.99 -2.34 29.55
International Stock na na na na na na na na 9.86
Small Cap na na na na 156.65 69.25 66.31 6.47 27.85
</TABLE>
*The above calendar-year returns assume a hypothetical investment of $1,000 on
January 1 of the first full calendar year that the underlying fund was in
existence. The returns assume that the money will be left on account until
retirement. Returns are provided for years before the fund was an available
investment option under the Contract. Returns for those periods reflect a
hypothetical return as if those funds were available under the Contract, and
reflect the deduction of the mortality and expense risk charge. The returns do
not reflect deductions for the pro rata portion of the Annual Administrative
Charge.
SEC regulations require that any product performance data be accompanied by
standardized performance data.
TAX LAW CONSIDERATIONS
Retirement Programs:
Participants are urged to discuss the income taxes considerations of their
retirement plan with their tax advisors. In many situations special rules may
apply to the plans and/or to the participants. See the Prospectus for a more
complete discussion of tax considerations and for limitations on the following
discussion.
- 8 -
<PAGE>
Contributions to retirement programs subject to Sections 401(a), 403(b), 408 and
457(b) may be excludable from a Participant's reportable gross income if the
Contributions do not exceed the limitations imposed under the Code. Certain
plans allow employees to make Elective Salary Deferral Contributions. Certain
Plans allow Employers to make Contributions. The information below is a brief
summary of some the important federal tax considerations that apply to
retirement plans. When there is a written Plan, often the Contribution limits,
withdrawal rights and other provisions of the Plan may be more restrictive than
those allowed by the Code.
Elective Salary Deferral Contributions
For calendar year 1996 the maximum elective salary deferral contributions to a
401(k) Plan which is a type of 401(a) Plan is limited to $9,500; For a 403(b)
plan the limit is $9,500 unless the employee is a qualified employee; For an
Eligible 457 Plan the limit is $7,500. When an employee is covered by two or
more of these Plans, the elective salary deferral contribution limits for all
the Plans must be coordinated.
Total Salary Deferral & Employer Contributions
QUALIFIED RETIREMENT PLAN - 401(A) PLAN
The Code limits the Contributions to a defined contribution 401(a) plan to the
lesser of $30,000 or 25% of compensation.
TAX SHELTERED ANNUITY PLAN - 403(B) PLAN
Total contributions which include both salary deferral contributions and
employer contributions are also limited.
The combined limit is:
(a) the amount determined by multiplying 20 percent of the employee's
includable compensation by the number of years of service, over
(b) the aggregate of the amount contributed by the employer for annuity
contracts and excludable from the gross income of the employee for the prior
taxable year.
Therefore, if the maximum exclusion allowance is less than $9,500 a year, the
employee's elective deferrals plus any other employer Contributions cannot
exceed this lesser amount.
Section 415 of the Code imposes limitations with respect to annual contributions
to all Section 403(b) programs, qualified plans and simplified employee pensions
maintained by the Employer. A Participant's annual contributions to these
programs and defined contribution plans generally cannot exceed the lesser of
$30,000 or 25 percent of the employee's compensation. This amount is subject to
the maximum exclusion allowance and the salary deferral amount limitations.
ELIGIBLE 457 PLAN - 457(B) PLAN
For a 457(b) plan the contribution limit is generally the lesser of $7,500 or
33% of the employee's compensation.
SECTION 457(F) PLANS
These are non-qualified deferred compensation arrangements between an Employer
and its employees. There are no stated limits in the Code regarding this type
of Plan.
- 9 -
<PAGE>
INDIVIDUAL RETIREMENT ACCOUNT - IRA OR 408 PLAN
For IRA's the maximum deductible contribution is the lesser of $2,000 or 100% of
taxable income. The $2,000 is increased to $2,250 when the IRA covers the
taxpayer and a non-working spouse.
Transfers and Rollovers
Participants who receive distributions from their 401(a) or 403(b) contract may
transfer the amount not representing employee contributions to an Individual
Retirement Account or Annuity (IRA) or another Section 401(a) or 403(b) program
without including that amount in gross income for the taxable year in which
paid. Note 401(a) distributions may not be transferred to a 403(b) plan or vice
versa. If the amount is paid directly to an acceptable rollover account,
Lincoln Life is not required to withhold any amount. In order for the
distribution to qualify for rollover, the distribution must be made on account
of the employee's death, after the employee attains age 59-1/2, on account of
the employee's separation from service, or after the employee has become
disabled. The distribution cannot be part of a series of substantially equal
payments made over the life expectancy of the employee or the joint life
expectancies of the employee and his or her spouse or made for a specified
period of 10 years or more. The rollover must be made within sixty days of the
distribution to avoid taxation.
Pursuant to Revenue Ruling 90-24, a Participant, to the extent permitted by any
applicable Contract or Plan, may transfer funds between Section 403(b)
investment vehicles, including both Section 403(b)(1) annuity contracts and
Section 403(b)(7) custodial accounts. Any amount transferred must continue to be
subject to withdrawal restrictions at least as restrictive as that of the
transferring investment vehicle. Lincoln Life considers any total or partial
transfer from a Lincoln Life investment vehicle to a non-Lincoln Life investment
vehicle to be a withdrawal.
Once every twelve months a participant in an IRA may roll the money from one IRA
to another IRA.
The rollover rules are not available to Section 457 Plans; limited transfers are
permitted under Eligible 457 Plans. If the rollover amount is paid directly to
the Participant, the amount distributed may be subject to a 20% federal tax
withholding.
Excise Tax on Early Distributions
Section 72(t) of the Code provides that any distribution made to a
Participant in a 401(a), 403(b) or 408 plan other than on account of the
following events will be subject to a 10 percent excise tax on the taxable
amount distributed:
a) the employee has attained age 59 1/2;
b) the employee has died;
c) the employee is disabled;
d) the employee is 55 and has separated from service (Does not apply to
IRA's).
Distributions which are received as a life annuity where payment is made at
least annually will not be subject to an excise tax. Certain amounts paid for
medical care may also not be subject to an excise tax.
Minimum Distribution Rules
The value in a contract under Sections 401(a), 403(b), 408 and Eligible 457
Plans are subject to the distribution rules provided in Section 401(a)(9) of the
Code. Generally, that section requires that an employee must begin receiving
distributions of his post-1986 balance by April 1 of the calendar year following
the calendar year in which
- 10 -
<PAGE>
the employee attains age 70 1/2. Such distributions must not exceed the life
expectancy of the employee or the life expectancy of such employee and the
designated beneficiary (as defined under the plan). An employee who attained age
70 1/2 before January 1, 1988 must begin receiving distributions by April 1 of
the calendar year following the later of (a) the calendar year in which the
employee attains age 70 1/2 or (b) the calendar year in which the employee
retires. There are special rules for Section 403(b) Plans.
Amounts contributed to an Eligible 457 contract must be distributed not earlier
than the earliest of: (1) calendar year in which the Participant attains age 70
1/2, (2) the Participant separates from service with the Employer, or (3) when
the Participant has an unforeseen emergency. However, in no event may the
distribution begin any later than described in Sections 401(a)(9) and 457(d) of
the Code.
Additionally, distribution of an employee's entire account balance (including
pre-1987 funds) must satisfy the minimum distribution incidental benefit
requirement. In general, this requires that death and other non-retirement
benefits payable under the above plans be incidental to the primary purpose of
the program which is to provide deferred compensation to the employee. A payee
is subject to a penalty for failing to receive the required minimum annual
distribution. Section 4974(a) of the Code provides that a payee will be subject
to a penalty equal to 50 percent of the amount by which the required minimum
distribution exceeds the actual amount distributed during the taxable year.
Additional information on federal income taxation is included in the prospectus.
DISTRIBUTION OF CONTRACTS
LNC Equity Sales Corporation ("LNC Equity"), 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. LNC Equity 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/ACCOUNTANTS
The financial statements of Lincoln Life & Annuity Company of New York included
in this SAI have been examined by Ernst & Young, independent accountants, for
the period indicated in their report thereon which appears elsewhere herein.
The financial statements examined by Ernst & Young have been included in
reliance on their report given on their authority as experts in accounting and
auditing.
FINANCIAL STATEMENTS
As of the date of this SAI, the Variable Investment Division had not yet
commenced operations, had no assets or liabilities and no income. Accordingly,
it has no financial statements for prior periods.
The financial statements of Lincoln Life which are included in this SAI, should
be considered only as bearing on the ability of Lincoln Life to meet its
obligations under the Contracts. The financial statements of Lincoln Life are
presented in accordance with generally accepted accounting principles.
FINANCIAL STATEMENTS WILL BE PROVIDED BY AMENDMENT
- 11 -
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial statements and Exhibits
(a) The following financial statements are included in Part B:
Financial Statements of Registrant - Lincoln Life & Annuity Variable Annuity
Account L.
Financial Statements of Depositor - Lincoln Life & Annuity Company of New York.
(b) Exhibits
1. Resolution adopted by the Board of Directors of Lincoln
Life & Annuity Company of New York on July 24, 1996
establishing the Lincoln Life & Annuity Variable Annuity
Account L of Lincoln Life & Annuity Company of New York.
2. Not applicable.
3(a). Principal Underwriting Contract.*
3(b). Broker-dealer sales agreement.*
4. Forms of Group Annuity Contracts.*
5(a). Form of application for Group Annuity Contract.
5(b). Form of Participant enrollment form (including
acknowledgement of restrictions on redemption imposed by
I.R.C. Section 403(b)).*
6. Copy of certificate of incorporation and by-laws of Lincoln
Life & Annuity Company of New York.
7. Not applicable.
8(a). Participation Agreement between Lincoln Life & Annuity
Company of New York and Dreyfus Life & Annuity Index Fund,
Inc.*
8(b). Participation Agreement between Lincoln Life & Annuity
Company of New York and Variable Insurance Products Fund I
and Fidelity Distributors Corporation.*
8(c). Participation Agreement between Lincoln Life & Annuity
Company of New York and Variable Insurance Products Fund II
and Fidelity Distributors Corporation.*
8(d). Participation Agreement between Lincoln Life & Annuity
Company of New York and Twentieth Century Management
Company.*
* To be filed by amendment.
C - 1
<PAGE>
8(e). Participation Agreement between Lincoln Life & Annuity
Company of New York and Dreyfus Variable Investment Fund
and Dreyfus Corporation.*
8(f). Participation Agreement between Lincoln Life & Annuity
Company of New York and Acacia Capital Corporation.*
8(g). Participation Agreement between Lincoln Life & Annuity
Company of New York and T. Rowe Price.*
9. Consent and opinion of General Counsel of Lincoln Life &
Annuity Company of New York, as to the legality of the
securities being registered.*
10(a). Consent of Ernst & Young, Independent Auditors.*
10(b). Powers of Attorney.*
11. Not applicable.
12. Not applicable.
13. Schedule for Computation of Performance Quotations.*
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
The following list contains the officers and directors of Lincoln Life & Annuity
Company of New York who are engaged directly or indirectly in activities
relating to the Lincoln Life & Annuity Variable Annuity Account L as well as the
Contracts. The list also shows Lincoln Life & Annuity Company of New York's
executive officers.
NAME AND ADDRESS POSITIONS AND OFFICES WITH LINCOLN LIFE
To be provided by amendment.
Item 26. Persons Controlled by or Under Common Control with Lincoln Life &
Annuity Company of New York ("Lincoln Life") or the Lincoln Life & Annuity
Variable Annuity Account L.
The Lincoln Life & Annuity 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.
The following chart indicates the persons controlled or under common control
with Lincoln Life and the Lincoln Life & Annuity Variable Annuity Account L:
To be provided by amendment.
* To be filed by amendment.
C - 2
<PAGE>
Item 27. Number of Contractholders
Not applicable.
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, Acacia Capital
Corporation, 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 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) LNC Equity Sales Corporation acts as the principal underwriter for
_______________________________.
To be provided by amendment.
(b)(1) The following table sets forth certain information regarding the
officers and directors of LNC Equity Sales Corporation:
NAME AND PRINCIPAL BUSINESS ADDRESS POSITION AND OFFICES WITH UNDERWRITERS
To be provided by amendment.
(c)
<TABLE>
<CAPTION>
Name of Net Underwriting
Principal Discounts and Compensation Brokerage
Underwriter Commissions on Redemption Commissions Compensation
- - - ----------- ---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
Not applicable.
</TABLE>
Item 30. Location of Accounts and Records
C - 3
<PAGE>
The records required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and Rules 31a-1 to 31a-3 thereunder are maintained by
Lincoln Life at 120 Madison Street, 17th Floor, Syracuse, New York 13202.
Item 31. Management Services
None
Item 32. Undertakings
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.
C - 4
<PAGE>
SIGNATURES
As required by the Securities Act of 1933 and the Investment Company Act of
1940, the Registrant and the Depositor have duly caused this Registration
Statement to be signed on their behalf, in the City of Syracuse, and State of
New York on this 22nd day of August, 1996.
Lincoln Life & Annuity Variable Annuity Account L
(Registrant)
By: Lincoln Life & Annuity Company of New York
By: /S/ Philip L. Holstein
-------------------------------------------
President
Lincoln Life & Annuity Company of New York
(Depositor)
By: /S/ Philip L. Holstein
-------------------------------------------
President
As required by the Securities Act of 1933 this Registration Statement has been
signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Philip L. Holstein August 22, 1996
- - - ---------------------------
Philip L. Holstein Chairman, Chief Executive
Officer and Director
(Principal Executive Officer)
/s/ Robert A. Anker August 22, 1996
- - - ---------------------------
Robert A. Anker Director
August __, 1996
- - - ---------------------------
Roland C. Baker Director
<PAGE>
August __, 1996
- - - ---------------------------
John P. Barrett Director
August __, 1996
- - - ---------------------------
Thomas D. Bell, Jr. Director
/s/ Jon A. Boscia August 22, 1996
- - - ---------------------------
Jon A. Boscia Director
August __, 1996
- - - ---------------------------
Harry L. Kavetas Director
/s/ Barbara Steury Kowalczyk August 22, 1996
- - - ---------------------------
Barbara Steury Kowalczyk Director
August __, 1996
- - - ---------------------------
Marguerite Leanne Lachman Director
August __, 1996
- - - ---------------------------
John M. Pietruski Director
/s/ Gabriel L. Shaheen August 22, 1996
- - - ---------------------------
Gabriel L. Shaheen Director
/s/ John L. Steinkamp August 22, 1996
- - - ---------------------------
John L. Steinkamp Director
/s/ Richard C. Vaughan August 22, 1996
- - - ---------------------------
Richard C. Vaughan Director
<PAGE>
[Conformed Copy of Officers Letter Establishing
Separate Account L ]
ESTABLISHMENT OF SEPARATE INVESTMENT ACCOUNT
OF
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
Pursuant to the authority given me by Resolution Number 96-21 adopted by
the Board of Directors of Lincoln Life & Annuity Company of New York (the
"Company") on July 24, 1996, I establish a separate investment account
designated as "Lincoln Life & Annuity Company of New York Variable Annuity
Account L" (the "Account"). The Account is to be used in connection with
the assumption reinsurance of the tax sheltered group annuity business of
UNUM Life Insurance Company of America. The Account will be registered as a
unit investment trust with the Securities and Exchange Commission ("SEC") and
shall invest in shares of the investment companies which are registered with
the SEC. The establishment and operation of the Account will be in
accordance with the applicable provisions of New York Insurance Law and all
rules and regulations issued pursuant thereto ("New York Insurance Law"), and
subject to the approval of the Superintendent of the Insurance Department of
the State of New York. The Account's investment objectives, policies, and
limitations shall be in accordance with (1) the registration statement for
the policies filed with the SEC under the Securities Act of 1933, and (2)
applicable provisions of New York Insurance Law and any other applicable
legal requirements.
/s/Philip L. Holstein
----------------------------------
Philip L. Holstein, President
Dated:
July 24, 1996
<PAGE>
I, C. Suzanne Womack, hereby certify that I am the duly
elected and qualified Secretary of Lincoln Life & Annuity
Company of New York, and that the following is a true and
correct copy of a resolution adopted by the Board of
Directors at their meeting of July 24, 1996, and that such
resolution is in full force and effect as of the date hereof:
RESOLVED, That the chief executive officer of
Lincoln Life & Annuity Company of New York (the "Company") is
hereby authorized in his discretion from time to time to
establish one or more separate investment accounts in
accordance with the provisions of the New York Insurance Law,
for such purpose or purposes as he may determine and as may
be appropriate under the New York Insurance Law; and
RESOLVED FURTHER, THAT if in the opinion of legal
counsel of the Company, it is necessary or desirable to
register any of such accounts under the Investment Company
Act of 1940 or to register a security issued by any such
account under the Securities Act of 1933, or to make
application for exemption from registration, the chief
executive officer or such other officers as he may designate
are hereby authorized to accomplish any such registration or
to make any such application for exemption, and to perform
all other acts as may be desirable or necessary in connection
with the conduct of business of the Company with respect to
any such account.
/S/
-----------------------------
C. Suzanne Womack, Secretary
Dated:
July 24,
1996
<PAGE>
LOGO LINCOLN LIFE & ANNUITY
COMPANY OF NEW YORK
SYRACUSE, NEW YORK
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
APPLICATION FOR GROUP ANNUITY CONTRACT
WITH
LINCOLN LIFE & ANNUTITY COMPANY OF NEW YORK
(HEREIN TERMED "LL&A")
SYRACUSE, NEW YORK
of
- - - ------------------------------------
- - - --------------------------------
(herein termed the "Contractholder")
(address)
hereby authorizes LL&A 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, LL&A 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. LL&A 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 LL&A.
Form No. 96-100A
<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.
Any person who knowingly and with intent to defraud any insurance company or
other person files an application for insurance or statement of claim containing
any materially false information, or conceals for the purpose of misleading,
information concerning any fact material thereto, commits a fraudulent insurance
act, which is a crime, and shall also be subject to a civil penalty not to
exceed five thousand dollars and the stated value of the claim for each such
violation.
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.
Form No. 96-100A
<PAGE>
SHORT CERTIFICATE
STATE OF NEW YORK
INSURANCE DEPARTMENT
EDWARD J. MUHL
SUPERINTENDENT OF INSURANCE
IT IS HEREBY CERTIFIED THAT the annexed copy of Declaration of Intention and
Charter of LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK, of Syracuse, New York, as
filed in this Department June 6, 1996,
HAS BEEN COMPARED WITH THE ORIGINAL ON FILE IN THIS DEPARTMENT AND THAT IT
IS A CORRECT TRANSCRIPT THEREFROM AND OF THE WHOLE OF SAID ORIGINAL.
IN WITNESS WHEREOF, I have here-
unto set my hand and affixed
the official seal of this Department
[SEAL] at the City of Albany, this
30th day of July, 1996.
/s/
Special Deputy Superintendent
<PAGE>
TRIPLICATE
STATE OF NEW YORK--INSURANCE DEPARTMENT
----------------
Albany, New York
June 6, 1996
$1,000.00
RECEIVED from Lincoln Life & Annuity Company Of New York.......................
One Thousand...........................................................Dollars,
in payment of tax provided by section 180, Tax Law, as amended by Chapter 794,
Laws of 1923. One-twentieth of one per centum upon $2,000,000.00 of shares
with par value........................................................$1,000.00
By /s/
------------------------------------------------
Special Deputy Superintendent of Insurance
<PAGE>
[Conformed Copy]
DECLARATION OF INTENTION
AND CHARTER OF
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
DECLARATION
We, the undersigned, all being natural persons over the
age of eighteen, and a majority of us being citizens of the United
States, and at least three of us being residents of the State of
New York, do hereby declare our intention to form a stock insurance
corporation pursuant to the provisions of the Insurance Law of the
State of New York for the purpose of doing the kinds of insurance
business authorized by paragraphs 1, 2 and 3 of Section 1113(a) of
the Insurance Law of the State of New York, under the name Lincoln
Life & Annuity Company of New York, and we do hereby make, sign,
acknowledge and file this Declaration of Intention and adopt and
set forth the proposed Charter of such corporation for the
aforesaid purpose, as follows:
CHARTER
ARTICLE I
NAME
The name of the corporation shall be Lincoln Life &
Annuity Company of New York.
ARTICLE II
PRINCIPAL OFFICE
The principal office of the corporation shall be located
in the City of Syracuse, County of Onondaga and State of New York.
ARTICLE III
POWERS
The corporation shall have the power to transact life
insurance, annuities and accident and health insurance business as
described in paragraphs 1, 2 and 3 of Section 1113(a) of the
Insurance Law of the State of New York, as amended, to wit:
(1) Life insurance, meaning every insurance upon the lives of
human beings, and every insurance appertaining thereto,
including the granting of endowment benefits, additional
benefits in the event of death by accident, additional
benefits to safeguard the contract from lapse, accelerated
payments of part or all of the death benefit or a special
surrender value upon diagnosis (A) of terminal illness defined
as a life expectancy of twelve months or less, or (B) of a
medical condition requiring extraordinary medical care or
treatment regardless of life expectancy, or provide a special
surrender value, upon total and permanent disability of the
insured, and optional modes of settlement of proceeds. "Life
insurance" also includes additional benefits to safeguard the
contract against lapse in the event of unemployment of the
insured. Amounts paid the corporation for life insurance and
<PAGE>
proceeds applied under optional modes of settlement or under
dividend options may be allocated by the corporation to one or
more separate accounts pursuant to section four thousand two
hundred forty of the New York Insurance Law;
(2) Annuities, meaning all agreements to make periodical
payments for a period certain or where the making or
continuance of all or some of a series of such payments, or
the amount of any such payment, depends upon the continuance
of human life, except payments made under the authority of
paragraph one hereof. Amounts paid the corporation to provide
annuities and proceeds applied under optional modes of
settlement or under dividend options may be allocated by the
corporation to one or more separate accounts pursuant to
section four thousand two hundred forty of the New York
Insurance Law;
(3) Accident and health insurance, meaning (A) insurance
against death or personal injury by accident or by any
specified kind or kinds of accident and insurance against
sickness, ailment or bodily injury, including insurance
providing disability benefits pursuant to article nine of the
New York State Workers' Compensation Law, except as specified
in item (B) hereof; and (B) non-cancellable disability
insurance, meaning insurance against disability resulting from
sickness, ailment or bodily injury (but excluding insurance
solely against accidental injury) under any contract which
does not give the corporation the option to cancel or
otherwise terminate the contract at or after one year from its
effective date or renewal date;
and any amendments to such paragraphs or provisions in substitution
therefor which may be hereafter adjusted. The corporation shall
also have the power to effect reinsurance of risks taken by it, and
to assume by way of reinsurance similar risks taken by other
insurers and reinsurers. In addition, the corporation shall have
the power to transact any other kind or kinds of business to the
extent now or hereafter permitted for life insurance companies
under the Insurance Law of the State of New York and necessarily or
properly incidental to the kind or kinds of insurance business
which the corporation is authorized to do.
ARTICLE IV
EXERCISE OF CORPORATE POWERS
Section 1. The corporate powers shall be exercised by a
Board of Directors and by a President and by one or more Vice
Presidents, a Secretary and a Treasurer and by such other officers
and such committees as the Board of Directors may elect or appoint.
The Directors shall have all of the qualifications, powers and
authority and shall be subject to all of the limitations as set
forth in the Insurance Law of the State of New York.
Section 2. The Board of Directors shall have the power
<PAGE>
to make, alter, amend or repeal the bylaws of the corporation
(except in those cases where stockholder action is required by
law).
ARTICLE V
NUMBER OF DIRECTORS
The number of Directors shall be thirteen.
ARTICLE VI
PROVISIONS CONCERNING DIRECTORS AND OFFICERS
Section 1. An election of directors shall be held
annually at a place and time specified by the Board of Directors on
the first Wednesday of May, if not a legal holiday in the state of
New York, and, if such day is a legal holiday, then on the next
succeeding business day not a legal holiday at the corporation's
principal office at 9:00 a.m. Each Director shall serve until his
successor is elected and qualified.
Section 2. The President, one or more Vice Presidents,
a Secretary and a Treasurer shall be elected annually by the
Directors at the first meeting of the Board of Directors held after
the election of the Directors as provided in Section 1 of this
Article VI. Each of such officers shall hold office until the
election of his successor. All other officers shall be elected or
appointed by the Board of Directors, or in such manner as the By-laws may
prescribe.
Section 3. Whenever any vacancy or vacancies shall occur
in the Board of Directors by death, resignation, removal or
otherwise, a majority of the remaining members of the Board of
Directors, at a meeting called for that purpose, or at any regular
meeting, shall elect a Director or Directors to fill the vacancy or
vacancies thus occasioned, and each Director so elected shall serve
until his successor is elected and is qualified. If, because of
any vacancy or vacancies in the Board of Directors, the number of
Directors shall be less than thirteen, the corporation shall not
for that reason be dissolved, but every Director shall continue to
hold office and discharge his duties until his successor shall have
been elected and qualified.
Section 4. Vacancies in any office may be filled for the
remainder of the term in which the same shall occur by a majority
vote of the Board of Directors.
Section 5. At all times, a majority of Directors shall
be citizens and residents of the United States, not less than three
Directors shall be residents of New York and no Director shall be
less than twenty-one years of age. Not less than one-third of the
Board of Directors shall be persons who are not officers or
employees of the corporation or any entity controlling, controlled
by, or under common control with the corporation and who are not
beneficial owners of a controlling interest in the voting stock of
the corporation or any such entity. Directors need not be
stockholders.
<PAGE>
ARTICLE VII
INITIAL DIRECTORS
The names and post office residence addresses of the
Directors who shall serve until the first annual meeting of
stockholders and until their successors are duly elected are:
Names Addresses
Robert Alvin Anker 3603 West Hamilton Road
Fort Wayne, Indiana 46804
Roland Charles Baker 1230 N. State Parkway
Apartment 23-C
Chicago, Illinois 60610
John Patrick Barrett 4605 Watergap
Manlius, New York 13104
Thomas D. Bell, Jr. 2 Lakewood Circle South
Greenwich, Connecticut 06830
Jon Andrew Boscia 4715 Creek Ridge Place
Fort Wayne, Indiana 46835
Harry Louis Kavetas 52 Woodbury Place
Rochester, New York 14618
Barbara Steury Kowalczyk 4745 Hartman Road
Fort Wayne, Indiana 46807
Marguerite Leanne Lachman 870 United Nations Plaza
Apartment 8-C
New York, New York 10017
John Michael Pietruski 27 Paddock Lane
Colts Neck, New Jersey 07722
Gabriel L. Shaheen 2101 Sycamore Hills Drive
Fort Wayne, Indiana 46804
John Lyman Steinkamp 4910 Oak Creek Court
Fort Wayne, Indiana 46835
Richard Charles Vaughan 1618 Sycamore Hills Drive
Fort Wayne, Indiana 46804
Michael Dean Wilkins 5605 Albany Court
Fort Wayne, Indiana 46835
ARTICLE VIII
DURATION
The duration of the existence of the corporation shall be
perpetual.
<PAGE>
ARTICLE IX
CAPITAL
The amount of the capital of the corporation shall be two
million dollars ($2,000,000), which shall consist of twenty
thousand (20,000) shares of Common Stock with a par value of one
hundred dollars ($100.00) per share.
ARTICLE X
EXCULPATION
No Director shall be personally liable to the corporation
or any of its stockholders for damages for any breach of duty as a
Director; provided, however, that the foregoing provision shall not
eliminate or limit the liability of a Director if a judgment or
other final adjudication adverse to him or her establishes that his
or her acts or omissions were in bad faith or involved intentional
misconduct or were acts or omissions (i) which he or she knew or
reasonably should have known violated the New York Insurance Law or
(ii) which violated a specific standard of care imposed on
Directors directly, and not by reference, by a provision of the
New York Insurance Law (or any regulations promulgated thereunder)
or (iii) which constituted a knowing violation of any other law, or
establishes that he or she personally gained in fact a financial
profit or other advantage to which he or she was not legally
entitled.
IN WITNESS WHEREOF, the undersigned hereby make, sign and
acknowledge this Declaration of Intention and Charter.
/S/
Robert Alvin Anker
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEM )
On May 9, 1996, before me personally came Robert Alvin
Anker, to me personally known and known to me to be the person who
executed the foregoing instrument, and he duly acknowledged before
me that he executed the same.
Notary Public
/S/
Linda Zimmer Smith
/S/
Roland Charles Baker
STATE OF Illinois )
) ss:.
<PAGE>
COUNTY OF DuPaige )
On May 8, 1996, before me personally came Roland Charles
Baker, to me personally known and known to me to be the person who
executed the foregoing instrument, and he duly acknowledged before
me that he executed the same.
Notary Public
/S/
Denise Karen Hauser
<PAGE>
/S/
John Patrick Barrett
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEN )
On May 9, 1996, before me personally came John Patrick
Barrett, to me personally known and known to me to be the person
who executed the foregoing instrument, and he duly acknowledged
before me that he executed the same.
Notary Public
/S/
Mary L. Lung
/S/
Thomas D. Bell, Jr.
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEn )
On May 9, 1996, before me personally came Thomas D.
Bell, Jr., to me personally known and known to me to be the person
who executed the foregoing instrument, and he duly acknowledged
before me that he executed the same.
Notary Public
/S/
Mary L. Lung
/S/
Jon Andrew Boscia
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEM )
On May 9, 1996, before me personally came Jon Andrew
Boscia, to me personally known and known to me to be the person who
executed the foregoing instrument, and he duly acknowledged before
me that he executed the same.
<PAGE>
Notary Public
/S/
Mary L. Lung
/S/
Harry Louis Kavetas
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEN )
On May 9, 1996, before me personally came Harry Louis
Kavetas, to me personally known and known to me to be the person
who executed the foregoing instrument, and he duly acknowledged
before me that he executed the same.
Notary Public
/S/
Mary L. Lung
/S/
Barbara Steury Kowalczyk
STATE OF Indiana )
) ss:.
COUNTY OF ALLEN )
On May 9, 1996, before me personally came Barbara Steury
Kowalczyk, to me personally known and known to me to be the person
who executed the foregoing instrument, and she duly acknowledged
before me that she executed the same.
Notary Public
/S/
Mary L. Lung
<PAGE>
/S/
Marguerite Leanne Lachman
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEN )
On May 9, 1996, before me personally came Marguerite
Leanne Lachman, to me personally known and known to me to be the
person who executed the foregoing instrument, and she duly
acknowledged before me that she executed the same.
Notary Public
/S/
/S/
John Michael Pietruski
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEN )
On May 9, 1996, before me personally came John Michael
Pietruski, to me personally known and known to me to be the person
who executed the foregoing instrument, and he duly acknowledged
before me that he executed the same.
Notary Public
/S/
Mary L. Lung
/S/
Gabriel L. Shaheen
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEN )
On May 9, 1996, before me personally came Gabriel L.
Shaheen, to me personally known and known to me to be the person
who executed the foregoing instrument, and he duly acknowledged
before me that he executed the same.
Notary Public
/S/
Mary L. Lung
/S/
John Lyman Steinkamp
<PAGE>
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEN )
On May 9, 1996, before me personally came John Lyman
Steinkamp, to me personally known and known to me to be the person
who executed the foregoing instrument, and he duly acknowledged
before me that he executed the same.
Notary Public
/S/
Mary L. Lung
/S/
Richard Charles Vaughan
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEN )
On May 7, 1996, before me personally came Richard
Charles Vaughan, to me personally known and known to me to be the
person who executed the foregoing instrument, and he duly
acknowledged before me that he executed the same.
Notary Public
/S/
Sharlene K. Geer
<PAGE>
/S/
Michael Dean Wilkins
STATE OF INDIANA )
) ss:.
COUNTY OF ALLEN )
On May 7, 1996, before me personally came Michael Dean
Wilkins, to me personally known and known to me to be the person
who executed the foregoing instrument, and he duly acknowledged
before me that he executed the same.
Notary Public
/S/
Mary L. Lung
<PAGE>
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
I, C. Suzanne Womack, hereby certify that I am the Secretary
of Lincoln Life & Annuity Company of New York and that the attached is a
true, complete and correct copy of the bylaws of said Company as adopted
by its Board of Directors, and that such bylaws are in full force and
effect as of the date hereof.
/S/ C. Suzanne Womack
----------------------------
C. Suzanne Womack, Secretary
Dated: July 24, 1996
<PAGE>
[conformed copy]
BYLAWS
OF
LINCOLN LIFE & ANNUITY COMPANY OF NEW YORK
A New York Company
ARTICLE I
Shareholders
Section 1. ANNUAL MEETING. An annual meeting of the shareholders shall
be held at a time and place, specified by the board of directors, on the
first Wednesday of May in each year for the purpose of electing directors for
the terms hereinafter provided and for the transaction of such other business
as may properly come before the meeting. If such date shall be a legal
holiday in the state of New York, the annual meeting shall be held on the
next succeeding business day not such a legal holiday at the corporation's
principal office at 9:00 a.m..
Section 2. SPECIAL MEETINGS. Special meetings of the shareholders may be
called by the chief executive officer, by the board of directors, or by
shareholders holding not less than 25% of all votes entitled to be cast on any
issue to be considered at the special meeting who sign, date and deliver to
the secretary of the corporation one or more written demands for the meeting
describing the purpose or purposes for which it is to be held. Only business
within the purpose or purposes described in the meeting notice may be
conducted at a special shareholders meeting.
Section 3. PLACE OF MEETINGS. All meetings of shareholders shall be
held at the principal office of the corporation in the state of New York, or
at such other place, either within or without the state of New York, as may be
specified in the respective notices, or waivers of notice, of such meetings.
Section 4. NOTICE OF MEETINGS. A written or printed notice, stating the
place, day and hour of the meeting, and in the case of a special meeting or
when required by law or by the charter or these bylaws, the purpose or
purposes for which the meeting is called, shall be delivered or mailed by the
secretary, or by the officer or persons calling the meeting, at least thirty
(30) days but no more than fifty (50) days before the date of the meeting, or
such other time period required by law for a special meeting for election of
directors, to each shareholder of record entitled to vote at such meeting at
such address as appears upon the stock records of the corporation.
1
<PAGE>
Section 5. WAIVER OF NOTICE. Notice of any meeting of shareholders may be
waived in writing by any shareholder if the waiver sets forth in reasonable
detail the purpose or purposes for which the meeting is called and the time and
place thereof. Attendance at any meeting in person, or by proxy when the
instrument of proxy sets forth in reasonable detail the purpose or purposes for
which the meeting is called, without protesting prior to the conclusion of the
meeting the lack of notice of such meeting, shall constitute a waiver of notice
of such meeting.
Section 6. QUORUM. Unless otherwise provided by the charter or by these
bylaws or by law, at any meeting of shareholders a majority of the
outstanding shares entitled to vote at such meeting, represented in person or
by proxy, shall constitute a quorum. If less than a majority of such shares
are represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time. The shareholders present at a duly
organized meeting may continue to transact business until adjournment,
notwithstanding the withdrawal of enough shareholders to leave less than a
quorum.
Section 7. ADJOURNED MEETINGS. At any adjourned meeting at which a
quorum shall be represented, any business may be transacted as might have
been transacted at the meeting as originally notified. If a new record date is
or must be established pursuant to law, notice of the adjourned meeting must
be given to persons who are shareholders as of the new record date.
Section 8. VOTING AT SHAREHOLDERS' MEETINGS.
Subsection 1. VOTING RIGHTS. Unless otherwise provided by the
charter or by these bylaws or by law, every shareholder shall have the right
at every shareholders' meeting to one vote for each share standing in his or
her name on the books of the corporation on the date established by the board
of directors as the record date for determination of shareholders entitled to
vote at such meeting; provided that such date shall not be more than fifty
(50) nor less than ten (10) days preceding the date of the meeting. If such
date is not established by the board of directors, such date shall be at the
close of business on the day next preceding the day on which notice is given,
or, if no notice is given, the day on which the meeting is held. Any
shareholder acquiring title to a share after the record date has been
established shall upon written request to the shareholder of record be
entitled to receive from the shareholder of record a proxy, with power of
substitution, to vote that share.
Subsection 2. PROHIBITION AGAINST VOTING SHARES. No share shall
be voted at any meeting:
(a) upon which any installment is due and unpaid; or
(b) which belongs to this corporation.
Subsection 3. VOTING OF SHARES OWNED BY CORPORATIONS AND FIDUCIARIES.
Shares of this corporation standing in the name of another corporation may be
voted by such officer, agent
2
<PAGE>
or proxy as the board of directors of such other corporation may appoint, or
as the bylaws of such other corporation may direct, or in the absence of such
direction, or the inability of the fiduciaries to act in accordance
therewith, the following provisions shall apply:
(a) where shares are held jointly by three (3) or more fiduciaries,
such shares shall be voted in accordance with the will of the
majority;
(b) where the fiduciaries, or a majority of them cannot agree, or
where they are equally divided upon the question of voting such
shares, any court of general equity jurisdiction may, upon petition
filed by any of such fiduciaries, or by any party in interest,
direct the voting of such shares as it may deem to be for the best
interests of the beneficiaries, and such shares shall be voted in
accordance with such direction.
Subsection 4. VOTING OF JOINTLY HELD SHARES. Shares issued and held in
the name of two or more persons shall be voted in accordance with the will of
the majority, and if a majority of them cannot agree, or if they are equally
divided as to the voting of such shares, the shares shall be divided equally
between or among such persons for voting purposes.
Subsection 5. PROXIES. A shareholder may vote either in person or by
proxy executed in writing by the shareholder or a duly authorized attorney-
in-fact. No proxy shall be valid after eleven (11) months from the date of
its execution, unless a longer time is expressly provided therein.
Section 9. ORDER OF BUSINESS. The order of business at each
shareholders' meeting shall be established by the person presiding at the
meeting.
Section 10. REQUIRED VOTES. A majority of the votes entitled to vote on
a matter represented at a meeting of shareholders at which a quorum is
present shall be required to take action on the matter, except for elections
of directors which shall require a plurality of votes cast at a meeting of
shareholders by the holders of shares entitled to vote in the election, unless
a different number is required by the articles of incorporation, these bylaws
or by law.
ARTICLE II
Board of Directors
Section 1. NUMBER, ELECTION AND TERM OF DIRECTORS. The business of the
corporation shall be managed by a board of directors composed of 13 members.
The directors shall be elected annually by the shareholders by a plurality of
votes, each for a term of one year, and shall hold office until their
successors are elected and have qualified or until their earlier death,
resignation,
3
<PAGE>
disqualification or removal. No decrease in the number of directors shall
shorten the term of any incumbent director.
A notice of the election of directors (setting forth the names of the nominees
and any other information required by law) shall be filed with the office of the
Superintendent of the Insurance Department of the State of New York at least ten
days before the date of election of directors.
Section 2. QUALIFICATIONS OF DIRECTORS. A majority of the directors
must, during their entire terms of service, be citizens of the United States,
and at least three of the directors shall reside in the state of New York. At
least one third of the directors shall be persons who are not officers or
employees of the corporation or officers or employees of any entity controlling,
controlled by or under common control with the corporation and who are not
beneficial owners of a controlling interest in the voting stock of the
corporation or any such entity.
Section 3. REGULAR MEETINGS. A regular meeting of the board of
directors shall be held without other notice than this bylaw immediately
after, and at the same place as, the annual meeting of shareholders, or
within thirty days thereafter upon notice in the manner provided by these
bylaws for calling special meetings of the board. The board of directors may
provide by resolution the time and place, either within or without the state
of New York, for the holding of additional regular meetings without other
notice than such resolution. In lieu of a regular meeting of the board of
directors, any action required or permitted to be taken therein may be taken
without a meeting in the manner described in Section 10 of this Article.
Section 4. SPECIAL MEETINGS. Special meetings of the board of directors
may be called by the chairman of the board, or in his absence or incapacity or
if such office is vacant, by the president. The secretary shall call special
meetings of the board of directors when requested in writing to do so by any
member thereof. All special meetings of the board of directors shall be held
at the principal office of the corporation in the state of New York, or at such
other place, either within or without the state of New York, as may be
unanimously designated by the board of directors, and upon notice provided by
these bylaws.
Section 5. NOTICE OF MEETINGS. Unless otherwise provided by these
bylaws, notice of any meeting of the board of directors shall be given not
less than two days before the date fixed for such meeting by oral, telefax,
telegraphic, telephonic, electronic or written communication stating the time
and place thereof and delivered to each member of the board of directors or
telegraphed or mailed to such director at his or her address as it appears on
the books of the corporation.
Section 6. WAIVER OF NOTICE. A director may sign a written waiver of
notice either before the time of the meeting, at the time of the meeting or
after the time of the meeting, if the waiver sets forth in reasonable detail
the purpose or purposes for which the meeting is called and the time and place
thereof. A director's attendance at, or participation in, a meeting waives any
required notice to the director of the meeting.
4
<PAGE>
Section 7. VACANCIES. A vacancy in the board of directors caused by an
increase in the number of directors or otherwise (except death, resignation,
removal or disqualification), shall be filled by a majority vote of the
remaining members of the board until the next annual meeting of the
shareholders. A vacancy in the board of directors caused by death,
resignation, removal, disqualification or otherwise shall be filled by a
majority vote of the remaining members of the board for the unexpired term of
the directorship.
Whenever any directors of the corporation shall have resigned and successors
shall have been chosen pursuant to the provisions of these bylaws, such
successors shall not take office nor exercise their duties until ten days after
written notice of their election shall have been filed in the office of the
Superintendent of the Insurance Department of the State of New York.
Section 8. QUORUM. The attendance of not less than a majority of the
whole board of directors shall be necessary to constitute a quorum for the
transaction of any business except the filling of vacancies, but if fewer than
a majority of the directors is present at a meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice. At least one director who is not an officer or employee of the
corporation or an officer or employee of any entity controlling, controlled by
or under common control with the corporation and who is not a beneficial owner
of a controlling interest in the corporation or any such entity must be
included in any quorum for the transaction of business.
Section 9. REQUIRED VOTES. The vote of a majority of the directors
present at any meeting at the time of the vote, if a quorum is present at such
time, shall be the act of the board of directors, unless a greater number is
required by the charter or by these bylaws or by law.
Section 10. ACTION WITHOUT A MEETING. Unless otherwise provided in the
charter, any action required or permitted to be taken at any meeting of the
board of directors or of any committee thereof may be taken without a meeting
if, a written consent to such action is signed by all members of the board or
of such committee, as the case may be, and such written consent is filed with
the minutes of proceedings of the board or committee.
Section 11. MEETING BY CONFERENCE CALL. Unless otherwise provided by the
charter, any or all members of the board of directors or of a committee
designated by the board may participate in a meeting of the board or committee
by means of a conference telephone or similar communications equipment allowing
all persons participating in the meeting to hear each other at the same time,
and participation in this manner shall constitute presence in person at the
meeting.
Section 12. REMOVAL OF DIRECTORS. Any or all members of the board of
directors may be removed, with or without cause, at a meeting of shareholders
called for that purpose by a vote of three-fourths of the shares of the
corporation outstanding and entitled to vote. A director may be removed only at
a meeting called for that purpose and the notice of the meeting must state that
the purpose, or one of the purposes, of the meeting is removal of the director.
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Section 13. OTHER DUTIES OF DIRECTORS. The board of directors shall keep
a record of the attendance of directors at meetings thereof, and the secretary
shall annually, for and on behalf of the board of directors, make a report
showing the names of the directors, the number of regular and special meetings
of the board, the number of meetings attended, and the number of meetings from
which each director was absent, which report shall be read at, and incorporated
in the minutes of, each annual meeting of shareholders.
Section 14. ANNUAL STATEMENT OF CONDITION. The board of directors, or a
committee therefrom, shall examine the corporation once each year and submit a
complete statement of the condition of the corporation to the Superintendent of
the Insurance Department of the State of New York.
ARTICLE III
Board Committees
Section 1. COMMITTEES. The board of directors may, by resolution adopted
by a majority of the entire board, from time to time, designate from among its
members an executive committee, an investment committee or one or more other
committees, each of which shall have five or more members who are directors and
shall serve until the meeting of the board of directors held immediately after
the next annual meeting of the shareholders. The board of directors shall, by
resolution adopted by the majority of the whole board from time to time,
designate from among its members an independent director's committee which
shall be comprised solely of directors who are not officers or employees of the
corporation or officers or employees of any entity controlling, controlled by
or under common control with the corporation and who are not beneficial owners
of a controlling interest in the voting stock of the corporation or any such
entity. Each committee shall exercise such authority of the board of directors
as provided by law, these bylaws, and provided in the resolution establishing
the committee; however, no such committee shall (1) authorize distributions,
except to authorize or approve a reacquisition of shares if done according to a
formula or method prescribed by the board of directors; (2) approve or propose
to shareholders, action required by law to be approved by shareholders; (3) fill
vacancies on the board or directors or any committee thereof; (4) amend the
charter; (5) adopt, amend, or repeal the bylaws; (6) approve a plan of merger
not requiring shareholder approval; or (7) amend or repeal any resolution of
the board which by its terms is not so amendable or repealable.
Section 2. EXECUTIVE COMMITTEE. The executive committee may exercise all
the authority of the board of directors in the management of the corporation
during the interval between the meetings of the board, except that reserved for
the independent directors committee.
Section 3. INDEPENDENT DIRECTORS COMMITTEE. The independent directors
committee shall have the responsibility for recommending the selection of
independent certified public accountants, reviewing the company's financial
condition, the scope and results of the independent audit and any
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internal audits, nominating candidates for director for election by
shareholders, evaluating the performance of the principal officers of the
corporation and recommending to the board of directors the selection and
compensation of such officers.
Section 4. INVESTMENT COMMITTEE. The board of directors may, by
resolution adopted by a majority of the whole board, from time to time
designate from among its members an investment committee, which shall consist
of five members who shall serve until the meeting of the board of directors
held immediately after the next annual meeting of the shareholders.
The investment committee shall have and possess all the rights and powers
of the board of directors to make, supervise and direct the investments of the
corporation, to sell, assign, exchange, lease, or otherwise dispose of such
investments, and to do and perform all things deemed necessary and proper in
relation to such investments. The investment committee shall have the further
right and power to delegate its powers and duties to such officers, employees
and agents, including investment advisers, of the corporation as it may select
and appoint in its discretion, subject to such policies, plans, standards,
limitations and objectives as the investment committee may prescribe from time
to time.
The investment committee shall keep a record of its proceedings, shall
submit a report of its action to the board of directors at its next meeting and
as otherwise may be required by law or by the board, shall adopt its own rules
of procedure, and shall take such other actions as may be required from time to
time by law.
Section 5. QUALIFICATION OF COMMITTEE MEMBERS. Unless a greater number is
required by the charter or by these bylaws or by law, at least one-third of the
members of each committee shall be a person or persons who are not officers or
employees of the corporation or officers or employees of any entity
controlling, controlled by or under common control with the corporation and who
are not beneficial owners of a controlling interest in the voting stock of the
corporation or any such entity.
Section 6. QUORUM. The attendance of not less than a majority of the
members of a committee shall be necessary to constitute a quorum for the
transaction of any business, but if fewer than a majority of the directors is
present at a meeting, a majority of the directors present may adjourn the
meeting from time to time without further notice. At least one director who is
not an officer or employee of the corporation or an officer or employee of any
entity controlling, controlled by or under common control with the corporation
and who is not a beneficial owner of a controlling interest in the voting stock
of the corporation or any such entity, must be included in any quorum for the
transaction of business.
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ARTICLE IV
Officers
Section 1. ELECTED OFFICERS. The elected officers of the corporation
shall be a president, a secretary, and a treasurer, and may also include a
chairman of the board, one or more vice presidents of a class or classes as
the board of directors may determine, and such other officers as the board of
directors may determine. Any two or more offices may be held by the same
person except the offices of president and secretary.
Section 2. APPOINTED OFFICERS. The appointed officers of the
corporation may include one or more second vice presidents, assistant vice
presidents, assistant treasurers, and assistant secretaries.
Section 3. ELECTION OR APPOINTMENT AND TERM OF OFFICE. The elected
officers of the corporation shall be elected annually by the board of
directors, each for a term of one year, at the regular meeting of the board
of directors held immediately after the annual meeting of the shareholders.
The appointed officers of the corporation shall be appointed annually by the
chief executive officer immediately following the regular board meeting held
after each annual meeting of shareholders. Additional officers may be
elected at any regular or special meeting of the board of directors to serve
until the regular meeting of the board held immediately after the next annual
meeting of the shareholders and additional officers may be appointed by the
chief executive officer at any time to serve until the next annual appointment
of officers. Each officer shall hold office for a term of one year until his
or her successor, if any, is elected or appointed and has qualified or until
his or her earlier death, resignation, retirement or removal.
Section 4. REMOVAL. Any officer may be removed by the board of
directors and any appointed officer may be removed by the chief executive
officer, with or without cause, but such removal shall be without prejudice
to the contract rights, if any, of the person so removed.
Section 5. VACANCIES. A vacancy in the office of president, secretary
or treasurer because of death, resignation, retirement, removal or otherwise,
shall be filled by the board of directors, and a vacancy in any other elected
office may be filled by the board of directors.
Section 6. CHIEF EXECUTIVE OFFICER. If the elected officers of the
corporation include both a chairman of the board and a president, the board of
directors shall designate one of such officers to be the chief executive officer
of the corporation. If the office of chairman of the board is vacant, the
president shall be chief executive officer of the corporation. The chief
executive officer of the corporation shall be, subject to the board of
directors, in general charge of the affairs of the corporation.
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Section 7. CHAIRMAN OF THE BOARD. The chairman of the board shall
preside at all meetings of the shareholders and of the board of directors at
which he may be present and shall have such other powers and duties as may be
determined by the board of directors.
Section 8. PRESIDENT. The president shall have such powers and duties
as may be determined by the board of directors. In the absence of the
chairman of the board, or if such office is vacant, the president shall have
all the powers of the chairman of the board and shall perform all his or her
duties.
Section 9. VICE PRESIDENTS. A vice president shall perform such duties
as may be assigned by the chief executive officer or the board of directors.
In the absence of the president and in accordance with such order of priority
as may be established by the board of directors, a vice president may perform
the duties of the president, and when so acting, shall have all the powers of
and be subject to all the restrictions upon the president.
Section 10. SECOND VICE PRESIDENTS AND ASSISTANT VICE PRESIDENTS. A
second vice president and an assistant vice president shall perform such
duties as may be assigned by the chief executive officer or the board of
directors.
Section 11. SECRETARY. The secretary shall (a) keep the minutes of the
shareholders' and board of directors' meetings in one or more books provided
for that purpose, (b) see that all notices are duly given in accordance with
the provisions of these bylaws or as required by law, (c) be custodian of the
corporate records and of the seal of the corporation and see that the seal of
the corporation is affixed to all documents, the execution of which on behalf
of the corporation under its seal is duly authorized, and (d) in general
perform all duties incident to the office of secretary and such other duties
as may be assigned by the chief executive officer or the board of directors.
Section 12. ASSISTANT SECRETARIES. In the absence of the secretary, an
assistant secretary shall have the power to perform his or her duties
including the certification, execution and attestation of corporate records
and corporate instruments. Assistant secretaries shall perform such other
duties as may be assigned to them by the chief executive officer or the board
of directors.
Section 13. TREASURER. The treasurer shall (a) have charge and custody of
all funds and securities of the corporation, (b) receive and give receipts
for monies due and payable to the corporation from any source whatsoever, (c)
deposit all such monies in the name of the corporation in such depositories
as are selected in the manner designated by the board of directors, and (d) in
general perform all duties incident to the office of treasurer and such other
duties as may be assigned by the chief executive officer or the board of
directors. If required by the board of directors, the treasurer shall give a
bond for the faithful discharge of his duties in such form and with such
surety or sureties as the board of directors shall determine.
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Section 14. ASSISTANT TREASURERS. In the absence of the treasurer, an
assistant treasurer shall have the power to perform his or her duties.
Assistant treasurers shall perform such other duties as may be assigned to them
by the chief executive officer or the board of directors.
Section 15. POSITIONS AND TITLES. The chief executive officer may
establish such positions and appoint persons to them with such titles as he or
she may deem necessary. He or she may also fix the duties of such positions
and may discharge persons from them.
ARTICLE V
Corporate Instruments, Loans, Books and Records
Section 1. CORPORATE INSTRUMENTS. The board of directors may authorize
any officer or officers to execute and deliver any instrument in the name of
or on behalf of the corporation, and such authority may be general or confined
to specific instances.
Section 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name unless
authorized by a resolution of the board of directors. Such authority may be
general or confined to specific instances.
Section 3. LOANS TO OFFICERS AND DIRECTORS. Neither the corporation, nor
any of its directors or officers acting for and on its behalf, shall directly
or indirectly loan any of its funds, monies, capital or other property to any
director or officer of the corporation. This section shall not apply to loans
upon a policy of insurance issued by the corporation not in excess of the net
cash surrender value thereof.
Section 4. BOOKS AND RECORDS. The corporation shall keep at its principal
office correct and complete books of account and minutes of the proceedings of
its shareholders, directors and board committees, and shall likewise keep at
its principal office a complete and accurate list of shareholders, giving the
names and addresses of all shareholders and the number of shares held by
each.
ARTICLE VI
Stock Certificates and Transfer of Shares
Section 1. Certificates for Shares. Each shareholder shall be entitled
to a certificate, signed by the president or a vice president and the secretary
or an assistant secretary of the corporation,
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certifying the number of shares owned by him or her in the corporation. If
such certificate is countersigned by the written signature of a transfer
agent other than the corporation or an employee of the corporation, the
signatures of the officers of the corporation may be facsimiles. If such
certificate is countersigned by the written signature of a registrar other
than the corporation or an employee of the corporation, the signatures of
the transfer agent and the officers of the corporation may be facsimiles. In
case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued,
it may be issued by the corporation with the same effect as if he or she were
such officer, transfer agent, or registrar at the date of its issue.
Certificates representing shares of the corporation shall be in such form
consistent with the laws of the state of New York as shall be determined by the
board of directors. All certificates for shares shall be consecutively numbered
or otherwise identified. The name and address of the person to whom the
shares represented thereby are issued, with the number of shares and the date
of issue, shall be entered on the stock transfer records of the corporation.
Section 2. LOST, DESTROYED OR WRONGFULLY TAKEN CERTIFICATES. Any
person claiming a certificate of stock to have been lost, destroyed or
wrongfully taken, and who requests the issuance of a new certificate before
the corporation has notice that the certificate alleged to have been lost,
destroyed or wrongfully taken has been acquired by a bona fide purchaser,
shall make an affidavit of the fact and shall give the corporation and its
transfer agents and registrars a bond of indemnity with unlimited liability,
in form and with one or more corporate sureties satisfactory to the chief
executive officer or treasurer of the corporation (except that the chief
executive officer or treasurer may authorize the acceptance of a bond of
different amount, or a bond with personal surety thereon, or a personal
agreement of indemnity), whereupon in the discretion of the chief executive
officer or the treasurer and except as otherwise provided by law a new
certificate may be issued of the same tenor and for the same number of shares
as the one alleged to have been lost, destroyed or wrongfully taken. In lieu
of a separate bond of indemnity in each case, the chief executive officer or
the treasurer may accept an assumption of liability under a blanket bond
issued in favor of the corporation and its transfer agents and registrars by
one or more corporate sureties satisfactory to the chief executive officer or
treasurer.
Section 3. TRANSFER OF SHARES. Transfer of shares of the corporation
shall be made on the stock transfer records of the corporation by the holder
of record thereof or by his or her legal representative, who shall furnish
proper evidence of authority to transfer, or by his or her attorney thereunto
authorized by power of attorney duly executed and filed with the corporation,
and, except as otherwise provided in these bylaws, upon surrender for
cancellation of the certificates for such shares.
Section 4. TRANSFER AGENT AND REGISTRARS. The board of directors by
resolution may appoint a transfer agent or agents or a registrar or
registrars of transfer, or both. All such appointments shall confer such
powers, rights, duties and obligations consistent with the laws of the state
of New York as the board of directors shall determine. The board of directors
may appoint the treasurer of the corporation and one or more assistant
treasurers to serve as transfer agent or agents.
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ARTICLE VII
Indemnification
Section 1. ACTIONS BY A THIRD PARTY. To the extent permitted or required
by the laws of New York, the corporation shall indemnify any person who is or
was a party, or is threatened to be made a defendant or respondent, to a
proceeding, including any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than actions by or in the right of the corporation), and whether formal or
informal, who is or was a director, officer, or employee of the corporation or
who, while a director, officer, or employee of the corporation, is or was
serving at the corporation's request as a director, officer, partner,
trustee, employee, or agent of another foreign or domestic corporation,
partnership, joint venture, trust, employee benefit plan, or other enterprise,
whether for profit or not, against:
(a) action, suit or any reasonable expenses (including attorneys' fees)
actually and necessarily incurred as a result of such action, suit or
proceeding, or any appeal therein, if such person is wholly
successful on the merits or otherwise in the defense of such action,
suit or proceeding, or
(b) judgments, settlements, penalties, fines (including excise taxes
assessed with respect to employee benefit plans) and reasonable
expenses (including attorneys' fees) actually and necessarily incurred
as a result of such action, suit or proceeding, or any appeal therein,
where such person is not wholly successful on the merits or otherwise
in the defense of the action, suit or proceeding if:
(i) the individual's conduct was in good faith; and
(ii) the individual reasonably believed:
(A) in the case of conduct in the individual's capacity
as a director, officer or employee of the corporation,
that the individual's conduct was in the corporation's
best interests; and
(B) in all other cases, that the individual s conduct was
not opposed to the corporation's best interests; and
(iii) in the case of any criminal proceeding, the individual also
had no reasonable cause to believe the individual's conduct
was unlawful.
The termination of a proceeding by a judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent is not, of itself,
determinative that the director, officer, or employee did
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not meet the standard of conduct described in this section.
Section 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. To the extent
permitted or required by the laws of New York, the corporation shall
indemnify any person who is or was a party or is threatened to be made a
defendant or respondent, to a proceeding, including any threatened, pending
or completed action, suit or proceeding, by or in the right of the corporation
to procure a judgment in its favor, by reason of the fact that such person is
or was a director, officer, or employee of the corporation or is or was serving
at the request of the corporation as a director, officer, partner, trustee,
employee, or agent of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other enterprise, whether for
profit or not, against any reasonable expenses (including attorneys' fees)
actually and necessarily incurred by such person in connection with the defense
or settlement of such action, suit or proceeding, or any appeal therein:
(a) if such person is wholly successful on the merits or otherwise
in the defense of such proceeding, or
(b) if not wholly successful:
(i) the individual s conduct was in good faith; and
(ii) the individual reasonably believed:
(A) in the case of conduct in the individual's capacity as
a director, officer, or employee of the corporation,
that the individual's conduct was in the corporation's
best Interests; and
(B) in all other cases that the individual's conduct was
not opposed to the corporation's best interests,
except that no indemnification shall be made in respect of a threatened action
or pending action which is settled or otherwise disposed of, or any claim,
issue, or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the court in
which such action or suit was brought or, if no action was brought, any court
of competent jurisdiction shall determine upon application, that despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court shall deem proper.
Section 3. METHODS OF DETERMINING WHETHER STANDARDS FOR INDEMNIFICATION
HAVE BEEN MET. Any indemnification under Sections 1 or 2 of this Article
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of
the director, officer, or employee is proper in the circumstances because he
has met the applicable standards of conduct set forth in Section 1 or 2. In
the case of directors of the
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corporation, such determination shall be made by any one of the following
procedures:
(a) by the board of directors by a majority vote of a quorum consisting of
directors not at the time parties to the proceeding;
(b) if a quorum of the board of directors cannot be obtained under (a) or,
even if obtainable, a quorum of disinterested directors so directs:
(i) by the board upon the written opinion of independent legal
counsel that indemnification is proper in the circumstances
because the applicable standard of conduct set forth in Section
1 or 2 of this Article has been met by such director or
officer, or,
(ii) by the shareholders upon a finding that the director or officer
has met the applicable standard of conduct set forth in section 1
or 2 of this Article.
Section 4. ADVANCEMENT OF DEFENSE EXPENSES. The corporation may pay for
or reimburse the reasonable expenses incurred by a director, officer, or
employee who is a party to a proceeding described in Section 1 or 2 of this
Article in advance of the final disposition of said proceeding if:
(a) the director, officer, or employee furnishes the corporation a written
affirmation of his good faith belief that he has met the standard of
conduct described in Section 1 or 2; and
(b) the director, officer, or employee furnishes the corporation a
written undertaking, executed personally or on his behalf, to repay
the advance if it is ultimately determined that the director,
officer, or employee is not entitled to indemnification, or, where
indemnification is granted, to the extent the expenses so advanced by
the corporation, or allowed by a court, exceed the indemnification to
which such person is entitled and
(c) a determination is made that the facts then known to those making the
determination pursuant to Section 3 of this Article VII would not
preclude indemnification under Section 1 or 2.
The undertaking required by this Section must be an unlimited general
obligation of the director, officer, or employee.
Section 5. NON-EXCLUSIVENESS OF INDEMNIFICATION. To the extent permitted
by the laws of New York, the indemnification and advancement of expenses
provided for or authorized by this Article does not exclude any other rights
to indemnification or advancement of expenses that a person may have under:
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(a) the corporation's charter or these bylaws;
(b) any resolution of the board of directors or the shareholders of
the corporation;
(c) an agreement providing for indemnification or
(d) otherwise as provided by law, provided that no indemnification may
be made to or on behalf of any director, officer or employee if a
judgment or other final adjudication adverse to the director,
officer or employee establishes that his acts were committed in
bad faith or were the result of active and deliberate dishonesty
and were material to the cause of action so adjudicated, or that
he personally gained in fact a financial profit or other advantage
to which he was not legally entitled.
Such indemnification shall continue as to a person who has ceased to be a
director, officer, or employee, and shall inure to the benefit of the heirs
and personal representatives of such person.
If any expenses or other amounts are paid by way of indemnification, otherwise
than by court order or action by the shareholders the corporation shall, not
later than the next annual meeting of shareholders unless such meeting is held
within three months form the date of such payment, and in any event, within
fifteen months from the date of such payment, mail to its shareholders of record
at the time entitled to vote for the election of directors a statement
specifying the persons paid, the amounts paid, and the nature and status at the
time of such payment of the litigation or threatened litigation
Section 6. NOTICE OF INDEMNIFICATION. No payment of indemnification or
advancement shall be made under this Article unless a notice has been filed
with the Superintendent of the Insurance Department of the State of New York
not less than 30 days prior to such payment, specifying the payee(s), the
amount(s) , the manner in which such payment is authorized, the nature and
status (at the time of such notice) of the litigation or threatened litigation
and any other information required by law.
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ARTICLE VIII
Fiscal Year
The fiscal year of the corporation shall begin on the first day of
January of each year and end upon the last day of December next succeeding.
ARTICLE IX
Amendments
These bylaws may be altered, amended or repealed and new bylaws may be
made by the shareholders and by the board of directors provided that any such
alteration, amendment or repeal is approved by the Superintendent of the
Insurance Department of the State of New York. Any bylaw adopted, altered,
amended or repealed by the board of directors may be amended or repealed by the
shareholders entitled to vote therein.
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