<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1999
1933 Act Registration No. 333-40937
1940 Act Registration No. 811-08517
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / /
POST-EFFECTIVE AMENDMENT NO. 2
/X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 4 /X/
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
(EXACT NAME OF REGISTRANT)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
1300 South Clinton Street, P.O. Box 1110, Fort Wayne, Indiana 46802
(ADDRESS OF DEPOSITOR'S PRINCIPAL EXECUTIVE OFFICES)
DEPOSITOR'S TELEPHONE NUMBER, INCLUDING AREA CODE
(219) 455-2000
<TABLE>
<S> <C>
COPY TO:
Jack D. Hunter, Esquire Kimberly J. Smith, Esquire
200 East Berry Street Sutherland Asbill & Brennan LLP
P.O. Box 1110 1275 Pennsylvania Ave., N.W.
Fort Wayne, Indiana 46802 Washington, D.C. 20004
(NAME AND ADDRESS OF
AGENT FOR SERVICE)
</TABLE>
Title of Securities: Interests in a separate account under individual flexible
payment deferred variable annuity contracts.
It is proposed that this filing will become effective:
/ / immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 1999, pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a)(1) of Rule 485
/ / on pursuant to paragraph (a)(1) of Rule 485
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
DELAWARE-LINCOLN CHOICEPLUS
LINCOLN LIFE VARIABLE ANNUITY
ACCOUNT N INDIVIDUAL VARIABLE ANNUITY CONTRACT
HOME OFFICE:
Lincoln National Life Insurance Company
1300 South Clinton Street
P.O. Box 7866
Fort Wayne, IN 46801
1-888-868-2583
This prospectus describes the individual flexible premium deferred variable
annuity contract that is issued by Lincoln National Life Insurance Company
(LINCOLN LIFE). The contract is for use with nonqualified plans and retirement
plans qualified under Section 408 of the tax code (IRAs) and Section 408A (Roth
IRA). In the future, we may offer the contract for other qualified plans.
Generally, you do not pay federal income tax on the contract's growth until it
is paid out. The contract is designed to accumulate CONTRACT VALUE and to
provide retirement income that you cannot outlive or for an agreed upon time.
These benefits may be a variable or fixed amount or a combination of both. If
you die before the ANNUITY COMMENCEMENT DATE, we will pay your BENEFICIARY A
DEATH BENEFIT.
The minimum initial PURCHASE PAYMENT for the contract is:
1. $10,000 for a nonqualified plan; and
2. $2,000 for a qualified plan.
Additional PURCHASE PAYMENTS may be made to the contract and must be at least
$100 per payment.
You choose whether your contract value accumulates on a variable or fixed
(guaranteed) basis or both. If you put all your PURCHASE PAYMENTS into the fixed
account, we guarantee your principal and a minimum interest rate. WE LIMIT
TRANSFERS FROM THE FIXED SIDE OF THE CONTRACT. A MARKET VALUE ADJUSTMENT (MVA)
MAY BE APPLIED TO ANY SURRENDER OR TRANSFER FROM THE FIXED ACCOUNT BEFORE THE
EXPIRATION DATE OF A GUARANTEED PERIOD.
All PURCHASE PAYMENTS for benefits on a variable basis will be placed in Lincoln
Life Variable Annuity Account N (VARIABLE ANNUITY ACCOUNT [VAA]). The VAA is a
segregated investment account of LINCOLN LIFE. If you put all or some of your
PURCHASE PAYMENTS into one or more of the contract's variable options, you take
all of the investment risk on the CONTRACT VALUE and the retirement income. If
the SUBACCOUNTS you select make money, your CONTRACT VALUE goes up; if they lose
money, your CONTRACT VALUE goes down. How much the CONTRACT VALUE goes up or
down depends on the performance of the SUBACCOUNTS you select. WE DO NOT
GUARANTEE HOW ANY OF THE VARIABLE OPTIONS OR THEIR FUNDS WILL PERFORM. ALSO,
NEITHER THE U.S. GOVERNMENT NOR ANY FEDERAL AGENCY INSURES OR GUARANTEES YOUR
INVESTMENT IN THE CONTRACT.
The available funds are listed below:
AIM Variable Insurance Funds, Inc.:
- - AIM V.I Growth Fund
- - AIM V.I. International Equity Fund
- - AIM V.I. Value Equity Fund
BT Insurance Funds:
- - BT Equity 500 Index Fund
Delaware Group Premium Fund Inc.:
- -Delaware Premium Growth & Income Series
(formerly known as Decatur Total Return)
- - Delaware Premium Delchester Series
- - Delaware Premium Devon Series
- - Delaware Premium Emerging Markets Series
- - Delaware Premium International Equity Series
- - Delaware Premium REIT Series
- - Delaware Premium Small Cap Value Series
- - Delaware Premium Social Awareness Series
- - Delaware Premium Trend Series
Dreyfus Variable Investment Fund:
- - Dreyfus Small Cap Portfolio
Variable Insurance Products Fund
- - Fidelity VIP Equity-Income Portfolio
- - Fidelity VIP Growth Portfolio
- - Fidelity VIP Overseas Portfolio
Variable Insurance Products Fund III:
- - Fidelity VIP III Growth Opportunities Portfolio
Kemper Variable Series:
- - Kemper Small Cap Growth Portfolio
- - Kemper Government Securities Portfolio
Liberty Variable Investment Trust:
- - Colonial U.S. Stock Fund
- - Newport Tiger Fund
Lincoln National:
- - Bond Fund
- - Money Market Fund
MFS -Registered Trademark- Variable Insurance Trust:
- - MFS Emerging Growth Series
- - MFS Research Series
- - MFS Total Return Series
- - MFS Utilities Series
OCC Accumulation Trust:
- - OCC Global Equity Portfolio
- - OCC Managed Portfolio
This Prospectus gives you information about the contract that you should know
before you decide to buy a contract and make PURCHASE PAYMENTS. You should also
review the prospectuses for the funds that are attached, and keep these
prospectuses for future reference.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED THIS CONTRACT
OR DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENCE.
You can obtain a Statement of Additional Information (SAI) about the contracts
that has more information. Its terms are made part of this Prospectus. For a
free copy, write: Lincoln National Life Insurance Company, P.O. Box 7866, Fort
Wayne, Indiana 46801, or call 1-888-868-2583. The SAI and other information
about LINCOLN LIFE and Account N are also available on the SEC's web site
(http:\\www.sec.gov). There is a table of contents for the SAI on the last page
of this Prospectus.
May 1, 1999
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
- ----------------------------------------------------------
Special terms 2
Expense tables 3
Summary 7
Condensed financial information for the VAA 9
Investment results 10
Financial statements 11
Lincoln National Life Insurance Company 11
Variable annuity account (VAA) 11
Investments of the variable annuity account 11
Charges and other deductions 14
The contracts 16
Annuity payouts 19
<CAPTION>
PAGE
- ----------------------------------------------------------
<S> <C>
Fixed side of the contract 21
Federal tax matters 22
Voting rights 26
Distribution of the contracts 26
Return privilege 26
State regulation 27
Records and reports 27
Other information 27
Statement of additional information table of
contents for Lincoln Life Variable Annuity
Account N Delaware-Lincoln ChoicePlus 29
</TABLE>
SPECIAL TERMS
(We have ITALICIZED the terms that have special meaning throughout the
Prospectus).
ACCOUNT OR VARIABLE ANNUITY ACCOUNT (VAA) -- The segregated investment account,
Account N, into which LINCOLN LIFE sets aside and invests the assets for the
variable side of the contract offered in this Prospectus.
ACCUMULATION UNIT -- A measure used to calculate CONTRACT VALUE for the variable
side of the contract before the ANNUITY COMMENCEMENT DATE.
ANNUITANT -- The person upon whose life the ANNUITY BENEFIT PAYMENTS are based
and made to after the ANNUITY COMMENCEMENT DATE.
ANNUITY COMMENCEMENT DATE -- The VALUATION DATE when funds are withdrawn or
converted into ANNUITY UNITS or fixed dollar payout for payment of retirement
income benefits under the ANNUITY PAYOUT option you select.
ANNUITY PAYOUT -- An amount paid at regular intervals after the ANNUITY
COMMENCEMENT DATE under one of several options available to the ANNUITANT and/or
any other payee. This amount maybe paid on a variable or fixed basis or a
combination of both.
ANNUITY UNIT -- A measure used to calculate the amount of ANNUITY PAYOUTS after
the ANNUITY COMMENCEMENT DATE. See Annuity payouts.
BENEFICIARY -- The person you choose to receive any DEATH
BENEFIT paid if you die before the ANNUITY COMMENCEMENT DATE.
CONTRACTOWNER (you, your, owner) -- The person who has the ability to exercise
the rights within the contract (e.g., decides on investment allocations,
transfers, payout option, designates the BENEFICIARY, etc.) Usually, but not
always, the owner is the ANNUITANT.
CONTRACT VALUE -- At a given time before the ANNUITY COMMENCEMENT DATE, the
total value of all ACCUMULATION UNITS for a contract plus the value of the fixed
side of the contract.
CONTRACT YEAR -- Each one-year period starting with the effective date of the
contract and starting with each contract anniversary after that.
DEATH BENEFIT -- An amount payable to your designated BENEFICIARY if the owner
dies before the ANNUITY COMMENCEMENT DATE.
LINCOLN LIFE (we, us, our) -- Lincoln National Life Insurance Company.
PURCHASE PAYMENTS -- Amounts paid into the contract.
SUBACCOUNT -- The portion of the VAA that reflects investments in ACCUMULATION
and ANNUITY UNITS of a particular fund available under the contracts.
VALUATION DATE -- Each day the New York Stock Exchange (NYSE) is open for
trading.
VALUATION PERIOD -- The period starting at the close of trading (currently 4:00
p.m. New York time) on each day that the NYSE is open for trading (VALUATION
DATE) and ending at the close of such trading on the next VALUATION DATE.
2
<PAGE>
EXPENSE TABLES
SUMMARY OF CONTRACTOWNER EXPENSES:
The maximum surrender charge (contingent deferred sales charge) as a percentage
of PURCHASE PAYMENTS surrendered/ withdrawn: 7%
<TABLE>
<S> <C>
Account fee: $ 35
Transfer fee: $ 10
</TABLE>
The surrender charge percentage is reduced over time. The later the redemption
occurs, the lower the surrender charge with respect to that surrender or
withdrawal. We may waive this charge in certain situations. See Charges and
other deductions -- Surrender charge.
A market value adjustment (MVA) may be applied to the amount being surrendered
or transferred (except for dollar cost averaging and account rebalancing) from a
fixed account guaranteed period amount. See Fixed side of the contract.
The account fee will be waived if your CONTRACT VALUE is $100,000 or more at the
end of any particular CONTRACT YEAR.
The transfer charge will not be imposed on the first 12 transfers during a
CONTRACT YEAR. We reserve the right to charge a $10 fee for transfers over 12
times during any CONTRACT YEAR. Automatic dollar cost averaging and automatic
rebalancing transfers are not included in these first twelve transfers.
ACCOUNT N ANNUAL EXPENSES FOR DELAWARE-LINCOLN CHOICEPLUS SUBACCOUNTS:
(as a percentage of average account value)
<TABLE>
<S> <C>
Mortality and expense risk charge............ 1.25%
Administrative charge........................ .15%
---
Total annual charge for each Delaware-Lincoln
ChoicePlus SUBACCOUNT...................... 1.40%
</TABLE>
FUND ANNUAL EXPENSES OF THE FUNDS FOR THE YEAR ENDED DECEMBER 31, 1998:
(as a percentage of each fund's average net assets):
<TABLE>
<CAPTION>
MANAGEMENT OTHER
FEES EXPENSES
(AFTER ANY + (AFTER ANY =
WAIVERS/ WAIVERS/
REIMBURSEMENTS) REIMBURSEMENTS)
----------------- -----------------
<S> <C> <C> <C> <C> <C>
1. AIM V.I. Growth Fund................................................ 0.64% 0.08%
2. AIM V.I. International Equity Fund.................................. 0.75 0.16
3. AIM V.I. Value Equity Fund.......................................... 0.61 0.05
4. BT Equity 500 Index Fund(1)......................................... 0.20 0.10
5. Delaware Premium Growth and Income Series(2)
(formerly known as Decatur Total Return)(3)........................ 0.60 0.11
6. Delaware Premium Delchester Series(2)(3)............................ 0.65 0.10
7. Delaware Premium Devon Series(2)(3)................................. 0.65 0.06
8. Delaware Premium Emerging Markets Series(2)(3)...................... 1.08 0.42
9. Delaware Premium International Equity Series(2)(3).................. 0.82 0.13
10. Delaware Premium REIT Series(@)(2)(3)............................... 0.58 0.27
11. Delaware Premium Small Cap Value Series(2)(3)....................... 0.75 0.10
12. Delaware Premium Social Awareness Series(2)(3)...................... 0.71 0.14
13. Delaware Premium Trend Series(2)....................................
14. Dreyfus Variable Fund Small Cap Portfolio(2)........................ 0.75 0.02
15. Fidelity VIP Equity-Income Portfolio (Initial class)(4)............. 0.49 0.09
16. Fidelity VIP Growth Portfolio (Initial class)(4).................... 0.59 0.09
17. Fidelity VIP Overseas Portfolio (Initial class)(4).................. 0.74 0.17
18. Fidelity VIP III Growth Opportunities Portfolio (Initial
class)(4).......................................................... 0.59 0.12
19. Kemper Variable Small Cap Growth Portfolio.......................... 0.65 0.05
20. Kemper Variable Government Series Portfolio......................... 0.55 0.11
21. Liberty Variable Trust Colonial U.S. Stock Fund..................... 0.80 0.10
22. Liberty Variable Trust Newport Tiger Fund........................... 0.90 0.40
23. Lincoln National Bond Fund.......................................... 0.44 0.13
<CAPTION>
TOTAL
EXPENSES
(AFTER ANY
WAIVERS/
REIMBURSEMENTS)
-----------------
<S><C>
1. 0.72%
2. 0.91
3. 0.66
4. 0.30
5.
0.71
6. 0.75
7. 0.71
8. 1.50
9. 0.95
10. 0.85
11. 0.85
12. 0.85
13.
14. 0.77
15. 0.58
16. 0.68
17. 0.91
18.
0.71
19. 0.70
20. 0.66
21. 0.90
22. 1.30
23. 0.57
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT OTHER
FEES EXPENSES
(AFTER ANY + (AFTER ANY =
WAIVERS/ WAIVERS/
REIMBURSEMENTS) REIMBURSEMENTS)
----------------- -----------------
<S> <C> <C> <C> <C> <C>
24. Lincoln National Money Market Fund.................................. 0.48 0.11
25. MFS Variable Trust Emerging Growth Series(5)........................ 0.75 0.10
26. MFS Variable Trust Research Series(5)............................... 0.75 0.11
27. MFS Variable Trust Total Return Series(5)........................... 0.75 0.16
28. MFS Variable Trust Utilities Series(5).............................. 0.75 0.26
29. OCC Trust Global Equity Portfolio(6)................................ 0.80 0.33
30. OCC Trust Managed Portfolio(6)...................................... 0.78 0.04
<CAPTION>
TOTAL
EXPENSES
(AFTER ANY
WAIVERS/
REIMBURSEMENTS)
-----------------
<S><C>
24. 0.59
25. 0.85
26. 0.86
27. 0.91
28. 1.01
29. 1.13
30. 0.82
</TABLE>
(@) The REIT Series commenced operations on May 1, 1998. Expenses shown are
based on annualized amounts. Actual expenses may be greater or less than
shown.
(1) Under the Advisory Agreement with Bankers Trust Company (the "Advisor"), the
fund will pay an advisory fee at an annual percentage rate of 0.20% of the
average daily net assets of the fund. These fees are accrued daily and paid
monthly. The Advisor has voluntarily undertaken to waive its fee and to
reimburse the fund for certain expenses so the fund's total operating
expenses will not exceed 0.30% of average daily net assets. If this
reimbursement were not in place, the total operating expenses for the year
ended December 31, 1998, would have been 1.19%.
(2) For the fiscal year ended December 31, 1998, before waiver and/or
reimbursement by the investment adviser, total Series expenses as a
percentage of average daily net assets were 0.89% for Social Awareness
Series, 1.02% for REIT Series, 1.67% for Emerging Markets Series and 0.88%
for International Equity Series.
(3) The investment advisor for the Growth and Income Series (formerly known as
"Decatur Total Return Series"), Devon Series, Delchester Series, Trend
Series, Small Cap Value Series, Social Awareness Series, and REIT Series is
Delaware Management Company, Inc. ("Delaware Management"). The investment
advisor for the International Equity Series and Emerging Market Series is
Delaware International Advisers, Limited ("Delaware International").
Effective May 1, 1999 through October 31, 1999, the investment advisers for
the Series of DGPF have agreed voluntarily to waive their management fees
and reimburse each Series for expenses to the extent that total expenses
will not exceed 0.80% for the Growth and Income Series, Devon Series, and
Delchester Series; 0.85% for the REIT Series, Trend Series, Small Cap Value
Series, and Social Awareness Series, 0.95% for International Equity Series,
and 1.50% for the Emerging Market Series. The fee ratios shown have been
restated, if necessary, to reflect the new voluntary limitations which took
effect May 1, 1999. The declaration of a voluntary expense limitation does
not bind the investment adviser to declare future expense limitations with
respect to these Funds. Pursuant to a vote of the Fund's shareholders on
March 17, 1999, a new management fee structure based on average daily net
assets was approved. The above ratios have been restated to reflect the new
management fee structure which took effect on May 1, 1999.
(4) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, Fidelity Management & Research ("FMR") on
behalf of certain funds, have entered into arrangements with their custodian
whereby credits realized as a result of uninvested cash balances were used
to reduce custodian expenses. Including these reductions, the total
operating expenses presented in the table would have been 0.57% for VIP
Equity-Income; 0.66% for VIP Growth; 0.89% for VIP Overseas and 0.70% for
VIP III Growth Opportunities.
(5) Each series has an expense offset arrangement, which reduces the series'
custodian fee based upon the amount of cash maintained by the series with
its custodian and dividend-disbursing agent. Each series may enter into
other such arrangements and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. Expenses do not take
into account these expense reductions, and are therefore higher than the
actual expenses of the series. MFS has agreed to bear expenses for these
series, subject to reimbursement by these series, such that each such
series' "Other Expenses" shall not exceed the following percentages of the
average daily net assets of the series during the current fiscal year: 0.25%
except for the Emerging Growth Series and the Research Series, which have no
such limitation. The payments made by MFS on behalf of each series under
this arrangement are subject to reimbursement by the series to MFS, which
will be accomplished by the payment of an expense reimbursement fee by the
series to MFS computed and paid monthly at a percentage of the series'
average daily net assets for its then current fiscal year, with a limitation
that immediately after such payment of the series', "Other Expenses" will
not exceed the percentage set forth above for that series. The obligation of
MFS to bear a series' "Other Expense" pursuant to this arrangement, and the
series' obligation to pay the reimbursement fee to MFS, terminates on the
earlier of the date on which payments made by the series' equal the prior
payment of such reimbursable expenses by MFS, or December 31, 2004.
4
<PAGE>
(6) Other Expenses are shown gross of expense offsets afforded the portfolio,
which effectively lowered overall custody expenses. Total portfolio expenses
for the Managed Portfolio are limited by OpCap Advisors so that its
respective annualized operating expenses (net of any expense offsets) do not
exceed 1.00% of average daily net assets.
EXAMPLES
(expenses of the SUBACCOUNTS and the funds)
If you surrender your contract at the end of the time period shown, you would
pay the following expenses on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. AIM V.I Growth Fund.................................................. $ 92 $ 119 $ 147 $ 252
2. AIM V.I. International Equity Fund................................... 93 120 148 237
3. AIM V.I. Value Fund.................................................. 91 113 136 217
4. BT Equity 500 Index Fund............................................. 87 103 119 185
5. Delaware Premium Growth and Income Series
(formerly known as Decatur Total Return)........................... 91 115 138 221
6. Delaware Premium Delchester Series................................... 92 116 140 224
7. Delaware Premium Devon Series........................................ 91 115 138 221
8. Delaware Premium Emerging Markets Series............................. 99 137 174 281
9. Delaware Premium International Equity Series......................... 94 122 130 240
10. Delaware Premium REIT Series......................................... 93 119 145 232
11. Delaware Premium Small Cap Value Series.............................. 93 119 145 232
12. Delaware Premium Social Awareness Series............................. 93 119 145 232
13. Delaware Premium Trend Series........................................ 92 118 143 229
14. Dreyfus Variable Fund Small Cap Portfolio............................ 92 116 141 226
15. Fidelity VIP Equity-Income Portfolio................................. 90 111 132 210
16. Fidelity VIP Growth Portfolio........................................ 91 114 137 218
17. Fidelity VIP Overseas Portfolio...................................... 93 120 148 237
18. Fidelity VIP III Growth Opportunities Portfolio...................... 91 115 138 221
19. Kemper Variable Small Cap Growth Portfolio........................... 91 114 138 220
20. Kemper Variable Government Series Portfolio.......................... 91 113 136 216
21. Liberty Variable Trust Colonial U.S. Stock Fund...................... 93 120 147 236
22. Liberty Variable Trust Newport Tiger Fund............................ 97 132 165 267
23. Lincoln National Bond Fund........................................... 89 109 130 205
24. Lincoln National Money Market Fund................................... 90 111 132 210
25. MFS Variable Trust Emerging Growth Series............................ 93 119 145 232
26. MFS Variable Trust Research Series................................... 93 119 145 233
27. MFS Variable Trust Total Return Series............................... 94 123 152 244
28. MFS Variable Trust Utilities Series.................................. 94 123 152 245
29. OCC Trust Global Equity Portfolio.................................... 96 127 158 254
30. OCC Trust Managed Portfolio.......................................... 93 118 144 230
</TABLE>
If you do not surrender your contract, or if you annuitize, you would pay the
following expenses on a $1,000 investment, assuming a 5% annual return.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1. AIM V.I Growth Fund.................................................. $ 22 $ 69 $ 117 $ 252
2. AIM V.I. International Equity Fund................................... 23 70 118 237
3. AIM V.I. Value Fund.................................................. 21 63 106 217
4. BT Equity 500 Index Fund............................................. 17 53 89 185
5. Delaware Premium Growth and Income Series
(formerly known as Decatur Total Return)........................... 21 65 108 221
6. Delaware Premium Delchester Series................................... 22 66 110 224
7. Delaware Premium Devon Series........................................ 21 65 108 221
8. Delaware Premium Emerging Markets Series............................. 29 87 144 281
9. Delaware Premium International Equity Series......................... 24 69 120 240
10. Delaware Premium REIT Series......................................... 23 69 115 232
11. Delaware Premium Small Cap Value Series.............................. 23 69 115 232
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
12. Delaware Premium Social Awareness Series............................. $ 23 $ 69 $ 115 $ 232
13. Delaware Premium Trend Series........................................ 22 68 113 229
14. Dreyfus Variable Fund Small Cap Portfolio............................ 22 66 111 226
15. Fidelity VIP Equity-Income Portfolio................................. 20 61 102 210
16. Fidelity VIP Growth Portfolio........................................ 21 64 107 218
17. Fidelity VIP Overseas Portfolio...................................... 23 70 118 237
18. Fidelity VIP III Growth Opportunities Portfolio...................... 21 65 108 221
19. Kemper Variable Small Cap Growth Portfolio........................... 21 64 108 220
20. Kemper Variable Government Series Portfolio.......................... 21 63 106 216
21. Liberty Variable Trust Colonial U.S. Stock Fund...................... 23 70 117 236
22. Liberty Variable Trust Newport Tiger Fund............................ 27 82 135 267
23. Lincoln National Bond Fund........................................... 19 59 100 205
24. Lincoln National Money Market Fund................................... 20 61 102 210
25. MFS Variable Trust Emerging Growth Series............................ 23 69 115 232
26. MFS Variable Trust Research Series................................... 23 69 115 233
27. MFS Variable Trust Total Return Series............................... 24 73 122 244
28. MFS Variable Trust Utilities Series.................................. 24 73 122 245
29. OCC Trust Global Equity Portfolio.................................... 26 77 128 254
30. OCC Trust Managed Portfolio.......................................... 23 68 114 230
</TABLE>
We provide these examples to help you understand the direct and indirect costs
and expenses of the contract.
For more information, see Charges and other deductions in this Prospectus, and
in the Prospectuses for the funds. Premium taxes may also apply, although they
do not appear in the examples. THESE EXAMPLES SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE MORE OR LESS
THAN THOSE SHOWN.
6
<PAGE>
SUMMARY
WHAT KIND OF CONTRACT AM I BUYING?
It is an individual annuity contract between you and LINCOLN LIFE. It may
provide for a fixed annuity and/or a variable annuity. This Prospectus describes
the variable side of the contract. See The contracts.
WHAT IS THE VARIABLE ANNUITY ACCOUNT (VAA)?
It is a separate account we established under Indiana insurance law, and
registered with the SEC as a unit investment trust. VAA assets are allocated to
one or more SUBACCOUNTS, according to your investment choices. VAA assets are
not chargeable with liabilities arising out of any other business which LINCOLN
LIFE may conduct. See Variable annuity account (VAA).
WHAT ARE MY INVESTMENT CHOICES?
Based upon your instruction, the VAA applies PURCHASE PAYMENTS to buy shares in
one or more of the investment options: AIM V.I. Growth Fund, AIM V.I.
International Equity Fund, AIM V.I. Value Equity Fund, BT Equity 500 Index Fund,
Delaware Premium Growth and Income Series (formerly known as Decatur Total
Return Series), Delaware Premium Delchester Series, Delaware Premium Devon
Series, Delaware Premium Emerging Markets Series, Delaware Premium International
Equity Series, Delaware Premium REIT Series, Delaware Premium Small Cap Value
Series, Delaware Premium Social Awareness Series, Delaware Premium Trend Series,
Dreyfus Variable Fund Small Cap Portfolio, Fidelity VIP Equity-Income Portfolio,
Fidelity VIP Growth Portfolio, Fidelity VIP Overseas Portfolio, Fidelity VIP III
Growth Opportunities Portfolio, Kemper Variable Small Cap Growth Portfolio,
Kemper Variable Government Series Portfolio, Liberty Variable Trust Colonial
U.S. Stock Fund, Liberty Variable Trust Newport Tiger Fund, Lincoln National
Bond Fund, Lincoln National Money Market Fund, MFS Variable Trust Emerging
Growth Series, MFS Variable Trust Research Series, MFS Variable Trust Total
Return Series, MFS Variable Trust Utilities Series, OCC Trust Global Equity
Portfolio and OCC Trust Managed Portfolio.
WHO INVESTS PURCHASE PAYMENTS?
A I M Advisors, Inc., is the advisor for AIM Variable Insurance Funds, Inc.;
Bankers Trust Company is the advisor for BT Insurance Funds Trust; Delaware
Management Company is the advisor for the Delaware Group Premium Fund, Inc.,
with Vantage Investment Advisors as sub-advisors for the Social Awareness Fund;
Delaware International Advisers Ltd., is the advisor for Delaware Premium
International and Delaware Premium Emerging Markets; Dreyfus Corporation is the
advisor for Dreyfus Variable Investment Fund; Fidelity Management and Research
Company is the advisor for Fidelity Variable Insurance Products Fund and
Variable Insurance Product Fund III; Scudder Kemper Investments is the advisor
for the Kemper Variable Series; Liberty Advisory Service Corp., is the advisor
and Colonial Management Associates, Inc. is the sub-advisor for the Liberty
Variable Investment Trust; Lincoln Investment Management, Inc., is the advisor
for the Lincoln National Bond Fund and Lincoln National Money Market Fund;
Massachusetts Financial Services Company is the advisor for MFS Variable
Insurance Trust; and OpCap Advisors is the advisor for the OCC Accumulation
Trust. See Investments of the variable annuity account -- Investment advisors.
HOW DOES THE CONTRACT WORK?
If we approve your application, we will send you a contract. When you make
PURCHASE PAYMENTS during the accumulation phase, you buy ACCUMULATION UNITS. If
you later decide to receive retirement income payments, your ACCUMULATION UNITS
are converted to ANNUITY UNITS. Your retirement income payments will be based on
the number of ANNUITY UNITS you received and the value of each ANNUITY UNIT on
payout days. See Charges and other deductions The contracts.
WHAT CHARGES DO I PAY UNDER CONTRACT?
If you withdraw CONTRACT VALUE, you pay a surrender or withdrawal charge which
may range from 0% to 7%, depending upon how many CONTRACT YEARS those payments
have been in the contract. We may waive surrender charges in certain situations.
See Charges and other deductions Surrender charge.
We charge an account fee of $35 per CONTRACT YEAR if the CONTRACT VALUE is less
than $100,000.
We reserve the right to charge a $10 fee for transfers over 12 times during any
CONTRACT YEAR, excluding automatic dollar cost averaging and automatic
rebalancing program transfers.
The surrender or transfer of value from a fixed account guaranteed period may be
subject to a market value adjustment (MVA). See Fixed side of the contract.
We will deduct any applicable premium tax from PURCHASE PAYMENTS or CONTRACT
VALUE at the time the tax is incurred or at another time we choose.
We apply an annual charge totaling 1.40% to the daily net asset value of the
VAA. This charge includes 0.15% as an administrative charge and 1.25% as a
mortality and expense risk charge. See Charges and other deductions. We may
waive these charges in certain situations.
The fund's investment management fees, expenses and expense limitations, if
applicable, are more fully described in the Prospectuses for the funds.
7
<PAGE>
WHAT PURCHASE PAYMENTS DO I MAKE, AND HOW OFTEN?
Subject to minimum and maximum PURCHASE PAYMENT AMOUNTS, your PURCHASE PAYMENTS
are completely flexible. See The contracts -- Purchase payments.
HOW WILL MY ANNUITY PAYOUTS BE CALCULATED?
If you decide to annuitize, you may select an annuity option and start receiving
retirement income payments from your contract as a fixed option or variable
option or a combination of both. See Annuity Payouts -- Annuity Options.
REMEMBER THAT PARTICIPANTS IN THE VAA BENEFIT FROM ANY GAIN, AND TAKE A RISK OF
ANY LOSS IN THE VALUE OF THE SECURITIES IN THE FUNDS' PORTFOLIOS.
WHAT HAPPENS IF I DIE BEFORE I ANNUITIZE?
Your BENEFICIARY will receive the greatest of the PURCHASE PAYMENTS, CONTRACT
VALUE or the highest CONTRACT VALUE as of the most recent CONTRACT YEAR
occurring on or before the CONTRACTOWNER'S 80th birthday. Your BENEFICIARY has
options as to how the DEATH BENEFIT is paid. See The Contracts -- Death benefit
before the ANNUITY COMMENCEMENT DATE.
MAY I TRANSFER CONTRACT VALUE AMONG VARIABLE OPTIONS AND BETWEEN THE FIXED SIDE
AND VARIABLE SIDE OF THE CONTRACT?
Yes, with certain limits. See The contracts -- Transfers between SUBACCOUNTS on
or before the ANNUITY COMMENCEMENT DATE; Transfers after the ANNUITY
COMMENCEMENT DATE; and Transfers to and from a Fixed Account on or before the
ANNUITY COMMENCEMENT DATE.
MAY I SURRENDER THE CONTRACT OR MAKE A WITHDRAWAL?
Yes, subject to contract requirements and to restrictions of any qualified
retirement plan for which the contract was purchased. See The Contracts --
Surrenders and withdrawals. If you surrender the contract or make a withdrawal,
certain charges may apply. In addition, if you decide to take a distribution
before age 591/2, a 10% Internal Revenue Service (IRS) tax penalty may apply. A
surrender or withdrawal may also be subject to 20% withholding. See Federal tax
matters.
DO I GET A FREE LOOK AT THIS CONTRACT?
Yes. You can cancel the contract within ten days (in some states longer) of the
date you first received the contract. You need to return the contract, postage
prepaid, to our home office. In most states you assume the risk of any market
drop on PURCHASE PAYMENTS you allocate to the variable side of the contract. See
Return privilege.
8
<PAGE>
CONDENSED FINANCIAL INFORMATION FOR THE VARIABLE ANNUITY ACCOUNT
ACCUMULATION UNIT VALUES
The following information relating to ACCUMULATION UNIT VALUES and number of
ACCUMULATION UNITS for the DELAWARE-LINCOLN CHOICEPLUS SUBACCOUNTS for the
period ended December 31, 1998 come from the VAA'S financial statements. It
should be read along with the VAA'S financial statements and notes which are all
included in the SAI.
<TABLE>
<CAPTION>
*1998
<S> <C>
- -----------------------------------------------------
AIM V.I. Growth Fund
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 11.112
Number of accumulation units
- End of period (000s omitted).......... 25
- ------------------------------------------
AIM V.I. International Equity Fund
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.278
Number of accumulation units
- End of period (000s omitted).......... 7
- ------------------------------------------
AIM V.I. Value Equity Fund
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.937
Number of accumulation units
- End of period (000s omitted).......... 37
- ------------------------------------------
BT Equity 500 Index Fund
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.353
Number of accumulation units
- End of period (000s omitted).......... 91
- ------------------------------------------
Delaware Premium Growth and Income Series
(formerly known as Decatur Total Return)
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.021
Number of accumulation units
- End of period (000s omitted).......... 23
- ------------------------------------------
Delaware Premium Delchester Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 9.970
Number of accumulation units
- End of period (000s omitted).......... 41
- ------------------------------------------
Delaware Premium Devon Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.313
Number of accumulation units
- End of period (000s omitted).......... 44
- ------------------------------------------
Delaware Premium Emerging Markets Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 9.268
Number of accumulation units
- End of period (000s omitted).......... 2
- ------------------------------------------
<CAPTION>
*1998
- -----------------------------------------------------
<S> <C>
Delaware Premium International Equity
Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.152
Number of accumulation units
- End of period (000s omitted).......... 2
- ------------------------------------------
Delaware Premium REIT Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.119
Number of accumulation units
- End of period (000s omitted).......... 9
- ------------------------------------------
Delaware Premium Small Cap Value Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.489
Number of accumulation units
- End of period (000s omitted).......... 17
- ------------------------------------------
Delaware Premium Social Awareness Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.659
Number of accumulation units
- End of period (000s omitted).......... 55
- ------------------------------------------
Delaware Premium Trend Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.854
Number of accumulation units
- End of period (000s omitted).......... 7
- ------------------------------------------
Dreyfus Variable Fund Small Cap Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.715
Number of accumulation units
- End of period (000s omitted).......... 13
- ------------------------------------------
Fidelity VIP Equity-Income Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.101
Number of accumulation units
- End of period (000s omitted).......... 37
- ------------------------------------------
Fidelity VIP Growth Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.605
Number of accumulation units
- End of period (000s omitted).......... 43
- ------------------------------------------
Fidelity VIP Overseas Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.106
Number of accumulation units
- End of period (000s omitted).......... 13
- ------------------------------------------
Fidelity VIP III Growth Opportunities
Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.389
Number of accumulation units
- End of period (000s omitted).......... 64
- ------------------------------------------
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
*1998
- -----------------------------------------------------
<S> <C>
Kemper Variable Small Cap Growth Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 11.014
Number of accumulation units
- End of period (000s omitted).......... 4
- ------------------------------------------
Kemper Variable Government Securities
Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.032
Number of accumulation units
- End of period (000s omitted).......... 77
- ------------------------------------------
Liberty Variable Trust Colonial U.S. Stock
Fund
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.395
Number of accumulation units
- End of period (000s omitted).......... 2
- ------------------------------------------
Liberty Variable Trust Newport Tiger Fund
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 9.923
Number of accumulation units
- End of period (000s omitted).......... 2
- ------------------------------------------
Lincoln National Bond Fund
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.095
Number of accumulation units
- End of period (000s omitted).......... 46
- ------------------------------------------
Lincoln National Money Market Fund
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.034
Number of accumulation units
- End of period (000s omitted).......... 348
- ------------------------------------------
MFS Variable Trust Emerging Growth Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 11.242
Number of accumulation units
- End of period (000s omitted).......... 6
- ------------------------------------------
MFS Variable Trust Research Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.586
Number of accumulation units
- End of period (000s omitted).......... 8
- ------------------------------------------
MFS Variable Trust Total Return Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.136
Number of accumulation units
- End of period (000s omitted).......... 51
- ------------------------------------------
<CAPTION>
*1998
- -----------------------------------------------------
<S> <C>
MFS Variable Trust Utilities Series
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.244
Number of accumulation units
- End of period (000s omitted).......... 67
- ------------------------------------------
OCC Trust Global Equity Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 10.062
Number of accumulation units
- End of period (000s omitted).......... 11
- ------------------------------------------
OCC Trust Managed Portfolio
Accumulation unit value
- Beginning of period................... 10.000
- End of period......................... 9.815
Number of accumulation units
- End of period (000s omitted).......... 4
- ------------------------------------------
</TABLE>
Additional information for the money market subaccount: seven-day yield: 2.82%;
length of base period -- 7 days; date of last day of base period: December 31,
1998.
INVESTMENT RESULTS
At times, the VAA may compare its investment results to various unmanaged
indices or other variable annuities in reports to shareholders, sales literature
and advertisements. The results will be calculated on a total return basis for
various periods, with or without contingent deferred sales charges. Results
calculated without contingent deferred sales charges will be higher. Total
returns include the reinvestment of all distributions, which are reflected in
changes in unit value. See the SAI for further information.
*These values do not reflect a full year's experience because they are
calculated for the period from the beginning of investment activity of the
subaccounts (November 20) through December 31.
10
<PAGE>
FINANCIAL STATEMENTS
The financial statements of the VAA and the statutory-basis financial statements
of LINCOLN LIFE are located in the SAI. If you would like a free copy of the
SAI, complete and mail the enclosed card, or call 1-888-868-2583.
LINCOLN NATIONAL LIFE INSURANCE CO.
LINCOLN LIFE was founded in 1905 and is organized under Indiana law. We are one
of the largest stock life insurance companies in the United States. We are owned
by Lincoln National Corp. (LNC) which is also organized under Indiana law. LNC's
primary businesses are insurance, reinsurance and financial services.
VARIABLE ANNUITY ACCOUNT (VAA)
On November 3, 1997, the VAA was established as an insurance company separate
account under Indiana law. It is registered with the SEC as a unit investment
trust under the provisions of the Investment Company Act of 1940 (1940 Act). The
SEC does not supervise the VAA or LINCOLN LIFE. The VAA is a segregated
investment account, meaning that its assets may not be charged with liabilities
resulting from any other business that we may conduct. Income, gains and losses,
whether realized or not, from assets allocated to the VAA are, in accordance
with the applicable annuity contracts, credited to or charged against the VAA.
They are credited or charged without regard to any other income, gains or losses
of LINCOLN LIFE. The VAA satisfies the definition of separate account under the
federal securities laws. We do not guarantee the investment performance of the
VAA. Any investment gain or loss depends on the investment performance of the
funds. You assume the full investment risk for all amounts placed in the VAA.
The VAA is used to support other annuity contracts offered by LINCOLN LIFE in
addition to the contracts described in this Prospectus. The other annuity
contracts supported by the VAA invest in the same portfolios of the fund as the
contracts described in this Prospectus. These other annuity contracts may have
different charges that could affect the performance of the SUBACCOUNT.
INVESTMENTS OF THE VARIABLE ANNUITY ACCOUNT
You decide the SUBACCOUNT(S) to which you allocate PURCHASE PAYMENTS. You may
change your allocation without penalty or charges. Shares of the funds will be
sold at net asset value with no initial sales charge to the VAA in order to fund
the contracts. The fund is required to redeem fund shares at net asset value
upon our request. We reserve the right to add, delete or substitute funds.
INVESTMENT ADVISORS
The investment advisors of the funds are:
AIM Variable Insurance Funds, Inc. ("AIM V.I. Funds"), managed by A I M
Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173.
BT Insurance Funds (the "BT Insurance Trust") managed by Bankers Trust Company,
130 Liberty Street, (One Bankers Trust Plaza), New York, NY 10006.
Delaware Group Premium Fund Inc., ("Delaware Group"), managed by Delaware
Management Company, One Commerce Square, Philadelphia, PA 19103. The Social
Awareness Fund is sub-advised by Vantage Investment Advisors located at 630
Fifth Avenue, New York, NY 10111. The International and Emerging Markets are
managed by Delaware International Advisers Ltd., 80 Cheapside, London, England,
ECV2 6EE.
Dreyfus Variable Investment Fund ("Dreyfus Variable Fund") managed by The
Dreyfus Corporation, 200 Park Avenue, New York, NY 10166.
Variable Insurance Products Fund ("Fidelity VIP") and Variable Insurance
Products Fund III ("Fidelity VIP III") managed by Fidelity Management & Research
Company, 82 Devonshire Street, Boston, MA 02109.
Kemper Fund Series ("Kemper Fund") managed by Scudder Kemper Investments, Inc.,
345 Park Avenue, New York, NY 10166.
Liberty Variable Investment Trust ("Liberty Variable Trust") managed by Liberty
Advisory Series Corp., 125 high Street, Boston, MA 02110 and sub-advised by
Colonial Management Associates, Inc. and Newport Fund Management, Inc.
Lincoln National Bond Fund, Inc., and Lincoln National Money Market Fund, Inc.,
managed by Lincoln Investment Management, Inc., 200 East Berry Street, Fort
Wayne, IN 46802;
MFS -Registered Trademark- Variable Insurance Trust ("MFS Variable Trust")
managed by Massachusetts Financial Services Company, 500 Boylston Street,
Boston, MA 02116.
11
<PAGE>
OCC Accumulation Trust ("OCC Trust") (formerly Quest for Value Accumulation
Trust) managed by OpCap Advisors (formerly Quest for Value Advisors), One World
Financial Center, New York, NY 10281.
The Delaware Premium Delchester Series, Delaware Premium Emerging Market Series,
Dreyfus Variable Fund Small Cap Portfolio, Fidelity VIP Equity-Income Portfolio,
Fidelity VIP Overseas Portfolio, MFS Variable Trust Emerging Growth Series, MFS
Variable Trust Research Series, MFS Variable Trust Total Return Series, MFS
Variable Trust Utilities Series, OCC Trust Global Equity Portfolio, and the OCC
Trust Managed Portfolio funds may invest in non-investment grade, high yield,
high-risk debt securities (commonly referred to as "junk bonds"), as detailed in
the individual fund prospectuses.
As compensation for their services to the fund, the investment advisors receive
a fee from the fund, which is accrued daily and paid monthly. This fee is based
on the net assets of each fund, as defined under the Purchase and Redemption of
Shares, in the Prospectus for the fund.
With respect to a fund, the advisor and/or distributor, or an affiliate thereof,
may compensate LINCOLN LIFE (or an affiliate) for administrative, distribution,
or other services. It is anticipated that such compensation will be based on
assets of the particular Fund attributable to the contracts along with certain
other variable contracts issued or administered by LINCOLN LIFE (or an
affiliate).
The funds' shares are issued and redeemed only in connection with variable
annuity contracts and variable life insurance policies (mixed funding) issued
through separate accounts of LINCOLN LIFE and other life insurance companies
(shared funding). The funds do not foresee any disadvantage to CONTRACTOWNERS
arising out of mixed or shared funding. Nevertheless, the fund's Boards intend
to monitor events in order to identify any material irreconcilable conflicts
which may possibly arise and to determine what action, if any, should be taken
in response thereto. If such a conflict were to occur, one of the separate
accounts might withdraw its investment in a fund. This might force a fund to
sell portfolio securities at disadvantageous prices.
DESCRIPTION OF THE FUNDS
Each of the thirty SUBACCOUNTS of the VAA is invested solely in shares of one of
the thirty funds available under the contract. Each fund was organized as a
series of one of twelve Massachusetts or Delaware business trusts or a Maryland
corporation. Each fund is registered as a diversified, open-end management
investment company under the 1940 Act, except for the Delaware Group REIT Series
and Delaware Group Emerging Market Series, which are non-diversified.
Diversified means not owning too great a percentage of the securities of any one
company. An open-end company is one which, in this case, permits LINCOLN LIFE to
sell its shares back to the fund when you make a withdrawal, surrender the
contract or transfer from one fund to another. Management investment company is
the legal term for a mutual fund. These definitions are very general. The
precise legal definitions for these terms are contained in the 1940 Act.
Certain funds offered as part of this contract have similar investment
objectives and policies to other portfolios managed by the advisor. The
investment results of the funds, however, may be higher or lower than the other
portfolios that are managed by the advisor or sub-advisor. There can be no
assurance, and no representation is made, that the investment results of any of
the funds will be comparable to the investment results of any other portfolio
managed by the advisor or sub-advisor.
Following are brief summaries of the investment objectives and policies of the
funds. Each fund is subject to certain investment policies and restrictions
which may not be changed without a majority vote of shareholders of that fund.
More detailed information may be obtained from the current Prospectus for the
fund which is included in this booklet. PLEASE BE ADVISED THAT THERE IS NO
ASSURANCE THAT ANY OF THE FUNDS WILL ACHIEVE THEIR STATED OBJECTIVES.
1. AIM V.I. Growth Fund: Seeks growth of capital principally through
investments in common stocks of seasoned and better capitalized companies
considered by AIM to have strong earnings momentum.
2. AIM V.I. International Equity Fund: Seeks to provide long-term growth of
capital by investing in a diversified portfolio of international equities
issued by companies considered by AIM to have strong earnings momentum.
3. AIM V.I. Value Fund: Seeks long-term capital growth by investing primarily
in equity securities the managers believe to be undervalued relative to
the current or projected earnings of the company, to current market value
of assets owned by the company, or to the equity market in general.
4. BT Equity 500 Index Fund: Seeks to match the performance of the stock
market as represented by Standard & Poor's 500-Registered Trademark-
Index, before fund expenses. The fund's managers closely track the S&P 500
Index and rebalance the portfolio on a monthly basis.
5. Delaware Premium Growth and Income Series: (formerly known as Decatur
Total Return) Seeks the highest possible total return by investing in
stocks that exhibit the potential for growth while providing higher than
average dividend income.
6. Delaware Premium Delchester Series: Seeks as high a level of current
income as possible by
12
<PAGE>
investing in rated and unrated corporate bonds (including high risk,
high-yield bonds commonly known as junk bonds), U.S. government securities
and commercial paper. An investment in this series may involve greater
risks than an investment in a portfolio comprised primarily of investment
grade bonds.
7. Delaware Premium Devon Series: Seeks growth and income by investing
primarily in income-producing stocks that the manager believes have the
potential for above-average dividend increases over time. This fund blends
traditional growth and value investment styles.
8. Delaware Premium Emerging Markets Series: Seeks long-term growth by
investing primarily in stocks of companies located or operating in
emerging or developing countries.
9. Delaware Premium International Equity Series: Seeks long-term growth
without undue risk to principal by investing primarily in foreign-company
stocks with the potential for capital appreciation and income.
10. Delaware Premium REIT Series: Seeks to achieve maximum long-term total
return by investing primarily in the securities of real estate investment
trusts and real estate operating companies.
11. Delaware Premium Small Cap Value Series: Seeks growth by investing
primarily in stocks of small cap companies whose market values appear low
relative to underlying value or future earnings and growth potential.
12. Delaware Premium Social Awareness Series: Seeks long-term growth by
investing in stocks of mid-size and large companies expected to grow over
time that also meet certain criteria of social responsibility.
13. Delaware Premium Trend Series: Seeks long-term growth by investing
primarily in stocks of small companies and convertible securities of
emerging and other growth-oriented companies.
14. Dreyfus Variable Fund Small Cap Portfolio: Seeks to maximize capital
appreciation by investing primarily in common stocks of domestic and
foreign companies. This fund focuses on small, emerging companies that the
managers believe are characterized by new or innovative products, services
or processes that will enhance prospects for growth in future earnings.
15. Fidelity VIP Equity-Income Portfolio: Seeks reasonable income by investing
primarily in income-producing equity securities, with some potential for
capital appreciation, seeking a yield that exceeds the composite yield on
the securities comprising the Standard and Poor's 500 Index (S&P 500).
16. Fidelity VIP Growth Portfolio: Seeks long-term capital appreciation. The
portfolio normally purchases common stocks.
17. Fidelity VIP Overseas Portfolio: Seeks long-term growth of capital by
investing primarily in foreign securities.
18. Fidelity VIP III Growth Opportunities Portfolio: Seeks capital growth by
investing primarily in common stocks.
19. Kemper Variable Small Cap Growth Portfolio: Seeks maximum appreciation of
investor's capital from a portfolio primarily of growth stocks of smaller
companies.
20. Kemper Variable Government Securities Portfolio: Seeks high current return
consistent with preservation of capital from a portfolio composed
primarily of U.S. government securities.
21. Liberty Variable Trust Colonial U.S. Stock Fund: Seeks long-term growth
and income by investing primarily in dividend-paying stocks of large
companies diversified across all sectors of the U.S. equities market, with
the added income benefit of high quality bonds.
22. Liberty Variable Trust Newport Tiger Fund: Seeks capital growth by
investing primarily in the stocks of high quality international companies
located in the nine "Tigers" of Asia: Hong Kong, China, Singapore,
Malaysia, Thailand, Indonesia, the Philippines, South Korea and Taiwan.
23. Lincoln National Bond Fund: Seeks maximum current income consistent with
prudent investment strategy. The fund invests primarily in medium- and
long-term corporate and government bonds.
24. Lincoln National Money Market Fund: Seeks maximum current income
consistent with the preservation of capital. The fund invests in short-
term obligations issued by U.S. corporations; the U.S. Government; and
federally chartered banks and U.S. branches of foreign banks.
25. MFS Variable Trust Emerging Growth Series: Seeks to provide long-term
growth by investing primarily in the common stocks of companies the
managers believe are in the early stages of their life cycle but which
have the potential to become major enterprises.
26. MFS Variable Trust Research Series: Seeks long-term growth and future
income by investing primarily in equity companies believed to possess
better than average prospects for long-term
13
<PAGE>
growth. A committee of investment research analysts selects the securities
for the fund, with individual analysts responsible for choosing securities
within an assigned industry.
27. MFS Variable Trust Total Return Series: Seeks to provide above-average
income consistent with the prudent employment of capital and to provide a
reasonable opportunity for capital growth and income. The fund invests in
a broad range of securities, including short-term obligations, and may be
diversified not only by company and industry, but also by security type.
28. MFS Variable Trust Utilities Series: Seeks capital growth and current
income by investing the majority of its assets in equity and debt
securities of both domestic and foreign companies in the utilities
industry.
29. OCC Trust Global Equity Portfolio: Seeks long-term growth through a global
investment strategy primarily involving equity securities.
30. OCC Trust Managed Portfolio: Seeks capital growth over time by investing
in varying percentages of common stocks, bonds and cash equivalents. The
percentage of the fund allocated to the different asset classes will vary
based on the manager's assessment of the relative outlook for each
investment.
FUND SHARES
We will purchase shares of the funds at net asset value and direct them to the
appropriate SUBACCOUNTS of the VAA. We will redeem sufficient shares of the
appropriate funds to pay ANNUITY PAYOUTS, DEATH BENEFITS, surrender/ withdrawal
proceeds or for other purposes described in the contract. If you want to
transfer all or part of your investment from one SUBACCOUNT to another, we may
redeem shares held in the first and purchase shares of the other. Redeemed
shares are retired, but they may be reissued later.
Shares of the funds are not sold directly to the general public. They are sold
to LINCOLN LIFE, and may be sold to other insurance companies, for investment of
the assets of the SUBACCOUNTS established by those insurance companies to fund
variable annuity and variable life insurance contracts.
REINVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
All dividends and capital gain distributions of the funds are automatically
reinvested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to CONTRACTOWNERS as additional
units, but are reflected as changes in unit values.
ADDITION, DELETION OR SUBSTITUTION OF INVESTMENTS
We reserve the right, within the law, to make additions, deletions and
substitutions for the funds in which the VAA participates. We may substitute
shares of other funds for shares already purchased, or to be purchased in the
future, under the contract. This substitution might occur if shares of a fund
should no longer be available, or if investment in any fund's shares should
become inappropriate, in the judgment of our management, for the purposes of the
contract. We cannot substitute shares of one fund for another without the
approval by the SEC. We will also notify you.
CHARGES AND OTHER DEDUCTIONS
We will deduct the charges described below to cover our costs and expenses,
services provided and risks assumed under the contracts. We incur certain costs
and expenses for the distribution and administration of the contracts and for
providing the benefits payable thereunder. More particularly, our administrative
services include: processing applications for and issuing the contracts,
processing purchases and redemptions of fund shares as required (including
dollar cost averaging, account rebalancing and automatic withdrawal services),
maintaining records, administering ANNUITY PAYOUTS, furnishing accounting and
valuation services (including the calculation and monitoring of daily SUBACCOUNT
values), reconciling and depositing cash receipts, providing contract
confirmations, providing toll-free inquiry services and furnishing telephone
fund transfer services. The risks we assume include: the risk that ANNUITANTS
receiving ANNUITY PAYOUTS under contract live longer than we assumed when we
calculated our guaranteed rates (these rates are incorporated in the contract
and cannot be changed); the risk that more owners than expected will qualify for
waivers of the surrender charge; and the risk that our costs in providing the
services will exceed our revenues from the contract charges (which we cannot
change). The amount of a charge may not necessarily correspond to the costs
associated with providing the services or benefits indicated by the description
of the charge. For example, the surrender charge collected may not fully cover
all of the sales and distribution expenses actually incurred by us.
DEDUCTIONS FROM THE VAA FOR DELAWARE-LINCOLN CHOICEPLUS
We deduct from the VAA an amount, computed daily, which is equal to an annual
rate of 1.40% of the average daily net assets. The charge consists of a 0.15%
administrative charge and a 1.25% mortality and expense risk charge.
14
<PAGE>
SURRENDER CHARGE
A surrender charge applies (except as described below) to surrenders and
withdrawals of PURCHASE PAYMENTS that have been invested for the periods
indicated as follows:
<TABLE>
<CAPTION>
Number of complete CONTRACT
YEARS that a PURCHASE PAYMENT
has been invested
<S> <C> <C>
- ---------------------------------------------------
Less than At least
One year 1 2 3 4 5 6 7+
Surrender charge as a
percentage of the
surrendered or
withdrawn
PURCHASE PAYMENTS 7% 6 5 4 3 2 1 0
</TABLE>
(An account fee will be deducted and any market value adjustment will be made
before the deduction of the surrender charge.)
A surrender charge does not apply to:
1. A surrender or withdrawal of PURCHASE PAYMENTS that have been invested for
more than seven full CONTRACT YEARS;
2. Withdrawals of CONTRACT VALUE during a CONTRACT YEAR to the extent that
the total CONTRACT VALUE withdrawn during the current contract year does
not exceed 15% of PURCHASE PAYMENTS;
3. Electing an annuity option available within the contract;
4. When the surviving spouse assumes ownership of the contract as a result of
the death of the original owner;
5. A surrender amount equal to a maximum of 75% of the CONTRACT VALUE as a
result of 180 days of continuous confinement of the CONTRACTOWNER in an
accredited nursing home or equivalent health care facility subsequent to
the effective date of the contract;
6. A surrender of the contract as a result of the death of the CONTRACTOWNER.
However, the surrender charge is not waived as a result of the death of an
ANNUITANT who is not the CONTRACTOWNER; and
7. A surrender of a contract or withdrawal of contract value of a contract
issued to employees and registered representatives of any member of the
selling group and their spouses and minor children, or to officers,
directors, trustees or bona-fide full-time employees of Lincoln Financial
Group, AIM-Registered Trademark-, Bankers Trust, Delaware Investments, The
Dreyfus Corporation, Fidelity Investments, Scudder Kemper Investments,
Liberty Funds Distributor, Inc., Lincoln Investment Management, Inc.,
MFS-Registered Trademark- Investment Management and OpCap Advisors or any
of their affiliated or managed companies (based upon CONTRACTOWNER'S
status at the time the contract was purchased.).
The surrender charge is calculated separately for each CONTRACT YEAR'S PURCHASE
PAYMENTS to which a charge applies. (FOR PURPOSES OF CALCULATING THIS CHARGE, WE
ASSUME THAT PURCHASE PAYMENTS ARE WITHDRAWN ON A FIRST IN-FIRST OUT BASIS, AND
THAT ALL PURCHASE PAYMENTS ARE WITHDRAWN BEFORE ANY EARNINGS ARE WITHDRAWN.)
ACCOUNT FEE
During the accumulation period, we will deduct $35 from the CONTRACT VALUE on
each contract anniversary to compensate us for the administrative services
provided to you; this $35 account fee will also be deducted from the CONTRACT
VALUE upon SURRENDER. This fee may be lower in certain states, if required. The
account fee will be waived for any contract with a CONTRACT VALUE that is
greater than $100,000.
TRANSFER FEE
We reserve the right to impose a $10 fee for transfers over 12 times during any
CONTRACT YEAR. Automatic dollar cost averaging and automatic rebalancing
transfers are not included in the limit of twelve transfers.
RIDER CHARGES
A fee or expense may also be deducted in connection with any benefits added to
the contract by rider or endorsement. See the rider for any applicable fee or
expense.
DEDUCTIONS FOR PREMIUM TAXES
Any premium tax or other tax levied by any government entity as a result of the
existence of the contracts of the VAA will be deducted from the CONTRACT VALUE
when incurred, or at another time of our choosing.
The applicable premium tax rates that states and other governmental entities
impose on the purchase of an annuity are subject to change by legislation, by
administration interpretation or by judicial action. These premium taxes
generally depend upon the law of your state of residence. The tax ranges from 0%
to 4.0%.
OTHER CHARGES AND DEDUCTIONS
There are deductions from and expenses paid out of the assets of the underlying
fund that are more fully described in the Prospectus for the fund.
ADDITIONAL INFORMATION
The administrative and surrender charges and the account fees described
previously may be reduced or eliminated for any particular contract. However,
these charges will be reduced only to the extent that we anticipate lower
distribution and/or administrative
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expenses, or that we perform fewer sales or administrative services than those
originally contemplated in establishing the level of those charges.
THE CONTRACTS
PURCHASE OF CONTRACTS
If you wish to purchase a contract, you must apply for it through a sales
representative authorized by us. The completed application is sent to us and we
decide whether to accept or reject it. If the application is accepted, a
contract is prepared and executed by our legally authorized officers. The
contract is then sent to you through your sales representative. See Distribution
of the contracts.
When a completed application and all other information necessary for processing
a purchase order is received, an initial PURCHASE PAYMENT will be priced no
later than two business days after we receive the order. While attempting to
finish an incomplete application, we may hold the initial PURCHASE PAYMENT for
no more than five business days. If the incomplete application cannot be
completed within those five days, you will be informed of the reasons, and the
PURCHASE PAYMENT will be returned immediately. Once the application is complete,
the initial PURCHASE PAYMENT must be priced within two business days.
WHO CAN INVEST
To apply for a contract, you must be of legal age in a state where the contracts
may be lawfully sold and also be eligible to participate in any of the qualified
or nonqualified plans for which the contracts are designed. The CONTRACTOWNER
cannot be older than age 85 at the time of application. The maximum
annuitization age is 90.
PURCHASE PAYMENTS
PURCHASE PAYMENTS are payable to us at a frequency and in an amount selected by
you in the application. The minimum initial PURCHASE PAYMENT is $10,000 for
nonqualified contracts and Section 403(b) transfers/rollovers to IRAs; and
$2,000 for qualified contracts. The minimum annual amount for additional
PURCHASE PAYMENTS for nonqualified and qualified contracts is $100. There is no
set maximum for additional PURCHASE PAYMENTS. However, PURCHASE PAYMENTS in
excess of $1,000,000 require pre-approval by LINCOLN LIFE. If you stop making
PURCHASE PAYMENTS for three consecutive years, and the ANNUITY ACCOUNT VALUE
decreases to less than $1,000, we may terminate the contract as allowed by your
state's non-forfeiture law for deferred annuities and pay the CONTRACTOWNER an
adjusted ANNUITY ACCOUNT VALUE.
We will notify the CONTRACTOWNER at least 30 days in advance of the intended
action. During the notification period, the CONTRACTOWNER may make additional
PURCHASE PAYMENTS to meet the minimum value requirements and to avoid
cancellation of the contract.
VALUATION DATE
ACCUMULATION and ANNUITY units will be valued once daily at the close of trading
(currently 4:00 p.m., New York time) on each day the New York Stock Exchange is
open (VALUATION DATE). On any date other than a VALUATION DATE, the ACCUMULATION
UNIT value and the ANNUITY UNIT value will not change.
ALLOCATION OF PURCHASE PAYMENTS
PURCHASE PAYMENTS are placed into the VAA'S SUBACCOUNTS, each of which invests
in shares of its corresponding fund, according to your instructions.
The minimum amount of any PURCHASE PAYMENT that can be put into any one variable
SUBACCOUNT is $50, or $2,000 for a fixed account. No allocation can be made that
would result in a variable SUBACCOUNT of less than $50, or that would result in
a fixed account of less than $2,000. Upon allocation to a SUBACCOUNT, PURCHASE
PAYMENTS are converted into ACCUMULATION UNITS. The number of ACCUMULATION UNITS
credited is determined by dividing the amount allocated to each SUBACCOUNT by
the value of an ACCUMULATION UNIT for that SUBACCOUNT on the VALUATION DATE on
which the PURCHASE PAYMENT is received at our home office if received before
4:00 p.m., New York time. If the PURCHASE PAYMENT is received at or after 4:00
p.m., New York time, we will use the ACCUMULATION UNIT value computed on the
next VALUATION DATE. The number of ACCUMULATION UNITS determined in this way is
not changed by any subsequent change in the value of an ACCUMULATION UNIT.
However, the dollar value of an ACCUMULATION UNIT will vary depending not only
upon how well the underlying fund's investment perform, but also upon the
expenses of the VAA and the underlying funds.
VALUATION OF ACCUMULATION UNITS
PURCHASE PAYMENTS allocated to the VAA are converted into ACCUMULATION UNITS.
This is done by dividing each PURCHASE PAYMENT by the value of an ACCUMULATION
UNIT for the VALUATION PERIOD during which the PURCHASE PAYMENT is allocated to
the VAA. The ACCUMULATION UNIT value for each SUBACCOUNT was or will be
established at the inception of the SUBACCOUNT. It may increase or decrease from
VALUATION PERIOD to VALUATION PERIOD. The ACCUMULATION UNIT value for a
SUBACCOUNT for a later VALUATION PERIOD is determined as follows:
(1) The total value of the fund shares held in the SUBACCOUNT is calculated by
multiplying the number of fund shares owned by the SUBACCOUNT at the beginning
of the VALUATION PERIOD by the net asset value per share of the fund at the end
of the VALUATION PERIOD, and adding any dividend or other distribution of the
fund if an ex-dividend date occurs during the VALUATION PERIOD; minus
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(2) The liabilities of the SUBACCOUNT at the end of the valuation period; these
liabilities include daily charges imposed on the SUBACCOUNT, and may include a
charge or credit with respect to any taxes paid or reserved for by us that we
determine result from the operations of the VAA; and
(3) The result of (2) is divided by the number of SUBACCOUNT units outstanding
at the beginning of the valuation period.
The daily charges imposed on a SUBACCOUNT for any VALUATION PERIOD are equal to
the daily mortality and expense risk charge and the daily administrative charge
multiplied by the number of calendar days in the VALUATION PERIOD.
TRANSFERS BETWEEN SUBACCOUNTS ON OR BEFORE THE ANNUITY COMMENCEMENT DATE
You may transfer all or a portion of your investment from one SUBACCOUNT to
another. A transfer involves the surrender of ACCUMULATION UNITS in one
SUBACCOUNT and the purchase of ACCUMULATION UNITS in the other SUBACCOUNT. A
transfer will be done using the respective ACCUMULATION UNIT values determined
at the end of the VALUATION DATE on which the transfer request is received. We
reserve the right to impose a $10 fee for transfers after the first 12 times
during a CONTRACT YEAR.
The minimum amount that may be transferred between subaccounts is $50 per
SUBACCOUNT. If the transfer from a SUBACCOUNT would leave you with less than $50
in the SUBACCOUNT, we may transfer the entire balance of the SUBACCOUNT.
Transfers will also be subject to any restrictions that may be imposed by the
funds themselves.
A transfer request may be made in writing to our home office or, if a Telephone
Exchange Authorization form (available from us) is on file with us, by a
toll-free telephone call. In order to prevent unauthorized or fraudulent
telephone transfers, we may require the caller to provide certain identifying
information before we will act upon their instructions. We may also assign the
CONTRACTOWNER a Personal Identification Number (PIN) to serve as identification.
We will not be liable for following telephone instructions we reasonably believe
are genuine. Telephone requests may be recorded and written confirmation of all
transfer requests will be mailed to the CONTRACTOWNER on the next VALUATION
DATE. Telephone transfers will be processed on the VALUATION DATE that they are
received when they are received at our customer service center before 4 p.m. New
York time.
When thinking about a transfer of CONTRACT VALUE, you should consider the
inherent risk involved. Frequent transfers based on short-term expectations may
increase the risk that a transfer will be made at an inopportune time. LINCOLN
LIFE may refuse to permit more than twelve transfers in any year and may modify
the transfer provisions of the contract. This contract is not designed for
professional market timing organizations or other entities using programmed and
frequent transfers.
Repeated patterns of frequent transfers are disruptive to the operation of the
sub-accounts, and should LINCOLN LIFE become aware of such disruptive practices,
LINCOLN LIFE may refuse to permit more than 12 transfers in any year and may
modify the transfer provisions of the contract.
Payment or transfer may be delayed as permitted by the 1940 Act.
TRANSFERS TO AND FROM A FIXED ACCOUNT ON OR BEFORE THE ANNUITY COMMENCEMENT DATE
You may transfer all or any part of the CONTRACT VALUE from the SUBACCOUNT(S) to
the fixed side of the contract. The minimum amount which can be transferred to a
fixed account is $2,000 or the total amount in the SUBACCOUNT if less than
$2,000. However, if a transfer from a SUBACCOUNT would leave you with less than
$50 in the SUBACCOUNT, we may transfer the total amount to the fixed side of the
contract.
You may also transfer all or any part of the CONTRACT VALUE from a fixed account
to the various SUBACCOUNT(S) subject to the following restrictions: (1) the sum
of the percentages of a fixed account transferred is limited to 15% of the value
of that fixed account in any contract year and, (2) the minimum amount
transferred is $2,000 (or the amount in the fixed account, if less).
Currently, there is no charge to you for a transfer. However, we reserve the
right to impose a charge in the future for any transfers in excess of 12 times
per contract year. Transfers of all or a portion of a fixed account (other than
dollar cost averaging) may be subject to MVA.
Payment or transfer may be delayed as permitted by the 1940 Act.
TRANSFERS AFTER THE ANNUITY COMMENCEMENT DATE
You may transfer all or a portion of your investment in one SUBACCOUNT to
another SUBACCOUNT in the VAA or to the fixed side of the contract. Those
transfers will be limited to three times per CONTRACT year. Currently, there is
no charge for those transfers. However, we reserve the right to impose a charge.
NO TRANSFERS ARE ALLOWED FROM THE FIXED SIDE OF THE CONTRACT TO THE SUBACCOUNTS.
DEATH BENEFIT BEFORE THE ANNUITY COMMENCEMENT DATE
You may designate a BENEFICIARY during your lifetime and change the BENEFICIARY
by filing a written request with our home office. Each change of beneficiary
revokes any previous designation. We reserve the right to request
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that you send us the contract for endorsement of a change of BENEFICIARY.
If the contractowner dies before the annuity commencement date, the DEATH
BENEFIT will be equal to the greatest of: the CONTRACT VALUE for the valuation
period during which the death benefit election becomes effective; the sum of all
PURCHASE PAYMENTS less the sum of all withdrawals; or the highest CONTRACT VALUE
as of any contract anniversary occurring on or before the CONTRACTOWNER'S 80th
birthday, adjusted for any subsequent PURCHASE PAYMENTS, withdrawals and charges
made since the contract anniversary.
On or after the CONTRACTOWNER'S 90th birthday, the amount of any DEATH BENEFIT
will be the greater of: the CONTRACT VALUE for the valuation period during which
the death benefit election becomes effective; or the sum of all PURCHASE
PAYMENTS less the sum of all withdrawals.
The amount of the DEATH BENEFIT will be determined as of the date on which we
receive all of the following requirements: (1) proof, satisfactory to us, of the
death of the CONTRACTOWNER; (2) written election of a method of settlement; and
(3) our receipt of any other required claim forms, fully completed.
Unless the owner has already selected a settlement option, the BENEFICIARY may
elect to receive payment of the DEATH BENEFIT either in the form of a lump
settlement or an annuity payout.
If a lump sum settlement is requested, the proceeds will be mailed within seven
days of receipt of satisfactory claim documentation as discussed previously,
subject to laws and regulations governing payment of DEATH BENEFITS. If an
election has not been made by the end of a 60-day period, a lump sum settlement
will be made to the BENEFICIARY at that time. This payment may be postponed as
permitted by the 1940 Act.
Payment will be made in accordance with the applicable laws and regulations
governing payment of DEATH BENEFITS.
Unless otherwise provided in the BENEFICIARY designation, one of the following
procedures will take place on the death of a BENEFICIARY.
1. If any BENEFICIARY dies before the CONTRACTOWNER, that BENEFICIARY'S interest
will go to any other BENEFICIARIES named, according to their respective
interests (There are no restrictions on the BENEFICIARY'S use of the proceeds.);
and/or
2. If no BENEFICIARY survives the CONTRACTOWNER, the proceeds will be paid to
the CONTRACTOWNER'S estate.
The DEATH BENEFIT payable to the BENEFICIARY must be distributed within five
years of the contractowner's DATE OF DEATH unless the BENEFICIARY begins
receiving within one year of the CONTRACTOWNER'S death the distribution in the
form of a life annuity over an annuity for a designated period not extending
beyond the BENEFICIARY'S life expectancy. This payment may be postponed as
permitted by the Investment Company Act of 1940.
If the BENEFICIARY is the spouse of the CONTRACTOWNER, then the spouse may elect
to continue as owner. If the CONTRACTOWNER is a corporation or other
non-individual (non-natural person), the death of the annuitant will be treated
as death of the CONTRACTOWNER and the above distribution rules will apply.
DEATH OF ANNUITANT
If the ANNUITANT dies before the ANNUITY COMMENCEMENT DATE, and the annuitant is
not the CONTRACTOWNER, then the CONTRACTOWNER (if a natural person) may select a
new ANNUITANT. The CONTRACTOWNER will become the new ANNUITANT until a new
person has been selected. If the CONTRACTOWNER is not a natural person, then the
death benefit will be based on the ANNUITANT and will be paid upon due proof of
the ANNUITANT'S death.
If the ANNUITANT dies after the ANNUITY COMMENCEMENT DATE, the death benefit, if
any, will be paid based on the annuity option selected. LINCOLN LIFE will
require proof of the ANNUITANT'S death. Under any option providing for
guaranteed payouts, the number of payouts which remain unpaid at the date of the
ANNUITANT'S death (or surviving ANNUITANT'S death in the case of a joint life
annuity) will be paid to your BENEFICIARY as payouts become due.
SURRENDERS AND WITHDRAWALS
Before the ANNUITY COMMENCEMENT DATE, we will allow the surrender of the
contract or a withdrawal of the CONTRACT VALUE upon your written request,
subject to the rules discussed below. Surrender or withdrawal rights after the
ANNUITY COMMENCEMENT DATE depend upon the annuity option you select.
The amount available upon the surrender/withdrawal is the cash surrender value
(CONTRACT VALUE, plus or minus any market value adjustment, less any applicable
surrender charges, account fees and premium tax charges) at the end of the
VALUATION PERIOD during which the written request for surrender/withdrawal is
received at the home office. Unless a request for withdrawal specifies
otherwise, withdrawals will be made from all SUBACCOUNTS within the VAA and from
the fixed account in the same proportion that the amount of withdrawal bears to
the total CONTRACT VALUE. As long as surrender charges apply, the maximum amount
which can be withdrawn is 15% of your PURCHASE PAYMENTS per year without
incurring any surrender charges and the remaining CONTRACT VALUE must be at
least $1,000. Unless prohibited, surrender/withdrawal payments will be mailed
within seven days after we receive a valid written request at the home office.
The payment may be postponed as permitted by the 1940 Act.
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The tax consequences of a surrender/withdrawal are discussed later in this
booklet. See Federal tax matters.
We may terminate the contract, if your PURCHASE PAYMENT'S frequency or your
CONTRACT'S VALUE falls below your state's minimum standards.
DELAY OF PAYMENTS
Contract proceeds from the VAA will be paid within seven days, except (i) when
the NYSE is closed (except weekends and holidays); (ii) times when the market
trading is restricted or the SEC declares an emergency, and we cannot value
units or the funds cannot redeem shares; or (iii) when the SEC so orders to
protect CONTRACTOWNERS.
REINVESTMENT PRIVILEGE
You may elect to make a reinvestment purchase with any part of the proceeds of a
surrender/withdrawal, and we will recredit the surrender/withdrawal charges
previously deducted. This election must be made within 30 days of the date of
the surrender/withdrawal, and the repurchase must be of a contract covered by
this Prospectus. A representation must be made that the proceeds being used to
make the purchase have retained their tax-favored status under an arrangement
for which the contracts offered by this Prospectus are designed. The number of
ACCUMULATION UNITS which will be credited when the proceeds are reinvested will
be based on the value of the ACCUMULATION UNIT(S) on the next VALUATION DATE.
This computation will occur following receipt of the proceeds and request for
reinvestment at the home office. You may utilize the reinvestment privilege only
once. For tax reporting purposes, we will treat a surrender/withdrawal and a
subsequent reinvestment purchase as separate transactions. You should consult a
tax advisor before you request a surrender/withdrawal or subsequent reinvestment
purchase.
AMENDMENT OF CONTRACT
We reserve the right to amend the contract to meet the requirements of the 1940
Act or other applicable federal or state laws or regulations. You will be
notified in writing of any changes, modifications or waivers.
COMMISSIONS
The commissions paid to dealers are a maximum of 6.50% of each PURCHASE PAYMENT.
In some instances, commissions on deposits may be lowered by as much as 2.50%
and replaced by a commission of up to .65% of annual CONTRACT VALUES. LINCOLN
LIFE will incur all other promotional or distribution expenses associated with
the marketing of the contracts. These commissions are not deducted from PURCHASE
PAYMENTS or CONTRACT VALUE, they are paid by us.
OWNERSHIP
As CONTRACTOWNER, you have all rights under the contract. According to Indiana
law, the assets of the VAA are held for the exclusive benefit of all
CONTRACTOWNERS and their designated BENEFICIARIES; and the assets of the VAA are
not chargeable with liabilities arising from any other business that we may
conduct. Qualified CONTRACTS may not be assigned or transferred except as
permitted by the Employee Retirement Income Security Act (ERISA) of 1974 and
upon written notification to us. Non-qualified CONTRACTS may not be collaterally
assigned. We assume no responsibility for the validity or effect of any
assignment, an assignment affects the death benefit calculated under our
contract. Consult your tax advisor about the tax consequence of an assignment.
CONTRACTOWNER QUESTIONS
The obligations to purchasers under the contracts are those of LINCOLN LIFE.
Questions about your contract should be directed to us at 1-888-868-2583.
ANNUITY PAYOUTS
When you apply for a contract, you may select any ANNUITY COMMENCEMENT
DATEpermitted by law which is usually on or before the CONTRACTOWNER'S 90th
birthday. (PLEASE NOTE THE FOLLOWING EXCEPTION: Contracts issued under qualified
employee pension and profit-sharing trusts [described in the Section 401(a) and
tax exempt under Section 501(a) of the tax code] and qualified annuity plans
[described in Section 403(a) of the tax code], including H.R. 10 trusts and
plans covering self-employed individuals and their employees, provide for
annuity payouts to start at the date and under the option specified.)
The contract provides optional forms of payouts of annuities (annuity options),
some of which is payable on a variable basis, fixed basis or a combination of
both as you specify. The contract provides that all or part of the CONTRACT
VALUE may be used to purchase an annuity. You may elect ANNUITY PAYOUTS in
monthly, quarterly, semiannual or annual installments. If the payouts from any
SUBACCOUNT would be or become less than $50, we have the right to reduce their
frequency until the payouts are at least $50 each. Following are explanations of
the annuity options available.
ANNUITY OPTIONS
LIFE ANNUITY. This option offers a periodic payout during the lifetime of the
ANNUITANT and ends with the last payout before the death of the ANNUITANT. This
option offers the highest periodic payout since there is no guarantee of a
minimum number of payouts or provision for a DEATH BENEFIT for BENEFICIARIES.
HOWEVER, THERE
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IS THE RISK UNDER THIS OPTION THAT THE RECIPIENT WOULD RECEIVE NO PAYOUTS IF THE
ANNUITANT DIES BEFORE THE DATE SET FOR THE FIRST PAYOUT; ONLY ONE PAYOUT IF
DEATH OCCURS BEFORE THE SECOND SCHEDULED PAYOUT, AND SO ON.
LIFE ANNUITY WITH GUARANTEED PERIOD. This option guarantees periodic payouts
during a designated period, usually 10 or 20 years, and then continues
throughout the lifetime of the ANNUITANT. The guarantee period is selected by
the CONTRACTOWNER.
JOINT LIFE ANNUITY. This option offers a periodic payout during the joint
lifetime of the ANNUITANT and a joint ANNUITANT. The payouts continue during the
lifetime of the survivor.
JOINT LIFE AND TWO-THIRDS SURVIVOR ANNUITY. This option provides a periodic
payout during the joint lifetime of the ANNUITANT and a designated joint
ANNUITANT. When one of the joint ANNUITANTS dies, the survivor receives
two-thirds of the periodic payout made when both were alive.
JOINT LIFE ANNUITY WITH GUARANTEED PERIOD. This option guarantees periodic
payouts during a period, usually 10 or 20 years, and continues during the joint
lifetime of the ANNUITANT and a joint ANNUITANT. The payout continues during the
lifetime of the survivor. The designated period is elected by the CONTRACTOWNER.
JOINT LIFE AND TWO-THIRDS SURVIVOR ANNUITY WITH GUARANTEED PERIOD. This option
provides a periodic payout during the joint lifetime of the ANNUITANT and a
joint ANNUITANT. When one of the joint ANNUITANTS dies, the survivor receives
two-thirds of the periodic payout made when both were alive. This option further
provides that should one or both of the ANNUITANTS die during the elected
guaranteed period, usually 10 or 20 years, full benefit payment will continue
for the rest of the guaranteed period.
LIFE ANNUITY WITH UNIT REFUND. This option offers VARIABLE ANNUITY benefit
payments that will be made for the lifetime of the ANNUITANT with the guarantee
that upon death, should (a) the number of ANNUITY UNITS purchased, as determined
by dividing the total dollar amount applied to purchase this option by the
ANNUITY UNIT VALUE at the ANNUITY COMMENCEMENT DATE be greater than (b) the
number of ANNUITY UNITS paid in each variable annuity benefit payment multiplied
by the number of annuity benefit payments paid prior to death, then a refund
payment equal to the number of ANNUITY UNITS determined by (a) minus (b) will be
made. The refund payment value will be determined using the ANNUITY UNIT VALUE
on the date the death claim is approved by us and payment is made after LINCOLN
LIFE is in receipt of: (1) proof, satisfactory to LINCOLN LIFE, of the death;
(2) written authorization for payment; and (3) all claim forms, fully completed.
LIFE ANNUITY WITH CASH REFUND. This option offers fixed ANNUITY benefit payments
that will be made for the lifetime of the ANNUITANT with the guarantee that upon
death, should (a) the total dollar amount applied to purchase this option be
greater than (b) the fixed annuity benefit payment multiplied by the number of
ANNUITY benefit payments paid prior to death, then a refund payment equal to the
dollar amount of (a) minus (b) will be made after LINCOLN LIFE is in receipt of:
(1) proof, satisfactory to LINCOLN LIFE, of the death; (2) written authorization
for payment; and (3) all claim forms, fully completed.
GENERAL INFORMATION
Under the options listed above, you may not make withdrawals. Other options,
with or without withdrawal features, may be made available by us. Options are
only available to the extent they are consistent with the requirements of the
contract as well as Sections 72(s) and 401(a)(9) of the tax code, if applicable.
The mortality and expense risk charge and the charge for administrative services
will be assessed on all variable ANNUITY PAYOUTS, including options that may be
offered that do not have a life contingency and therefore no mortality risk.
The ANNUITY COMMENCEMENT DATE is usually on or before the CONTRACTOWNER'S 90th
birthday. You may change the ANNUITY COMMENCEMENT DATE, change the annuity
option or change the allocation of the investment among SUBACCOUNTS up to 30
days before the scheduled ANNUITY COMMENCEMENT DATE, upon written notice to the
home office. You must give us at least 30 days notice before the date on which
you want payouts to begin. If you have not already chosen an annuity payout
option, the BENEFICIARY of the death benefit may choose any annuity payout
option.
Unless you select another option, the contract automatically provides for a life
annuity with ANNUITY PAYOUTS guaranteed for 10 years (on a fixed, variable or
combination fixed and variable basis, in proportion to the account allocation at
the time of annuitization) except when a joint life payout is required by law.
Under any option providing for guaranteed period payouts, the number of payouts
which remain unpaid at the date of the ANNUITANT'S death (or surviving
ANNUITANT'S death in case of joint life annuity) will be paid to your
BENEFICIARY as payouts become due.
VARIABLE ANNUITY PAYOUTS
Variable ANNUITY PAYOUTS will be determined using:
1. The CONTRACT VALUE on the ANNUITY COMMENCEMENT DATE;
2. The annuity tables contained in the contract;
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3. The annuity option selected; and
4. The investment performance of the fund(s) selected.
To determine the amount of payouts, we make this calculation:
1. Determine the dollar amount of the first periodic payout; then
2. Credit the contract with a fixed number of ANNUITY UNITS equal to the
first periodic payout divided by the ANNUITY UNIT value; and
3. Calculate the value of the ANNUITY UNITS each period thereafter.
We assume an investment return of 4% per year, as applied to the applicable
mortality table. The amount of each payout after the initial payout will depend
upon how the underlying fund(s) perform, relative to the 4% assumed rate. If the
actual net investment rate (annualized) exceeds 4%, the annuity payout will
increase at a rate proportional to the amount of such excess. Conversely, if the
actual rate is less than 4% annuity payouts will decrease. There is a more
complete explanation of this calculation in the SAI.
FIXED SIDE OF THE CONTRACT
PURCHASE PAYMENTS allocated to the fixed side of the contract become part of
LINCOLN LIFE'S general account, and DO NOT participate in the investment
experience of the VAA. The general account is subject to regulation and
supervision by the Indiana Insurance Department as well as the insurance laws
and regulations of the jurisdictions in which the contracts are distributed.
In reliance on certain exemptions, exclusions and rules, LINCOLN LIFE has not
registered interests in the general account as a security under the Securities
Act of 1933 and has not registered the general account as an investment company
under the 1940 Act. Accordingly, neither the general account nor any interests
in it are regulated 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 our general account and to the
fixed account under the contract. These disclosures, however, may be subject to
certain 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 VAA, and therefore contains only selected information regarding
the fixed side of the contract. Complete details regarding the fixed side of the
contract are in the contract.
We guarantee an interest rate of not less than 3.0% per year on amounts held in
a fixed account. Any amount withdrawn from or transferred out of a fixed account
prior to the expiration of the guaranteed period is subject to a MVA (see market
value adjustment below) and Charges and other deductions -- Surrender charge.
The Market Value Adjustment will NOT reduce the amount available for a
surrender, withdrawal or transfer to an amount less than the initial amount
allocated or transferred to a fixed account plus interest of 3.0% per year, less
surrender charges and account fees, if any.
ANY INTEREST IN EXCESS OF 3.0% WILL BE DECLARED IN ADVANCE AT LINCOLN LIFE'S
SOLE DISCRETION, CONTRACTOWNERS BEAR THE RISK THAT NO INTEREST IN EXCESS OF 3.0%
WILL BE DECLARED.
GUARANTEED PERIODS
The owner may allocate PURCHASE PAYMENTS to one or more fixed accounts with
guaranteed periods of 1, 3, 5, 7, or 10 years. LINCOLN LIFE may offer a fixed
account for a period of less than one year for the purpose of dollar cost
averaging. Each PURCHASE PAYMENT allocated to a fixed account will start its own
guaranteed period and will earn a guaranteed interest rate. The duration of the
guaranteed period affects the guaranteed interest rate of the fixed account. A
fixed account guarantee period ends on the date after the number of calendar
years in the fixed account's guaranteed period. Interest will be credited daily
at a guaranteed rate that is equal to the compound annual rate determined on the
first day of the fixed account guaranteed period. Amounts transferred or
withdrawn from a fixed account prior to the end of the guaranteed period will be
subject to the MVA. Each guaranteed period PURCHASE PAYMENT amount will be
treated separately for purposes of determining any applicable market value
adjustment. Any amount withdrawn from a fixed account may be subject to any
applicable surrender charges, account fees or premium taxes.
LINCOLN LIFE will notify the CONTRACTOWNER in writing at least 60 days prior to
the expiration date for any guaranteed period amount. A new fixed account
guaranteed period of the same duration as the previous fixed account guaranteed
period will begin automatically at the end of the previous guaranteed period,
unless LINCOLN LIFE receives, prior to the end of a guaranteed period, a written
election by the contractowner. The written election may request the transfer of
the guaranteed period amount to a different fixed account or to a variable
subaccount from among those being offered by LINCOLN LIFE. Transfers of any
guaranteed period amount which become effective upon the date of expiration of
the applicable guaranteed period are not subject to the limitation of twelve
transfers per CONTRACT YEAR or the additional fixed account transfer
restrictions.
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MARKET VALUE ADJUSTMENT
Any surrender or transfer of a fixed account guaranteed period amount before the
end of the guaranteed period (other than Dollar Cost Averaging transfers) will
be subject to a market value adjustment (MVA). A surrender or transfer effective
upon the expiration date of the guaranteed period will not be subject to an MVA.
The MVA will be applied to the amount being surrendered or transferred. The MVA
will be applied after the deduction of any applicable account fees and before
any applicable surrender or transfer charges. In general, the MVA reflects the
relationship between the index rate in effect at the time a PURCHASE PAYMENT is
allocated to a fixed account's guaranteed period under the contract and the
index rate in effect at the time of the PURCHASE PAYMENT'S surrender or
transfer. It also reflects the time remaining in the fixed account's guaranteed
period. If the index rate at the time of the surrender or transfer is lower than
the index rate at the time the PURCHASE PAYMENT was allocated, then the
application of the MVA will generally result in a higher payment at the time of
the surrender or transfer. Similarly, if the index rate at the time of surrender
or transfer is higher than the index rate at the time of the allocation of the
PURCHASE PAYMENT, then the application of the MVA will generally result in a
lower payment at the time of the surrender or transfer. The index rate is
published by the Federal Reserve Board.
The MVA is calculated as follows:
where: (1+A)TO THE POWER OF n
------
(1+B)TO THE POWER OF n
A = an Index Rate (based on the Treasury Constant Maturity Series published by
the Federal Reserve) for a security with time to maturity equal to the
SUBACCOUNT'S guaranteed period, determined at the beginning of the guaranteed
period.
B = an Index Rate (based on the Treasury Constant Maturity Series published by
the Federal/reserve) for a security with time to maturity equal to the
SUBACCOUNT'S guaranteed period, determined at the time of surrender or transfer,
plus a 0.50% adjustment (unless otherwise limited by applicable state law). If
Index Rates "A" and "B" are within .25% of each other when the index rate is
determined, no such percentage to "B" will be made, unless required by state
law. This adjustment builds into the formula a factor representing direct and
indirect costs to Lincoln Life associated with liquidating general account
assets in order to satisfy surrender requests. This adjustment of 0.50% has been
added to the denominator of the formula because it is anticipated that a
substantial portion of applicable general account portfolio assets will be in
relatively illiquid securities. Thus, in addition to direct transaction costs,
if such securities must be sold (e.g., because of surrenders), the market price
may be lower. Accordingly, even if interest rates decline, there will not be a
positive adjustment until this factor is overcome, and then any adjustment will
be lower than otherwise, to compensate for this factor. Similarly, if interest
rates rise, any negative adjustment will be greater than otherwise, to
compensate for this factor. If interest rates stay the same, this factor will
result in a small but negative MVA.
N = The number of years remaining in the guaranteed period (e.g., 1 year and
73 days = 1 = (73 divided by 365) = 1.2 years)
Straight-Line interpolation is used for periods to maturity not quoted.
See the SAI for examples of the application of the MVA.
Additional adjustments may be included in this calculation that can positively
or negatively affect the MVA. The adjustments represent the direct and indirect
costs LINCOLN LIFE can incur due to the liquidation of general assets in order
to satisfy surrender requests.
FEDERAL TAX MATTERS
INTRODUCTION
The Federal income tax treatment of the contract is complex and sometimes
uncertain. The Federal income tax rules may vary with your particular
circumstances. This discussion does not include all the Federal income tax rules
that may affect you and your contract. This discussion also does not address
other Federal tax consequences or state or local tax consequences, associated
with the contract. As a result, you should always consult a tax adviser about
the application of tax rules to your individual situation.
TAXATION OF NONQUALIFIED ANNUITIES
This part of the discussion describes some of the Federal income tax rules
applicable to nonqualified annuities. A nonqualified annuity is a contract not
issued in connection with a qualified retirement plan receiving special tax
treatment under the tax code, such as an IRA.
TAX DEFERRAL ON EARNINGS
The Federal income tax law generally does not tax any increase in your contract
value until you receive a contract distribution. However, for this general rule
to apply, certain requirement must be satisfied:
- - An individual must own the contract (or the tax law must treat the contract as
owned by an individual).
- - The investments of the VAA must be "adequately diversified" in accordance with
IRS regulations.
- - Your right to choose particular investments for a contract must be limited.
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- - The ANNUITY COMMENCEMENT DATE must not occur near the end of the ANNUITANT'S
life expectancy.
CONTRACTS NOT OWNED BY THE INDIVIDUAL
If a contract is owned by an entity (rather than an individual), the tax code
generally does not treat it as an annuity contract for Federal income tax
purposes. This means that the entity owning the contract pays tax currently on
the excess of the contract value over the purchase payments for the contract.
Examples of contracts where the owner pays current tax on the contract's
earnings are contracts issued to a corporation or a trust. Exceptions to this
rule exist. For example, the tax code treats a contract as owned by an
individual if the named owner is a trust or other entity that holds the contract
as an agent for an individual. However, this exception does not apply in the
case of any employer that owns a contract to provide deferred compensation for
its employees.
INVESTMENTS IN THE VAA MUST BE DIVERSIFIED
For a contract to be treated as an annuity for Federal Income tax purposes, the
investments of the VAA must be "adequately diversified." IRS regulations define
standards for determining whether the investments of the VAA are adequately
diversified. If the VAA fails to comply with these diversification standards,
you could be required to pay tax currently on the excess of the CONTRACT VALUE
over the contract PURCHASE PAYMENTS. Although we do not control the investments
of the underlying investment options, we expect that the underlying investment
options will comply with the IRS regulations so that the VAA will be considered
"adequately diversified."
RESTRICTIONS
Federal income tax law limits your right to choose particular investments for
the contract. Because the IRS has not issued guidance specifying those limits,
the limits are uncertain and your right to allocate CONTRACT VALUES among the
SUBACCOUNTS may exceed those limits. If so, you would be treated as the owner of
the assets of the VAA and thus subject to current taxation on the income and
gains from those assets. We do not know what limits may be set by the IRS in any
guidance that it may issue and whether any such limits will apply to existing
contracts. We reserve the right to modify the contract without your consent to
try to prevent the tax law from considering you as the owner of the assets of
the VAA.
AGE AT WHICH ANNUITY PAYOUTS BEGIN
Federal income tax rules do not expressly identify a particular age by which
ANNUITY PAYOUTS must begin. However, those rules do require that annuity
contract provide for amortization, through ANNUITY PAYOUTS, of the contract's
PURCHASE PAYMENTS and earnings. If ANNUITY PAYOUTS under the contract begin or
are scheduled to begin on a date past the ANNUITANT'S 85th birthday, it is
possible that the tax law will not treat the contract as an annuity for Federal
income tax purposes. In that event, you would be currently taxable on the excess
of the CONTRACT VALUE over the PURCHASE PAYMENTS of the contract.
TAX TREATMENT OF PAYMENTS
We make no guarantees regarding the tax treatment of any contract or of any
transaction involving a contract. However, the rest of this discussion assumes
your contract will be treated as an annuity for Federal income tax purposes and
that the tax law will not tax any increase in your CONTRACT VALUE until there is
a distribution from your contract.
TAXATION OF WITHDRAWALS AND SURRENDERS
You will pay tax on withdrawals to the extent your CONTRACT VALUE exceeds your
PURCHASE PAYMENTS in the contract. This income (and all other income from your
contract) is considered ordinary income. A higher rate of tax is paid on
ordinary income than on capital gains. You will pay tax on a surrender to the
extent the amount you receive exceeds your PURCHASE PAYMENTS. In certain
circumstances, your PURCHASE PAYMENTS are reduced by amounts received from your
contract that were not included in income.
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TAXATION OF ANNUITY PAYOUTS
The tax code imposes tax on a portion of each ANNUITY PAYOUT (at ordinary income
tax rates) and treats a portion as a nontaxable return of your PURCHASE PAYMENTS
in the contract. We will notify you annually of the taxable amount of your
ANNUITY PAYOUT. Once you have recovered the total amount of the PURCHASE payment
in the contract, you will pay tax on the full amount of your ANNUITY PAYOUTS. If
ANNUITY PAYOUTS end because of the ANNUITANT'S death and before the total amount
of the PURCHASE PAYMENTS in the contract has been received, the amount not
received generally will be deductible.
TAXATION OF DEATH BENEFITS
We may distribute amounts from your contract because of the death of a
CONTRACTOWNER or an ANNUITANT. The tax treatment of these amounts depends on
whether you or the ANNUITANT dies before or after the ANNUITY COMMENCEMENT DATE.
- - Death prior to the ANNUITY COMMENCEMENT DATE
- If the beneficiary receives DEATH BENEFITS under an ANNUITY PAYOUT option,
they are taxed in the same manner as ANNUITY PAYOUTS.
- If the BENEFICIARY does not receive DEATH BENEFITS under an ANNUITY PAYOUT
option, they are taxed in the same manner as a withdrawal.
- - Death after the ANNUITY COMMENCEMENT DATE
- If DEATH BENEFITS are received in accordance with the existing ANNUITY
PAYOUT option, they are excludible from income if they do not exceed the
PURCHASE PAYMENTS not yet distributed from the contract. All ANNUITY
PAYOUTS in excess of the PURCHASE PAYMENTS not previously received are
included in income.
- If DEATH BENEFITS are received in a lump sum, the tax law imposes tax on
the amount of DEATH BENEFITS which exceeds the amount of PURCHASE not
previously received.
PENALTY TAXES PAYABLE ON WITHDRAWALS, SURRENDERS OR ANNUITY PAYOUTS
The tax code may impose a 10% penalty tax on any distribution from you contract
which you must include in your gross income. The 10% penalty tax does not apply
if one of several exceptions exists. These exceptions include withdrawals,
surrenders or ANNUITY PAYOUTS that:
- - You receive on or after you reach age 59 1/2,
- - You receive because you became disabled (as defined in the tax law),
- - A beneficiary receives on or after your death, or
- - You receive as a series of substantially equal periodic payments for you life
(or life expectancy).
SPECIAL RULES IF YOU OWN MORE THAN ONE ANNUITY CONTRACT
In certain circumstances, you must combine some or all of the nonqualified
annuity contracts you own in order to determine the amount of an ANNUITY PAYOUT,
a surrender or a withdrawal that you must include in income. For example, if you
purchase two or more deferred annuity contracts from the same life insurance
company (or its affiliates) during any calendar year the tax code treats all
such contracts as one contract. Treating two or more contracts as one contract
could affect the amount of a surrender, a withdrawal or an ANNUITY PAYOUT that
you must include in income and the amount that might be subject to the penalty
tax described above.
LOANS AND ASSIGNMENTS
Except for certain qualified contracts, the tax code treats any amount received
as a loan under a contract, and any assignment or pledge (or agreement to assign
or pledge) any portion of your CONTRACT VALUE, as a withdrawal of such amount or
portion.
GIFTING A CONTRACT
If you transfer ownership of your contract to a person other than your spouse
(or to your former spouse incident to divorce), and receive a payment less than
your contract's value to the extent that it exceeds your PURCHASE PAYMENTS not
previously received, the new owner's PURCHASE PAYMENTS in the contract would
then be increased to reflect the amount included in your income.
LOSS OF INTEREST DEDUCTION
After June 8, 1997, if a contract is issued to a taxpayer that is not an
individual, or if a contract is held for the benefit of an entity, the entity
will lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
contract value. Entities that are considering purchasing a contract, or entities
that will benefit from someone else's ownership of a contract, should consult a
tax advisor.
QUALIFIED RETIREMENT PLANS
We are also designed the contracts for use in connection with certain types of
retirement plans that receive favorable treatment under the tax code. Contracts
issued to or in connection with a qualified retirement plan are called
"qualified contracts". We issue contracts for use with different types of
qualified plans. The Federal income tax rules applicable to those plans are
complex and varied. As a result, this Prospectus does not attempt to provide
more than general information about use of the contract with the various types
of qualified
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plans. Persons planning to use the contract in connection with a qualified plan
should obtain advice from a competent tax advisor.
TYPES OF QUALIFIED CONTRACTS AND TERMS OF CONTRACTS
Currently, we issue contracts in connection with the following types of
qualified plans:
- - Individual Retirement Accounts and Annuities ("Traditional IRAs")
- - Roth IRAs
We may issue contracts in connection with the following types of qualified
plans:
- - Simplified Employee Pensions ("SEPs")
- - Savings Incentive Matched Plan for Employees ("Simple 401(k) plans")
- - Public school system and tax-exempt organization annuity plans ("403(b)
plans")
- - Qualified corporate employee pension and profit sharing plans ("401(a)") and
qualified annuity plans ("403(a) plans")
- - Self-employed individual plans ("H.R. 10 plans" or Keogh Plans")
- - Deferred compensation plans of state and local governments and tax-exempt
organizations ("457 plans")
We may issue a contract for use with other types of qualified plans in the
future.
We will amend contracts to be used with a qualified plan as generally necessary
to conform to tax law requirements for the type of plan. However, the rights of
a person to any qualified plan benefits may be subject to the plan's terms and
conditions, regardless of the contract's terms and conditions. In addition, we
are not bound by the terms and conditions of qualified plans to the extent such
terms and conditions contradict the contract, unless we consent.
TAX TREATMENT OF QUALIFIED CONTRACTS
The Federal income tax rules applicable to qualified plans and qualified
contracts vary with the type of plan and contract. For example,
- - Federal tax rules limit the amount of PURCHASE PAYMENTS that can be made and
the tax deduction or exclusion that may be allowed for the PURCHASE PAYMENTS.
These limits vary depending on the type of qualified plan and the plan
participant's specific circumstances, e.g., the participant's compensation.
- - Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the
ANNUITANT must begin receiving payments from the contract in certain minimum
amounts by a certain age, typically age 70 1/2. However, these "minimum
distribution rules" do not apply to a Roth IRA.
- - Loans are allowed under certain types of qualified plans, but Federal income
tax rules permit loans under some section 403(b) plans, but prohibit loans
under Traditional and Roth IRAs. If allowed, loans are subject to a variety of
limitations, including restrictions as to the loan amount, the loan duration,
and the manner of repayment. Your contract or plan may not permit loans.
TAX TREATMENT OF PAYMENTS
Federal income tax rules generally include distributions from a qualified
contract in the recipient's income as ordinary income. These taxable
distributions will include PURCHASE PAYMENTS that were deductible or excludible
from income. Thus, under many qualified contracts the total amount received is
included in income since a deduction or exclusion from income was taken for
PURCHASE PAYMENTS. There are exceptions, For example, you do not include amounts
received from a Roth IRA in income if certain conditions are satisfied.
Failure to comply with the minimum distribution rules applicable to certain
qualified plans, such as Traditional IRAs, will result in the imposition of an
excise tax. This excise tax generally equals 50% of the amount by which a
minimum required distribution exceeds the actual distribution from the qualified
plan.
FEDERAL PENALTY TAXES PAYABLE ON DISTRIBUTIONS
The tax code may impose a 10% penalty tax on the amount received from the
qualified contract that must be included in income. The tax code does not impose
the penalty tax if one of several exceptions applies. The exceptions vary
depending on the type of qualified contract you purchase. For example, in the
case of an IRA, exceptions provide that the penalty tax does not apply to a
withdrawal, surrender or ANNUITY PAYOUT:
- - received on or after the annuitant reaches age 59 1/2,
- - received on or after the ANNUITANT'S death or because of the ANNUITANT'S
disability (as defined in the tax law),
- - received as a series of substantially equal periodic payments for the
ANNUITANT'S life or (life expectancy), or
- - received as reimbursement for certain amounts paid for medical care.
These exceptions, as well as certain others not described here, generally apply
to taxable distributions from other qualified plans. However, the specific
requirements of the exception may vary.
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TRANSFERS AND DIRECT ROLLOVERS
In many circumstances, money may be moved between qualified contracts and
qualified plans by means of a rollover or a transfer. Special rules apply to
such rollovers and transfers. If the applicable rules are not followed, you may
suffer adverse Federal income tax consequences, including paying taxes which
might not otherwise have had to be paid. A qualified advisor should always be
consulted before you move or attempt to move funds between any qualified plan or
contract and another qualified plan or contract.
The direct rollover rules apply to certain payments (called "eligible rollover
distributions") from section 401(a) plans, section 403(a) or (b) plans, HR 10
plans, and contracts used in connection with these types of plans. (The direct
rollover rules do not apply to distributions from IRAs or section 457 plans).
The direct rollover rules require that we withhold Federal income tax equal to
20% of the eligible rollover distribution from the distribution amount unless
you elect to have the amount directly transferred to certain qualified plans or
contracts. Before we send a rollover distribution, we will provide the recipient
with a notice explaining these requirements and how the 20% withholding can be
avoided by electing a direct rollover.
FEDERAL INCOME TAX WITHHOLDING
We will withhold and remit to the IRS a part of the taxable portion of each
distribution made under a contract unless the distributee notifies us at or
before the time of distribution that tax is not to be withheld. In certain
circumstances, Federal income tax rules may require us to withhold tax. At the
time a withdrawal, surrender or ANNUITY PAYOUT is requested, we will give the
recipient an explanation of the withholding requirements.
TAX STATUS OF LINCOLN LIFE
Under existing Federal income tax laws, LINCOLN LIFE does not pay tax on
investment income and realized capital gains of the VAA. LINCOLN LIFE does not
expect that it will incur any Federal income tax liability on the income and
gains earned by the VAA. We, therefore, do not impose a charge for Federal
income taxes. If Federal income tax law changes and we must pay tax on some or
all of the income and gains earned by the VAA, we may impose a charge against
the VAA to pay the taxes.
CHANGES IN THE LAW
The above discussion is based on the tax code, IRS regulations, and
interpretations existing on the date of this Prospectus. However, Congress, the
IRS and the courts may modify these authorities, sometimes retroactively.
VOTING RIGHTS
As required by law, we will vote the fund shares held in the VAA at meetings of
the shareholders of the fund. The voting will be done according to the
instructions of CONTRACTOWNERS who have interests in the SUBACCOUNTS which
invest in classes of funds. If the 1940 Act or any regulation under it should be
amended or if present interpretations should be amended or if present
interpretations should change, and if as a result we determine that we are
permitted to vote the fund shares in our own right, we may elect to do so.
The number of votes which you have the right to cast will be determined by
applying your percentage interest in a SUBACCOUNT to the total number of votes
attributable to the SUBACCOUNT. In determining the number of votes, fractional
shares will be recognized.
Fund shares of a class held in a SUBACCOUNT for which no timely instructions are
received will be voted by us in proportion to the voting instructions which are
received for all contracts participating in that SUBACCOUNT. Voting instructions
to abstain on any item to be voted on will be applied on a pro-rata basis to
reduce the number of votes eligible to be cast.
Whenever a shareholders meeting is called, each person having a voting interest
in a SUBACCOUNT will receive proxy voting material, reports and other materials
relating to the trust. Since the fund engages in shared funding, other persons
or entities besides LINCOLN LIFE may vote fund shares. See Sale of fund shares
by the fund.
DISTRIBUTION OF THE CONTRACTS
LINCOLN LIFE is the distributor and principal underwriter of the contracts.
Under an agreement with LINCOLN LIFE, Delaware Distributors, L.P. ("DDLP") will
act as wholesaler and will assist LINCOLN LIFE in forming the selling group.
DDLP will also perform certain enumerated marketing and ancillary functions in
support of the selling group. The contracts will be sold by our properly
licensed registered representatives of independent broker-dealers which in turn
have selling agreements with LINCOLN LIFE and have been licensed by state
insurance departments to represent us. LINCOLN LIFE will offer the contracts in
all states it is licensed to do business.
RETURN PRIVILEGE
Within the free-look period after you receive the contract, you may cancel it
for any reason by delivering or mailing it postage prepaid, to the home office
at P.O. Box 7866, 1300 South Clinton Street, Fort Wayne, Indiana, 46801. A
contract canceled under this provision will be void. With respect to the fixed
portion of a contract, we will return PURCHASE PAYMENTS. With respect to the
VAA, except as explained in the following paragraph, we will return the CONTRACT
VALUE as of the date of receipt of the cancellation, plus any premium taxes
which had been deducted. No surrender charge will be assessed. A PURCHASER WHO
PARTICIPATES IN THE VAA
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IS SUBJECT TO THE RISK OF A MARKET LOSS DURING THE FREE-LOOK PERIOD.
For contracts written in those states whose laws require that we assume this
market risk during the free-look period, a contract may be canceled, subject to
the conditions explained before, except that we will return only the PURCHASE
PAYMENT(S).
STATE REGULATION
As a life insurance company organized and operated under Indiana law, we are
subject to provisions governing life insurers and to regulation by the Indiana
Commissioner of Insurance.
Our books and accounts are subject to review and examination by the Indiana
Insurance Department at all times. A full examination of our operations is
conducted by that Department at least every five years.
RECORDS AND REPORTS
As presently required by the 1940 Act and applicable regulations, we are
responsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with the Delaware Management Company, 2005 Market
Street, Philadelphia, PA, 19203, to provide accounting services to the VAA. We
will mail to you, at your last known address of record at the home office, at
least semiannually after the first CONTRACT YEAR, reports containing information
required that Act or any other applicable law or regulation.
OTHER INFORMATION
A Registration Statement has been filed with the SEC, under the Securities Act
of 1933 as amended, for the contracts being offered here. This Prospectus does
not contain all the information in the Registration Statement, its amendments
and exhibits. Please refer to the Registration Statement for further information
about the VAA, LINCOLN LIFE and the contracts offered. Statements in this
Prospectus about the content of contracts and other legal instruments are
summaries. For the complete text of those contracts and instruments, please
refer to those documents as files with the SEC.
We are a member of the Insurance Marketplace Standards Association ("IMSA") and
may include the IMSA logo and information about IMSA membership in our
advertisements. Companies that belong to IMSA subscribe to a set of ethical
standards covering the various aspects of sales and services for individually
sold life insurance and annuities.
Lincoln National Variable Annuity Account E and Lincoln Life Flexible Premium
Variable Life Accounts F,G and J (all registered as investment companies under
the 1940 Act) and Lincoln National Flexible Premium Group Variable Annuity
Accounts 50, 51 and 52 are all segregated investment accounts of Lincoln
National Life Insurance Co. (LINCOLN LIFE) which also invest in the fund. The
fund also offers shares of the funds to other segregated investment accounts.
PREPARING FOR THE YEAR 2000
Many existing computer programs use only two digits in the date field to
identify the year. If left uncorrected these programs, which were designed and
developed without considering the impact of the upcoming change in the century,
could fail to operate or could produce erroneous results when processing dates
after December 31, 1999. For example, for a bond with a stated maturity date of
July 1, 2000, a computer program could read and store the maturity date as July
1, 1900. This problem is known by many names, such as the "Year 2000 Problem",
"Y2K", and the "Millenium Bug".
The Year 2000 Problem affects virtually all computer programs worldwide. It can
cause a computer system to suddenly stop operating. It can also result in a
computer corrupting vital company records, and the problem could go undetected
for a long time. For our products, if left unchecked it could cause such
problems as PURCHASE PAYMENT collection and deposit errors; claim payment
difficulties; accounting errors; erroneous unit values; and difficulties or
delays in processing transfers, surrenders and withdrawals. In a worst case
scenario, this could result in a material disruption to the operations both of
LINCOLN LIFE and of Delaware Service Company Inc. (Delaware), the provider of
the accounting and valuation services for the VAA.
However, both companies are wholly owned by Lincoln National Corporation (LNC),
which has had Year 2000 processes in place since 1996. LNC projects aggregate
expenditures in excess of $92 million for its Y2K efforts through the year 2000.
Both LINCOLN LIFE and Delaware have dedicated Year 2000 teams and steering
committees that are answerable to their counterparts in LNC.
In light of the potential problems discussed above, LINCOLN LIFE, as part of its
Year 2000 updating process, has assumed responsibility for correcting all
high-priority Information Technology (IT) systems which service the VAA.
Delaware is responsible for updating all its high-priority IT systems to support
these vital services. The Year 2000 effort, for both IT and non-IT systems, is
organized into four phases:
- - awareness-raising and inventory of all assets (including third-party agent and
vendor relationships)
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- - assessment and high-level planning and strategy
- - remediation of affected systems and equipment; and
- - testing to verify Year 2000 readiness.
Both companies are currently on schedule to have their high-priority IT systems
remediated and tested to demonstrate readiness by June 30, 1999. During the
third and fourth quarters of 1999 additional testing of the environment will
continue. Both companies are currently on schedule to have their high-priority
non-IT systems (elevators, heating and ventilation, security systems, etc.)
remediated and tested by October 31, 1999.
The work on Year 2000 issues has not suffered significant delays; however, some
uncertainty remains. Specific factors that give rise to this uncertainty include
(but are certainly not limited to) a possible loss of technical resources to
perform the work; failure to identify all susceptible systems; and
non-compliance by third parties whose systems and operations impact LINCOLN
LIFE. In a report dated February 26, 1999, entitled, INVESTIGATING THE IMPACT OF
THE YEAR 2000 TECHNOLOGY PROBLEM, S. Prt. 106-10, the U.S. Senate Special
Committee on the Year 2000 Technology Problem expressed its concern that
"Financial services firms . . . are particularly vulnerable to . . . the risk
that a material customer or business partner will fail, as a result of the
computer problems, to meet its obligations".
One important source of uncertainty is the extent to which the key trading
partners of LINCOLN LIFE and of Delaware will be successful in their own
remediation and testing efforts. LINCOLN LIFE and Delaware have been monitoring
the progress of their trading partners; however, the efforts of these partners
are beyond our control.
LINCOLN LIFE and Delaware expect to have completed their necessary remediation
and testing efforts prior to December 31, 1999. However, given the nature and
complexity of the problem, there can be no guarantee by either company that
there will not be significant computer problems after December 31, 1999.
LEGAL PROCEEDINGS
LINCOLN LIFE is involved in various pending or threatened legal proceedings
arising from the conduct of its business. Most of those proceedings are routine
and in the ordinary course of business. In some instances they include claims
for unspecified or substantial punitive damages and similar types of relief in
addition to amounts for equitable relief. After consultation with legal counsel
and a review of available facts, it is management's opinion that the ultimate
liability, if any, under these suits will not have a material adverse effect on
the financial position of LINCOLN LIFE.
LINCOLN LIFE is presently defending three lawsuits in which Plaintiffs seek to
represent national classes of policyholders in connection with alleged fraud,
breach of contract and other claims relating to the sale of interest-sensitive
universal and participating whole life insurance policies. As of the date of
this prospectus, the courts have not certified a class in any of the suits.
Plaintiffs seek unspecified damages and penalties for themselves and on behalf
of the putative class. Although the relief sought in these cases is substantial,
the cases are in the preliminary stages of litigation, and it is premature to
make assessments about potential loss, if any. Management is defending these
suits vigorously. The amount of liability, if any, which may ultimately arise as
a result of these suits cannot be reasonably determined at this time.
28
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY
ACCOUNT N (DELAWARE-LINCOLN CHOICEPLUS) (REGISTRANT)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY (DEPOSITOR)
STATEMENT OF ADDITIONAL INFORMATION (SAI)
This SAI should be read along with the Prospectus of Lincoln Life Variable
Annuity Account N (Delaware-Lincoln ChoicePlus) dated May 1, 1999. You may
obtain a copy of the Delaware-Lincoln ChoicePlus Prospectus on request and
without charge. Please write Delaware-Lincoln ChoicePlus, The Lincoln National
Life Insurance Company, P.O. Box 7866, Fort Wayne, Indiana 46801 or call
1-888-868-2583.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
<S> <C>
- ------------------------------------------------------
General information and history of Lincoln
Life B-2
Special terms B-2
Services B-2
Principal underwriter B-2
<CAPTION>
ITEM PAGE
- ------------------------------------------------------
<S> <C>
Purchase of securities being offered B-2
Calculation of investment results B-2
Annuity payouts B-6
Advertising and sales literature B-7
Financial statements B-9
</TABLE>
THIS SAI IS NOT A PROSPECTUS.
The date of this SAI is May 1, 1999
B-1
<PAGE>
GENERAL INFORMATION AND HISTORY OF THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
(LINCOLN LIFE)
The Lincoln National Life Insurance Company (LINCOLN LIFE), organized in 1905,
is an Indiana stock insurance corporation, engaged primarily in the direct
insurance of life and health insurance contracts and annuities, and is also a
professional reinsurer. LINCOLN LIFE is wholly owned by Lincoln National Corp.
(LNC), a publicly held insurance and financial services holding company
domiciled in Indiana.
SPECIAL TERMS
The special terms used in this SAI are the ones defined in the Prospectus. In
connection with the term VALUATION DATE the New York Stock Exchange is currently
closed on weekends and on these holidays: New Year's Day, Martin Luther King's
Birthday, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor
Day, Thanksgiving Day, and Christmas Day. If any of these holidays occurs on a
weekend day, the Exchange may also be closed on the business day occurring
before or just after the holiday.
SERVICES
INDEPENDENT AUDITORS
The financial statements of the VARIABLE ANNUITY ACCOUNT (VAA) and the
statutory-basis financial statements of LINCOLN LIFE appearing in this SAI and
Registration Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports also appearing elsewhere in this
document and in the Registration Statement. The financial statements audited by
Ernst & Young LLP have been included in this document in reliance on their
reports given on their authority as experts in accounting and auditing.
KEEPER OF RECORDS
All accounts, books, records and other documents which are to be maintained for
the VAA are maintained by LINCOLN LIFE or by third parties responsible to
LINCOLN LIFE. We have entered into an agreement with the Delaware Management
Company, 2005 Market Street, Philadelphia, PA 19203, to provide accounting
services to the VAA. No separate charge against the assets of the VAA is made by
LINCOLN LIFE for this service.
PRINCIPAL UNDERWRITER
LINCOLN LIFE is the principal underwriter for the contracts, which are offered
continuously. Delaware Distributors, L.P. will perform certain marketing and
other ancillary functions as described in the Prospectus.
Sales charges and exchange privileges under the contracts are described in the
Prospectus.
PURCHASE OF SECURITIES BEING OFFERED
The variable annuity contracts are offered to the public through licensed
insurance agents who specialize in selling LINCOLN LIFE products; through
independent insurance brokers; and through certain securities brokers/ dealers
selected by LINCOLN LIFE whose personnel are legally authorized to sell annuity
products. There are no special purchase plans for any class of prospective
buyers. However, under certain limited circumstances described in the Prospectus
under the section Charges and other deductions, the contract and/or surrender
charges may be waived.
There are exchange privileges between subaccounts, and between the VAA and
LINCOLN LIFE'S general account (see The Contract--Transfers of accumulation
units between SUBACCOUNTS in the Prospectus.) No exchanges are permitted between
the VAA and other separate accounts.
The offering of the contract is continuous.
CALCULATION OF INVESTMENT RESULTS
The paragraphs set forth below represent performance information for the VAA and
the SUBACCOUNTS calculated in several different ways.
MONEY MARKET SUBACCOUNT
1. Seven-day yield: 2.82%.
Length of base period used in computing yield: 7 days
2. The yield reported above and in the table of condensed information in the
Prospectus is determined by calculating the change in unit value for the
base period (the 7-day period ended December 31, 1998; then dividing this
figure by the account value at the beginning of the period; then
annualizing this result by the factor 365/7. This yield includes all
deductions charged to the CONTRACTOWNER'S account, and excludes any
realized gain and losses from the sale of securities.
B-2
<PAGE>
PERFORMANCE OF THE VAA AND SUBACCOUNTS
Paragraph A is commonly referred to as "standard performance" because it is the
formula used to calculate performance in accordance with that prescribed by the
SEC. Under rules issued by the SEC, standard performance must be included in
certain advertising material that discusses the performance of the VAA and the
SUBACCOUNTS. Paragraph B shows non-standard performance of the SUBACCOUNTS over
the periods indicated in the tables set forth in the paragraph, adjusted to
reflect the recurring charges and expenses associated with the contracts.
(A) STANDARD PERFORMANCE -- FORMULAS:
Average annual return for each period is determined by finding the average
annual compounded rate of return over each period that would equate the initial
amount invested to the ending redeemable value for that period, according to the
following formula--
P(1+T)TO THE POWER OF n = ERV
Where: P = a hypothetical initial PURCHASE PAYMENT of $1,000
T = average annual total return for the period in question
n = number of years
ERV = ending redeemable value (as of the end of the period in question)
of a hypothetical $1,000 PURCHASE PAYMENT made at the beginning
of the 1-year, 5-year, or 10-year period in questions (or
fractional portion thereof)
The formula assumes that: (1) all recurring fees have been charged to
CONTRACTOWNER accounts; (2) all applicable non-recurring charges are deducted at
the end of the period in question; and 3) there will be a complete redemption at
the end of the period in question.
(B) NON-STANDARD SUBACCOUNT PERFORMANCE ADJUSTED FOR NON-RECURRING CONTRACT
EXPENSE CHARGES
The examples below show, for the various SUBACCOUNTS of the VAA, non-standard
performance for the stated periods. These figures are calculated as if the
SUBACCOUNTS had commenced activity at the same time as the underlying funds
SUBACCOUNT PERFORMANCE (ADJUSTED FOR CONTRACT EXPENSE CHARGES)
<TABLE>
<CAPTION>
1-YEAR 3-YEAR 5-YEAR 10-YEAR
YTD PERIOD PERIOD PERIOD PERIOD LIFETIME
--------- ----------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Growth Fund................ 32.25% 32.25% 24.42% 19.74% N/A 19.17%
(as if commenced activity 5/05/93)
AIM V.I. International Equity 13.87% 13.87% 12.43% 9.77% N/A 11.77%
Fund..............................
(as if commenced activity 5/05/93)
AIM V.I. Value Equity Fund.......... 30.56% 30.56% 21.77% 20.00% N/A 20.18%
(as if commenced activity 5/05/93)
BT Equity 500 Index Fund............ 26.92% 26.92% N/A N/A N/A 22.50%
(as if commenced activity 10/01/97)
Delaware Premium Growth and Income 9.80% 9.80% 19.18% 17.48% 12.13% 11.71%
Series............................
(formerly known as Decatur Total
Return)
(as if commenced activity 7/28/88)
Delaware Premium Delchester (3.33%) (3.33%) 6.40% 5.62% 8.01% 7.95%
Series............................
(as if commenced activity 7/28/88)
Delaware Premium Devon Series....... 22.32% 22.32% N/A N/A N/A 29.67%
(as if commenced activity 5/01/97)
Delaware Premium Emerging Markets (33.42%) (33.42%) N/A N/A N/A (27.43%)
Series............................
(as if commenced activity 5/01/97)
Delaware Premium International 8.79% 8.79% 10.61% 9.00% N/A 9.59%
Equity Series.....................
(as if commenced activity 10/29/92)
Delaware Premium REIT Series........ N/A N/A N/A N/A N/A (9.85%)
(as if commenced activity 5/18/98)
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
1-YEAR 3-YEAR 5-YEAR 10-YEAR
YTD PERIOD PERIOD PERIOD PERIOD LIFETIME
--------- ----------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Delaware Premium Small Cap Value (6.12%) (6.12%) 14.13% 12.53% N/A 12.96%
Series............................
(as if commenced activity 12/27/93)
Delaware Premium Social Awareness 13.85% 13.85% N/A N/A N/A 24.85%
Series............................
(as if commenced activity 5/01/97)
Delaware Premium Trend Series....... 14.42% 14.42% 14.49% 15.14% N/A 15.55%
(as if commenced activity 12/27/93)
Dreyfus Variable Fund Small Cap (4.78%) (4.78%) N/A 11.30% N/A 35.32%
Portfolio.........................
(as if commenced activity 8/31/90)
Fidelity VIP Equity-Income 10.08% 10.08% 16.14% 17.12% 14.01% 12.74%
Portfolio.........................
(as if commenced activity 10/9/86)
Fidelity VIP Growth Portfolio....... 37.55% 37.55% 23.73% 20.04% 17.74% 15.71%
(as if commenced activity 10/9/86)
Fidelity VIP Overseas Portfolio..... 11.18% 11.18% 10.91% 8.17% 8.55% 7.08%
(as if commenced activity 1/28/87)
Fidelity VIP III Growth 22.85% 22.85% 22.45% N/A N/A 24.53%
Opportunities Portfolio...........
(as if commenced activity 1/3/95)
Kemper Variable Small Cap Growth 16.89% 16.89% 24.81% N/A N/A 22.40%
Portfolio.........................
(as if commenced activity 5/02/94)
Kemper Variable Government 5.32% 5.32% 4.58% 5.18% 6.83% 6.32%
Securities Portfolio..............
(as if commenced activity 9/03/87)
Liberty Variable Trust Colonial U.S. 18.49% 18.49% 22.92% N/A N/A 22.22%
Stock Fund........................
(as if commenced activity 7/5/94)
Liberty Variable Trust Newport Tiger (7.76%) (7.76%) (11.64%) N/A N/A (6.35%)
Fund..............................
(as if commenced activity 5/1/95)
Lincoln National Bond Fund.......... 8.04% 8.04% 5.50% 5.43% 7.64% 9.51%
(as if commenced activity 12/28/81)
Lincoln National Money Market Fund.. 3.65% 3.65% 3.62% 3.48% 3.89% 5.16%
(as if commenced activity 1/07/82)
MFS Variable Trust Emerging Growth 32.23% 32.23% 22.45% N/A N/A 24.80%
Series............................
(as if commenced activity 7/24/95)
MFS Variable Trust Research 21.63% 21.63% 20.32% N/A N/A 20.84%
Series............................
(as if commenced activity 7/26/95)
MFS Variable Trust Total Return 10.76% 10.76% 14.33% N/A N/A 17.08%
Series............................
(as if commenced activity 1/3/95)
MFS Variable Trust Utilities 16.40% 16.40% 20.89% N/A N/A 23.64%
Series............................
(as if commenced activity 1/3/95)
OCC Trust Global Equity Portfolio... 11.70% 11.70% 12.52% N/A N/A 14.36%
(as if commenced activity 3/1/95)
OCC Trust Managed Portfolio......... 5.62% 5.62% 15.49% 17.48% 17.69% 17.35%
(as if commenced activity 8/1/88)
</TABLE>
* The lifetime of each SUBACCOUNT is less than the complete period indicated.
See the date the SUBACCOUNT commenced activity under its name.
The length of the periods and the last day of each period used in the above
table are set out in the table heading and in the footnotes above.
B-4
<PAGE>
WITHDRAWAL CHARGE AND MARKET VALUE ADJUSTMENT EXAMPLES
The following example illustrates the detailed calculations for a $50,000
deposit into the fixed account with a guaranteed rate of 4.5% for a duration of
five years. The intent of the example is to show the effect of the "MVA" and the
3% minimum guarantee under various interest rates on the calculation of the cash
surrender (withdrawal) values. Any charges for optional death benefit risks are
not taken into account in the example. The effect of the MVA is reflected in the
index rate factor in column (2) and the minimum 3% guarantee is shown under
column (4) under the "Surrender Value Calculation". The "Market Value Adjustment
Tables" and "Minimum Value Calculation" contain the explicit calculation of the
index factors and the 3% minimum guarantee respectively. The "Annuity Value
Calculation" and "Minimum Value" calculations assume the imposition of the
annual $35 account fee, but that fee is waived if the annuity account value at
the end of a contract year is $100,000 or more. The results would be slightly
different in the states where the annual fee is less than $35.
WITHDRAWAL CHARGE EXAMPLE
SAMPLE CALCULATIONS FOR MALE 35 ISSUE
CASH SURRENDER VALUES
<TABLE>
<S> <C>
Single Premium............................................... $50,000
Premium Taxes................................................ None
Withdrawals.................................................. None
Guaranteed Period............................................ 5 years
Guaranteed Interest Rate..................................... 4.50%
Annuity Date................................................. Age 70
Index Rate A................................................. 5.00%
Index Rate B................................................. 6.00% End of contract year
1
5.50% End of contract year
2
5.00% End of contract year
3
4.00% End of contract year
4
Percentage Adjustment to Index Rate B........................ 0.50%
</TABLE>
SURRENDER VALUE CALCULATION
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5) (6) (7)
ANNUITY INDEX RATE ADJUSTED MINIMUM GREATER OF SURRENDER SURRENDER
CONTRACT YEAR VALUE FACTOR ANNUITY VALUE VALUE (3) & (4) CHARGE VALUE
- -------------------- --------- ----------- --------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
1................... $ 52,215 0.944841 $ 49,335 $ 51,465 $ 51,465 $ 3,500 $ 47,965
2................... $ 54,530 0.971964 $ 53,001 $ 52,974 $ 53,001 $ 3,500 $ 50,001
3................... $ 56,949 1.000000 $ 56,949 $ 54,528 $ 56,949 $ 2,500 $ 54,449
4................... $ 59,476 1.004785 $ 59,761 $ 56,129 $ 59,761 $ 2,000 $ 57,761
5................... $ 62,118 NA $ 62,118 $ 57,778 $ 62,118 $ 1,500 $ 60,618
</TABLE>
ANNUITY VALUE CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR
- ----------------------------------------
<S> <C>
1....................................... $50,000 X 1.045 - $35 = $52,215
2....................................... $52,215 X 1.045 - $35 = $54,530
3....................................... $54,530 X 1.045 - $35 = $56,949
4....................................... $56,949 X 1.045 - $35 = $59,476
5....................................... $59,476 X 1.045 - $35 = $62,118
</TABLE>
SURRENDER CHARGE CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR SC FACTOR SURRENDER CHG
- ----------------------------------------------------------------------------------- --------- ---------------
<S> <C> <C>
1.................................................................................. 0.07 $3,500
2.................................................................................. 0.06 $3,000
3.................................................................................. 0.05 $2,500
4.................................................................................. 0.04 $2,000
5.................................................................................. 0.03 $1,500
</TABLE>
B-5
<PAGE>
MARKET VALUE ADJUSTMENT EXAMPLE
INTEREST RATE FACTOR CALCULATION
<TABLE>
<CAPTION>
ADJ. INDEX
CONTRACT YEAR INDEX A INDEX B B N RESULT
- -------------------------------------------- --------- --------- ----------- --- ---------
<S> <C> <C> <C> <C> <C>
1........................................... 5.00% 6.00% 6.50% 4 0.944841
2........................................... 5.00% 5.50% 6.00% 3 0.971964
3........................................... 5.00% 5.00% 5.00% 2 1.000000
4........................................... 5.00% 4.00% 4.50% 1 1.004785
5........................................... 5.00% N/A N/A N/A N/A
</TABLE>
MINIMUM VALUE CALCULATION
<TABLE>
<CAPTION>
CONTRACT YEAR
- --------------------------------
<S> <C>
1............................... $50,000 X 1.03 - $35 = $51,465
2............................... $51,465 X 1.03 - $35 = $52,974
3............................... $52,974 X 1.03 - $35 = $54,528
4............................... $54,528 X 1.03 - $35 = $56,129
5............................... $56,129 X 1.03 - $35 = $57,778
</TABLE>
ANNUITY PAYOUTS
VARIABLE ANNUITY PAYOUTS
Variable ANNUITY PAYOUTS will be determined on the basis of: (1) the dollar
value of the contract on the ANNUITY COMMENCEMENT DATE; (2) the annuity tables
contained in the CONTRACT; (3) the type of ANNUITY OPTION selected; and (4) the
investment results of the fund(s) selected. In order to determine the amount of
variable ANNUITY PAYOUTS, LINCOLN LIFE makes the following calculation: first,
it determines the dollar amount of the first payout; second, it credits the
contract with a fixed number of ANNUITY UNITS based on the amount of the first
payout; and third, it calculates the value of the ANNUITY UNITS each period
thereafter. These steps are explained below.
The dollar amount of the first periodic variable ANNUITY PAYOUT is determined by
applying the total value of the ACCUMULATION UNITS credited under the contract
valued as of the ANNUITY COMMENCEMENT DATE (less any premium taxes) to the
annuity tables contained in the contract. The first variable annuity payout will
be paid 14 days after the ANNUITY COMMENCEMENT DATE. This day of the month will
become the day on which all future ANNUITY PAYOUTS will be paid. Amounts shown
in the tables are based on the 1983 Table "a" Individual Annuity Mortality
Tables, modified, with an assumed investment return at the rate of 4% per annum.
The first ANNUITY PAYOUT is determined by multiplying the benefit per $1,000 of
value shown in the contract tables by the number of thousands of dollars of
value accumulated under the contract. These annuity tables vary according to the
form of annuity selected and the age of the ANNUITANT at the ANNUITY
COMMENCEMENT DATE. The 4% interest rate stated above is the measuring point for
subsequent ANNUITY PAYOUTS. If the actual net investment rate (annualized)
exceeds 4%, the payout will increase at a rate equal to the amount of such
excess. Conversely, if the actual rate is less than 4%, ANNUITY PAYOUTS will
decrease. If the assumed rate of interest were to be increased, ANNUITY PAYOUTS
would start at a higher level but would decrease more rapidly or increase more
slowly.
LINCOLN LIFE may use sex distinct annuity tables in contracts that are not
associated with employer sponsored plans and where not prohibited by law. At an
ANNUITY COMMENCEMENT DATE, the contract is credited with ANNUITY UNITS for each
SUBACCOUNT on which variable ANNUITY PAYOUTS are based. The number of ANNUITY
UNITS to be credited is determined by dividing the amount of the first periodic
payout by the value of an ANNUITY UNIT in each subaccount selected. Although the
number of ANNUITY UNITS is fixed by this process, the value of such units will
vary with the value of the underlying fund.
The amount of the second and subsequent periodic payout is determined by
multiplying the CONTRACTOWNER'S fixed number of ANNUITY UNITS I each SUBACCOUNT
by the appropriate ANNUITY UNIT value for the valuation date ending 14 days
prior to the date that payout is due.
The value of each subaccount's ANNUITY UNIT will be set initially at $1.0. The
ANNUITY UNIT value for each SUBACCOUNT at the end of any VALUATION DATE is
determined by multiplying the SUBACCOUNT ANNUITY UNIT value for the immediately
preceding VALUATION DATE by the product of:
(a) The net investment factor of the SUBACCOUNT for the VALUATION PERIOD for
which the ANNUITY UNIT value is being determined, and
(b) A factor to neutralize the assumed investment return in the annuity table.
B-6
<PAGE>
The value of the ANNUITY UNITS is determined as of a VALUATION DATE 14 days
prior to the payment date in order to permit calculation of amounts of ANNUITY
PAYOUTS and mailing of checks in advance of their due dates. Such checks will
normally be issued and mailed at least three days before the due date.
PROOF OF AGE, SEX AND SURVIVAL
LINCOLN LIFE may require proof of age, sex, or survival of any payee upon whose
age, sex, or survival payments depend.
ADVERTISING AND SALES LITERATURE
As set forth in the Prospectus, LINCOLN LIFE may refer to the following
organizations (and others) in its marketing materials.
A.M. BEST'S RATING SYSTEM is designed to evaluate the various factors affecting
the overall performance of an insurance company in order to provide an opinion
as to an insurance company's relative financial strength and ability to meet its
contractual obligations. The procedure includes both a quantitative and
qualitative review of each company. A.M. Best also provides certain rankings, to
which LINCOLN LIFE intends to refer.
DUFF & PHELPS insurance company claims paying ability (CPA) service provides
purchasers of insurance company policies and contracts with analytical and
statistical information on the solvency and liquidity of major U.S. licensed
companies, both mutual and stock.
EAFE INDEX is prepared by Morgan Stanley Capital International (MSCI). It
measures performance of equity securities in Europe, Australia and the Far East.
The index reflects the movements of world stock markets by representing the
evolution of an unmanaged portfolio. The EAFE Index offers international
diversification representing 1,000 companies across 20 different countries.
LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a publisher
of statistical data covering the investment company industry in the United
States and overseas. Lipper is recognized as the leading source of data on
open-end and closed-end funds. Lipper currently tracks the performance of over
5,000 investment companies and publishes numerous specialized reports, including
reports on performance and portfolio analysis, fee and expense analysis.
MOODY'S insurance financial strength rating is a an opinion of an insurance
company's financial strength, market leadership, and ability to meet financial
obligations. The purpose of Moody's ratings is to provide investors with a
simple system of gradation by which the relative quality of insurance companies
may be noted.
MORNINGSTAR is an independent financial publisher offering comprehensive
statistical and analytical coverage of open-end and closed-end funds and
variable annuities.
STANDARD & POOR'S insurance claims-paying ability rating is an opinion of an
operating insurance company's financial capacity to meet obligations under an
insurance policy in accordance with the terms. The likelihood of a timely flow
of funds from the insurer to the trustee for the bondholders is a key element in
the rating determination for such debt issues.
VARDS (VARIABLE ANNUITY RESEARCH DATA SERVICE) provides a comprehensive guide to
variable annuity contract features and historical fund performance. The service
also provides a readily understandable analysis of the comparative
characteristics and market performance of funds inclusive in variable contracts.
STANDARD & POOR'S INDEX -- A broad-based measurement of U.S. stock-market
performance based on the weighted performance of 500 common stocks of leading
company's and leading industries, commonly known as the Standard & Poor's (S&P
500). The selection of stocks, their relative weightings to reflect differences
in the number of outstanding shares, and publication of the index itself are
services of Standard & Poor's Corporation, a financial advisory, securities
rating, and publishing firm.
RUSSELL 1000 INDEX -- Measures the performance of the 1,000 largest companies in
the Russell 3000 Index, which represents approximately 90% of the total market
capitalization of the Russell 3000 that measures 3000 of the largest US
companies.
RUSSELL 2000 INDEX -- Measures the performance of the 2,000 smallest companies
in the Russell 3000 Index, which represents approximately 10% of the total
market capitalization of the Russell 3000 that measures 3000 of the largest US
companies.
LEHMAN BROTHERS AGGREGATE BOND INDEX -- Composed of securities from Lehman
Brothers Government/Corporate Bond Index, Mortgage-Backed Securities Index, and
the Asset-Backed Securities Index. Indexes are rebalanced monthly by market
capitalization.
LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX -- This is a measurement of the
movement of approximately 4,200 corporate, publicated traded, fixed-rate,
nonconvertible, domestic debt securities, as well as the domestic debt
securities issued by the U.S. government or its agencies.
LEHMAN BROTHERS GOVERNMENT INTERMEDIATE BOND INDEX -- Composed of all bonds
covered by the Lehman Brothers Government Bond Index (all publicly issued,
nonconvertible, domestic debt of the US government or
B-7
<PAGE>
any agency thereof, quasi-federal corporations, or corporate debt guaranteed by
the US government) with maturities between one and 9.99 years.
MERRILL LYNCH HIGH YIELD MASTER INDEX -- This is an index of high yield debt
securities. High yield securities are those below the top four quality rating
categories and are considered more risky than investment grade. Issues must be
rated by Standard & Poor's or by Moody's Investors Service as less than
investment grade (i.e., BBB or Baa) but not in default (i.e. DDD1 or less).
Issues must be in the form of publicly placed nonconvertible, coupon-bearing US
domestic debt and must carry a term to maturity of at least one year.
MORGAN STANLEY EMERGING MARKETS FREE INDEX -- A market capitalization weighted
index composed of companies representative of the market structure of 22
Emerging Market countries in Europe, Latin America, and the Pacific Basin. This
index excludes closed markets and those shares in otherwise free markets, which
are not purchasable by foreigners.
MORGAN STANLEY WORLD CAPITAL INTERNATIONAL WORLD INDEX -- A market
capitalization weighted index composed of companies representative of the market
structure of 22 Developed Market countries in North America, Europe and the
Asia/Pacific Region.
MORGAN STANLEY PACIFIC BASIN (EX-JAPAN) INDEX -- An arithmetic, market
value-weighted average of the performance of securities listed on the stock
exchanges of the following Pacific Basin Countries: Australia, Hong Kong,
Malaysia, New Zealand and Singapore.
NAREIT EQUITY REIT INDEX -- All of the data is based on the last closing price
of the month for all tax-qualified REITs listed on the New York Stock Exchange,
American Stock Exchange, and the NASDAQ National Market System. The data is
market weighted.
SALOMON BROTHERS WORLD GOVERNMENT BOND (NON US) INDEX -- A market capitalization
weighted index consisting of government bond markets of the following 13
countries: Australia, Austria, Belgium, Canada, Denmark, France, Germany, Italy,
Japan, The Netherlands, Spain, Sweden, and The United Kingdom.
SALOMON BROTHERS 90 DAY TREASURY-BILL INDEX -- Equal dollar amounts of
three-month Treasury bills are purchased at the beginning of each of three
consecutive months. As each bill matures, all proceeds are rolled over or
reinvested in a new three-month bill.
STANDARD AND POOR'S INDEX (S&P 400) -- Consists of 400 domestic stocks chosen
for market size, liquidity, and industry group representations.
STANDARD AND POOR'S UTILITIES INDEX -- The utility index is one of several
industry groups within the broader S&P 500. Utility stocks include electric,
natural gas, and telephone companies included in the S&P 500.
NASDAQ-QTC PRICE INDEX -- this index is based on the National Association of
Securities Dealers Automated Quotations (NASDAQ) and represents all domestic
over-the-counter stocks except those traded on exchanges and those having only
one market maker, a total of some 3,500 stocks. It is market value-weighted and
was introduced with a base of 100.00 on February 5, 1971.
DOW JONES INDUSTRIAL AVERAGE (DJIA) -- A price-weighted average of 30 actively
traded blue chip stocks, primarily industrials but including American Express
Company and American Telephone and Telegraph Company. Prepared and published by
Dow Jones & Company, it is the oldest and most widely quoted of all the market
indicators. The average is quoted in points, not dollars.
In its advertisements and other sales literature for the VAA and the SERIES
funds, LINCOLN LIFE intends to illustrate the advantages of the contracts in a
number of ways:
COMPOUND INTEREST ILLUSTRATIONS. These will emphasize several advantages of the
variable annuity contract. For example, but not by way of illustration, the
literature may emphasize the potential tax advantage of the VARIABLE ANNUITY
ACCOUNT over the fixed account; and the compounding effect when a client makes
regular deposits to his or her contract.
INTERNET. An electronic communications network which may be used to provide
information regarding LINCOLN LIFE, performance of the subaccounts and
advertisement literature.
DOLLAR-COST AVERAGING. (DCA) -- You may systematically transfer on a monthly
basis amounts from certain SUBACCOUNTS, or the fixed side of the contract into
the SUBACCOUNTS. You may elect to participate in the DCA program at the time of
application or at anytime before the ANNUITY COMMENCEMENT DATE by completing an
election form available from us. The minimum amount to be dollar cost averaged
is $2,000 over any period between six and 60 months. Once elected, the program
will remain in effect until the earlier of: (1) the ANNUITY COMMENCEMENT DATE;
(2) the value of the amount being DCA'd is depleted; or (3) you cancel the
program by written request or by telephone if we have your telephone
authorization on file. Currently, there is no charge for this service. However,
we reserve the right to impose one. A transfer under this program is not
considered a transfer for purposes of limiting the number of transfers that may
be made, or assessing any charges or MVA which may apply to transfers. We
reserve the right to discontinue this program at any time. DCA does not assure a
profit or protect against loss.
AUTOMATIC WITHDRAWAL SERVICE. (AWS) -- AWS provides an automatic, periodic
withdrawal of CONTRACT VALUE
B-8
<PAGE>
to you. You may elect to participate in AWS at the time of application or at any
time before the ANNUITY COMMENCEMENT DATE by sending a written request to our
home office. The minimum CONTRACT VALUE required to establish AWS is $10,000.
You may cancel or make changes to your AWS program at any time by sending a
written request to our home office. If telephone authorization has been elected,
certain changes may be by telephone. Notwithstanding the requirements of the
program, any withdrawal must be permitted by Section 401(a)(9) of the code for
qualified plans or permitted under Section 72 for non-qualified contracts. To
the extent that withdrawals under AWS do not qualify for an exemption from the
contingent deferred sales charge, we will assess any applicable surrender
charges on those withdrawals. See Charges and other deductions -- Surrender
charge. Currently, there is no charge for this service. However, we reserve the
right to impose one. If a charge is imposed, it will not exceed $25 per
transaction or 2% of the amount withdrawn, whichever is less. We reserve the
right to discontinue this service at any time.
ACCOUNT REBALANCING. Account rebalancing is an option which, if elected by the
CONTRACTOWNER, restores to a pre-determined level the percentage of CONTRACT
VALUE allocated to each variable account SUBACCOUNT (e.g., 20% Money Market, 50%
Growth, 30% Utilities). This pre-determined level will be the allocation
initially selected when the contract was purchased, unless subsequently changed.
The account rebalancing allocation may be changed at any time by submitting a
request to LINCOLN LIFE.
If account rebalancing is elected, all PURCHASE PAYMENTS allocated to the
variable account SUBACCOUNTS must be subject to account rebalancing. The fixed
account SUBACCOUNT is not available for account rebalancing.
Account rebalancing may take place on either a quarterly, semi-annual or annual
basis, as selected by the CONTRACTOWNER. Once the account rebalancing option is
activated, any variable account SUBACCOUNT transfers executed outside of the
account rebalancing option will terminate the account rebalancing option. Any
subsequent PURCHASE PAYMENT or withdrawal that modifies the account balance
within each variable account SUBACCOUNT may also cause termination of the
account rebalancing option. Any such termination will be confirmed to the
CONTRACTOWNER. The CONTRACTOWNER may terminate the account rebalancing option or
re-enroll at any time by calling or writing LINCOLN LIFE.
The account rebalancing program is not available following the ANNUITY
COMMENCEMENT DATE. Currently, there is no charge for this service. However, we
reserve the right to impose one.
LINCOLN LIFE'S CUSTOMERS. More than one million individuals and 10,000 employers
trust LINCOLN LIFE to help them plan for retirement. They're in good company
with a good company, a company known for financial strength and superior
service. As a member of the Insurance Marketplace Standards Association (IMSA),
we are committed to upholding strong business ethics.
LINCOLN LIFE'S ASSETS, SIZE. LINCOLN LIFE may discuss its general financial
condition (see, for example, the reference to A.M. Best Company, above); it may
refer to its assets; it may also discuss its relative size and/or ranking among
companies in the industry or among any sub-classification of those companies,
based upon recognized evaluation criteria (see reference to A.M. Best Company
above). For example, at December 31, 1998 LINCOLN LIFE had statutory-basis
admitted assets of over $70 billion.
FINANCIAL STATEMENTS
Financial statements of the VAA and the statutory-basis financial statements of
LINCOLN LIFE appear on the following pages.
B-9
<PAGE>
(This page has been left blank intentionally.)
N-1
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
STATEMENT OF ASSETS AND LIABILITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
AIM V.I. BANKER'S LIBERTY
AIM V.I. INTERNATIONAL AIM V.I. TRUST EQUITY COLONIAL
GROWTH EQUITY VALUE 500 INDEX US STOCK
COMBINED FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
ASSETS
Investments at
Market--Affiliated
(Cost $5,952,315) $ 6,020,270 $ -- $ -- $ -- $ -- $ --
Investments at
Market--Unaffiliated
(Cost $5,669,345) 5,838,033 278,180 76,763 404,765 945,573 19,120
- --------------------------- ----------- -------- -------------- ----------- ------------- ---------
TOTAL INVESTMENTS 11,858,303 278,180 76,763 404,765 945,573 19,120
- ---------------------------
Dividend Receivable 1,018 -- -- -- -- --
TOTAL ASSETS 11,859,321 278,180 76,763 404,765 945,573 19,120
- ---------------------------
LIABILITY--
Payable to The Lincoln
National Life Insurance
Company 443 10 3 14 36 1
- --------------------------- ----------- -------- -------------- ----------- ------------- ---------
NET ASSETS $11,858,878 $278,170 $ 76,760 $ 404,751 $945,537 $19,119
- --------------------------- ----------- -------- -------------- ----------- ------------- ---------
----------- -------- -------------- ----------- ------------- ---------
Percent of net assets 100.00% 2.35% 0.65% 3.41% 7.97% 0.16%
- --------------------------- ----------- -------- -------------- ----------- ------------- ---------
----------- -------- -------------- ----------- ------------- ---------
NET ASSETS ARE REPRESENTED BY:
Units in accumulation
period 25,033 7,468 37,007 91,329 1,839
Unit value $ 11.112 $ 10.278 $ 10.937 $ 10.353 $10.395
-------- -------------- ----------- ------------- ---------
- ---------------------------
NET ASSETS $278,170 $ 76,760 $ 404,751 $945,537 $19,119
-------- -------------- ----------- ------------- ---------
-------- -------------- ----------- ------------- ---------
- ---------------------------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY
VIP FIDELITY FIDELITY VIP III KEMPER
DREYFUS EQUITY VIP VIP GROWTH SMALL CAP
SMALL CAP INCOME GROWTH OVERSEAS OPPORTUNITIES GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
ASSETS
Investments at
Market--Affiliated
(Cost $5,952,315) $ -- $ -- $ -- $ -- $ -- $ --
Investments at
Market--Unaffiliated
(Cost $5,669,345) 135,529 377,902 451,647 135,429 665,200 49,365
- --------------------------- ---------- --------- --------- --------- -------------- ----------
TOTAL INVESTMENTS 135,529 377,902 451,647 135,429 665,200 49,365
- ---------------------------
Dividend Receivable -- -- -- -- -- --
TOTAL ASSETS 135,529 377,902 451,647 135,429 665,200 49,365
- ---------------------------
LIABILITY--
Payable to The Lincoln
National Life Insurance
Company 5 15 17 5 23 1
- --------------------------- ---------- --------- --------- --------- -------------- ----------
NET ASSETS $135,524 $ 377,887 $ 451,630 $ 135,424 $665,177 $49,364
- --------------------------- ---------- --------- --------- --------- -------------- ----------
---------- --------- --------- --------- -------------- ----------
Percent of net assets 1.14% 3.19% 3.81% 1.14% 5.61% 0.42%
- --------------------------- ---------- --------- --------- --------- -------------- ----------
---------- --------- --------- --------- -------------- ----------
NET ASSETS ARE REPRESENTED BY:
Units in accumulation
period 12,648 37,412 42,588 13,400 64,024 4,482
Unit value $ 10.715 $ 10.101 $ 10.605 $ 10.106 $ 10.389 $11.014
---------- --------- --------- --------- -------------- ----------
- ---------------------------
NET ASSETS $135,524 $ 377,887 $ 451,630 $ 135,424 $665,177 $49,364
---------- --------- --------- --------- -------------- ----------
---------- --------- --------- --------- -------------- ----------
- ---------------------------
</TABLE>
See accompanying notes.
N-2
<PAGE>
<TABLE>
<CAPTION>
LIBERTY DELAWARE DELAWARE DELAWARE
COLONIAL PREMIUM DELAWARE DELAWARE PREMIUM PREMIUM DELAWARE
NEWPORT DECATUR PREMIUM PREMIUM EMERGING INTERNATIONAL PREMIUM
TIGER TOTAL RETURN DELCHESTER DEVON MARKETS EQUITY REAL ESTATE
FUND SERIES SERIES SERIES SERIES SERIES SERIES
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments at
Market--Affiliated
(Cost $5,952,315) $ -- $231,121 $ 412,238 $ 456,037 $14,702 $18,226 $ 95,780
Investments at
Market--Unaffiliated
(Cost $5,669,345) 16,793 -- -- -- -- -- --
- --------------------------- --------- ------------- ---------- ---------- --------- ------- ------------
TOTAL INVESTMENTS 16,793 231,121 412,238 456,037 14,702 18,226 95,780
- ---------------------------
Dividend Receivable -- -- 1,018 -- -- -- --
TOTAL ASSETS 16,793 231,121 413,256 456,037 14,702 18,226 95,780
- ---------------------------
LIABILITY--
Payable to The Lincoln
National Life Insurance
Company -- 9 15 17 -- 1 4
- --------------------------- --------- ------------- ---------- ---------- --------- ------- ------------
NET ASSETS $ 16,793 $231,112 $ 413,241 $ 456,020 $14,702 $18,225 $ 95,776
- --------------------------- --------- ------------- ---------- ---------- --------- ------- ------------
--------- ------------- ---------- ---------- --------- ------- ------------
Percent of net assets 0.14% 1.95% 3.48% 3.85% 0.12% 0.15% 0.81%
- --------------------------- --------- ------------- ---------- ---------- --------- ------- ------------
--------- ------------- ---------- ---------- --------- ------- ------------
NET ASSETS ARE REPRESENTED BY:
Units in accumulation
period 1,692 23,062 41,449 44,219 1,586 1,795 9,465
Unit value $ 9.923 $ 10.021 $ 9.970 $ 10.313 $ 9.268 $10.152 $ 10.119
--------- ------------- ---------- ---------- --------- ------- ------------
- ---------------------------
NET ASSETS $ 16,793 $231,112 $ 413,241 $ 456,020 $14,702 $18,225 $ 95,776
--------- ------------- ---------- ---------- --------- ------- ------------
--------- ------------- ---------- ---------- --------- ------- ------------
- ---------------------------
<CAPTION>
DELAWARE DELAWARE
PREMIUM PREMIUM DELAWARE
SMALL CAP SOCIAL PREMIUM
VALUE AWARENESS TREND
SERIES SERIES SERIES
<S> <C> <C> <C>
- ---------------------------
ASSETS
Investments at
Market--Affiliated
(Cost $5,952,315) $179,343 $582,262 $ 73,399
Investments at
Market--Unaffiliated
(Cost $5,669,345) -- -- --
- --------------------------- ---------- ---------- ---------
TOTAL INVESTMENTS 179,343 582,262 73,399
- ---------------------------
Dividend Receivable -- -- --
TOTAL ASSETS 179,343 582,262 73,399
- ---------------------------
LIABILITY--
Payable to The Lincoln
National Life Insurance
Company 7 21 3
- --------------------------- ---------- ---------- ---------
NET ASSETS $179,336 $582,241 $ 73,396
- --------------------------- ---------- ---------- ---------
---------- ---------- ---------
Percent of net assets 1.51% 4.91% 0.62%
- --------------------------- ---------- ---------- ---------
---------- ---------- ---------
NET ASSETS ARE REPRESENTED
Units in accumulation
period 17,097 54,622 6,762
Unit value $ 10.489 $ 10.659 $ 10.854
---------- ---------- ---------
- ---------------------------
NET ASSETS $179,336 $582,241 $ 73,396
---------- ---------- ---------
---------- ---------- ---------
- ---------------------------
</TABLE>
<TABLE>
<CAPTION>
LINCOLN OCC
KEMPER NATIONAL LINCOLN MFS MFS ACCUMULATION
GOVERNMENT MONEY NATIONAL EMERGING TOTAL MFS MFS GLOBAL
SECURITIES MARKET BOND GROWTH RETURN UTILITIES RESEARCH EQUITY
PORTFOLIO FUND FUND SERIES SERIES SERIES SERIES PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
ASSETS
Investments at
Market--Affiliated
(Cost $5,952,315) $ -- $ 3,491,408 $ 465,754 $ -- $ -- $ -- $ -- $ --
Investments at
Market--Unaffiliated
(Cost $5,669,345) 773,371 -- -- 64,835 515,926 687,840 87,428 113,945
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
TOTAL INVESTMENTS 773,371 3,491,408 465,754 64,835 515,926 687,840 87,428 113,945
- ---------------------------
Dividend Receivable -- -- -- -- -- -- -- --
TOTAL ASSETS 773,371 3,491,408 465,754 64,835 515,926 687,840 87,428 113,945
- ---------------------------
LIABILITY--
Payable to The Lincoln
National Life Insurance
Company 30 131 18 3 20 25 3 5
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
NET ASSETS $ 773,341 $ 3,491,277 $ 465,736 $ 64,832 $ 515,906 $ 687,815 $ 87,425 $113,940
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
----------- ----------- --------- --------- --------- --------- -------- -------------
Percent of net assets 6.52% 29.44% 3.93% 0.55% 4.35% 5.80% 0.74% 0.96%
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
----------- ----------- --------- --------- --------- --------- -------- -------------
NET ASSETS ARE REPRESENTED BY:
Units in accumulation
period 77,085 347,933 46,137 5,767 50,896 67,144 8,259 11,324
Unit value $ 10.032 $ 10.034 $ 10.095 $ 11.242 $ 10.136 $ 10.244 $ 10.586 $ 10.062
----------- ----------- --------- --------- --------- --------- -------- -------------
- ---------------------------
NET ASSETS $ 773,341 $ 3,491,277 $ 465,736 $ 64,832 $ 515,906 $ 687,815 $ 87,425 $113,940
----------- ----------- --------- --------- --------- --------- -------- -------------
----------- ----------- --------- --------- --------- --------- -------- -------------
- ---------------------------
<CAPTION>
OCC
ACCUMULATION
MANAGED
PORTFOLIO
<S> <C>
- ---------------------------
ASSETS
Investments at
Market--Affiliated
(Cost $5,952,315) $ --
Investments at
Market--Unaffiliated
(Cost $5,669,345) 38,422
- --------------------------- -------------
TOTAL INVESTMENTS 38,422
- ---------------------------
Dividend Receivable --
TOTAL ASSETS 38,422
- ---------------------------
LIABILITY--
Payable to The Lincoln
National Life Insurance
Company 1
- --------------------------- -------------
NET ASSETS $38,421
- --------------------------- -------------
-------------
Percent of net assets 0.32%
- --------------------------- -------------
-------------
NET ASSETS ARE REPRESENTED
Units in accumulation
period 3,915
Unit value $ 9.815
-------------
- ---------------------------
NET ASSETS $38,421
-------------
-------------
- ---------------------------
</TABLE>
N-3
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
STATEMENT OF OPERATIONS
PERIOD FROM NOVEMBER 24, 1998 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
AIM AIM V.I. BANKER'S LIBERTY
V.I. INTERNATIONAL AIM V.I. TRUST EQUITY COLONIAL
GROWTH EQUITY VALUE 500 INDEX US STOCK
COMBINED FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------
Net Investment Income:
Dividends from investment
income $ 15,622 $ 572 $ 323 $ 1,189 $ 621 $762
Dividends from net
realized gains on
investments 29,531 10,738 -- 10,509 3,969 --
Mortality and expense
guarantees (7,306) (187) (36) (215) (601) (13)
- --------------------------- -------- ------- ------ ----------- ------------- ---------
NET INVESTMENT INCOME 37,847 11,123 287 11,483 3,989 749
- ---------------------------
Net Realized and Unrealized
Gain (Loss) on
Investments:
Net realized gain (loss)
on investments 46 -- -- 1 1 --
Net change in unrealized
appreciation or
depreciation on
investments 236,643 8,483 2,328 10,765 28,725 250
- --------------------------- -------- ------- ------ ----------- ------------- ---------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS 236,689 8,483 2,328 10,766 28,726 250
- --------------------------- -------- ------- ------ ----------- ------------- ---------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $274,536 $19,606 $2,615 $ 22,249 $32,715 $999
- --------------------------- -------- ------- ------ ----------- ------------- ---------
-------- ------- ------ ----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY
VIP FIDELITY FIDELITY VIP III KEMPER
DREYFUS EQUITY VIP VIP GROWTH SMALL CAP
SMALL CAP INCOME GROWTH OVERSEAS OPPORTUNITIES GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
Net Investment Income:
Dividends from investment
income $ -- $ -- $ -- $ -- $ -- $ --
Dividends from net
realized gains on
investments -- -- -- -- -- --
Mortality and expense
guarantees (96) (209) (347) (88) (370) (23)
- --------------------------- ---------- -------- -------- --------- ------- ----------
NET INVESTMENT INCOME (96) (209) (347) (88) (370) (23)
- ---------------------------
Net Realized and Unrealized
Gain (Loss) on
Investments:
Net realized gain (loss)
on investments -- 2 6 -- 3 --
Net change in unrealized
appreciation or
depreciation on
investments 10,278 14,833 27,814 3,051 23,185 3,603
- --------------------------- ---------- -------- -------- --------- ------- ----------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS 10,278 14,835 27,820 3,051 23,188 3,603
- --------------------------- ---------- -------- -------- --------- ------- ----------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $10,182 $ 14,626 $ 27,473 $2,963 $22,818 $3,580
- --------------------------- ---------- -------- -------- --------- ------- ----------
---------- -------- -------- --------- ------- ----------
</TABLE>
See accompanying notes.
N-4
<PAGE>
<TABLE>
<CAPTION>
LIBERTY DELAWARE DELAWARE DELAWARE
COLONIAL PREMIUM DELAWARE DELAWARE PREMIUM PREMIUM DELAWARE
NEWPORT DECATUR PREMIUM PREMIUM EMERGING INTERNATIONAL PREMIUM
TIGER TOTAL RETURN DELCHESTER DEVON MARKETS EQUITY REAL ESTATE
FUND SERIES SERIES SERIES SERIES SERIES SERIES
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Net Investment Income:
Dividends from investment
income $ 315 $ -- $ 2,809 $ -- $ -- $ -- $ --
Dividends from net
realized gains on
investments -- -- -- -- -- -- --
Mortality and expense
guarantees (11) (129) (383) (331) (10) (7) (76)
- --------------------------- -------- ------ ----------- --------- --- ----- ------
NET INVESTMENT INCOME 304 (129) 2,426 (331) (10) (7) (76)
- ---------------------------
Net Realized and Unrealized
Gain (Loss) on
Investments:
Net realized gain (loss)
on investments -- 1 (1) -- -- -- --
Net change in unrealized
appreciation or
depreciation on
investments (512) 3,753 (3,741) 18,543 80 102 1,802
- --------------------------- -------- ------ ----------- --------- --- ----- ------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS (512) 3,754 (3,742) 18,543 80 102 1,802
- --------------------------- -------- ------ ----------- --------- --- ----- ------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $(208) $3,625 $(1,316) $18,212 $ 70 $ 95 $1,726
- --------------------------- -------- ------ ----------- --------- --- ----- ------
-------- ------ ----------- --------- --- ----- ------
<CAPTION>
DELAWARE DELAWARE
PREMIUM PREMIUM DELAWARE
SMALL CAP SOCIAL PREMIUM
VALUE AWARENESS TREND
SERIES SERIES SERIES
<S> <C> <C> <C>
- ---------------------------
Net Investment Income:
Dividends from investment
income $ -- $ -- $ --
Dividends from net
realized gains on
investments -- -- --
Mortality and expense
guarantees (150) (288) (43)
- --------------------------- ---------- ---------- --------
NET INVESTMENT INCOME (150) (288) (43)
- ---------------------------
Net Realized and Unrealized
Gain (Loss) on
Investments:
Net realized gain (loss)
on investments 1 1 --
Net change in unrealized
appreciation or
depreciation on
investments 9,528 33,401 4,330
- --------------------------- ---------- ---------- --------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS 9,529 33,402 4,330
- --------------------------- ---------- ---------- --------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $9,379 $33,114 $4,287
- --------------------------- ---------- ---------- --------
---------- ---------- --------
</TABLE>
<TABLE>
<CAPTION>
LINCOLN OCC
KEMPER NATIONAL LINCOLN MFS MFS ACCUMULATION
GOVERNMENT MONEY NATIONAL EMERGING TOTAL MFS MFS GLOBAL
SECURITIES MARKET BOND GROWTH RETURN UTILITIES RESEARCH EQUITY
PORTFOLIO FUND FUND SERIES SERIES SERIES SERIES PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Net Investment Income:
Dividends from investment
income $ -- $ 7,777 $ -- $ -- $ -- $ -- $ -- $ 1,254
Dividends from net
realized gains on
investments -- -- -- -- -- -- -- 4,315
Mortality and expense
guarantees (365) (2,326) (229) (44) (270) (290) (62) (66)
- --------------------------- ----------- --------- --------- --------- ------- -------- --------- -------------
NET INVESTMENT INCOME (365) 5,451 (229) (44) (270) (290) (62) 5,503
- ---------------------------
Net Realized and Unrealized
Gain (Loss) on
Investments:
Net realized gain (loss)
on investments -- -- -- 1 2 26 1 1
Net change in unrealized
appreciation or
depreciation on
investments 1,207 -- 157 5,891 9,731 15,394 5,147 (1,722)
- --------------------------- ----------- --------- --------- --------- ------- -------- --------- -------------
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS 1,207 -- 157 5,892 9,733 15,420 5,148 (1,721)
- --------------------------- ----------- --------- --------- --------- ------- -------- --------- -------------
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $ 842 $ 5,451 $ (72) $5,848 $ 9,463 $ 15,130 $5,086 $ 3,782
- --------------------------- ----------- --------- --------- --------- ------- -------- --------- -------------
----------- --------- --------- --------- ------- -------- --------- -------------
<CAPTION>
OCC
ACCUMULATION
MANAGED
PORTFOLIO
<S> <C>
- ---------------------------
Net Investment Income:
Dividends from investment
income $ --
Dividends from net
realized gains on
investments --
Mortality and expense
guarantees (41)
- --------------------------- -----
NET INVESTMENT INCOME (41)
- ---------------------------
Net Realized and Unrealized
Gain (Loss) on
Investments:
Net realized gain (loss)
on investments --
Net change in unrealized
appreciation or
depreciation on
investments 237
- --------------------------- -----
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON
INVESTMENTS 237
- --------------------------- -----
NET INCREASE (DECREASE) IN
NET ASSETS RESULTING
FROM OPERATIONS $196
- --------------------------- -----
-----
</TABLE>
N-5
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
STATEMENT OF CHANGES IN NET ASSETS
PERIOD FROM NOVEMBER 24, 1998 TO DECEMBER 31, 1998
<TABLE>
<CAPTION>
AIM V.I. BANKER'S LIBERTY
AIM V.I. INTERNATIONAL AIM V.I. TRUST EQUITY COLONIAL
GROWTH EQUITY VALUE 500 INDEX US STOCK
COMBINED FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Changes From Operations:
Net investment income $ 37,847 $ 11,123 $ 287 $ 11,483 $ 3,989 $ 749
Net realized gain (loss)
on investments 46 -- -- 1 1 --
Net change in unrealized
appreciation or
depreciation on
investments 236,643 8,483 2,328 10,765 28,725 250
- --------------------------- ----------- -------- ------- ----------- ------------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS 274,536 19,606 2,615 22,249 32,715 999
- ---------------------------
Change From Unit
Transactions:
Accumulation Units:
Contract purchases 11,651,639 258,564 74,145 382,502 915,708 18,120
Terminated contracts
and transfers to
annuity reserves (67,297) -- -- -- (2,886) --
- --------------------------- ----------- -------- ------- ----------- ------------- ---------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT
TRANSACTIONS 11,584,342 258,564 74,145 382,502 912,822 18,120
- --------------------------- ----------- -------- ------- ----------- ------------- ---------
TOTAL INCREASE IN NET
ASSETS 11,858,878 278,170 76,760 404,751 945,537 19,119
- --------------------------- ----------- -------- ------- ----------- ------------- ---------
NET ASSETS AT DECEMBER 31,
1998 $11,858,878 $278,170 $76,760 $ 404,751 $945,537 $19,119
- --------------------------- ----------- -------- ------- ----------- ------------- ---------
----------- -------- ------- ----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY
VIP FIDELITY FIDELITY VIP III KEMPER
DREYFUS EQUITY VIP VIP GROWTH SMALL CAP
SMALL CAP INCOME GROWTH OVERSEAS OPPORTUNITIES GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Changes From Operations:
Net investment income $ (96) $ (209) $ (347) $ (88) $ (370) $ (23)
Net realized gain (loss)
on investments -- 2 6 -- 3 --
Net change in unrealized
appreciation or
depreciation on
investments 10,278 14,833 27,814 3,051 23,185 3,603
- --------------------------- ---------- --------- --------- --------- -------------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS 10,182 14,626 27,473 2,963 22,818 3,580
- ---------------------------
Change From Unit
Transactions:
Accumulation Units:
Contract purchases 125,342 363,261 424,157 132,461 645,222 45,784
Terminated contracts
and transfers to
annuity reserves -- -- -- -- (2,863) --
- --------------------------- ---------- --------- --------- --------- -------------- ----------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT
TRANSACTIONS 125,342 363,261 424,157 132,461 642,359 45,784
- --------------------------- ---------- --------- --------- --------- -------------- ----------
TOTAL INCREASE IN NET
ASSETS 135,524 377,887 451,630 135,424 665,177 49,364
- --------------------------- ---------- --------- --------- --------- -------------- ----------
NET ASSETS AT DECEMBER 31,
1998 $135,524 $ 377,887 $ 451,630 $ 135,424 $665,177 $49,364
- --------------------------- ---------- --------- --------- --------- -------------- ----------
---------- --------- --------- --------- -------------- ----------
</TABLE>
See accompanying notes.
N-6
<PAGE>
<TABLE>
<CAPTION>
LIBERTY DELAWARE DELAWARE DELAWARE
COLONIAL PREMIUM DELAWARE DELAWARE PREMIUM PREMIUM DELAWARE
NEWPORT DECATUR PREMIUM PREMIUM EMERGING INTERNATIONAL PREMIUM
TIGER TOTAL RETURN DELCHESTER DEVON MARKETS EQUITY REAL ESTATE
FUND SERIES SERIES SERIES SERIES SERIES SERIES
<S> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------
Changes From Operations:
Net investment income $ 304 $ (129) $ 2,426 $ (331) $ (10) $ (7) $ (76)
Net realized gain (loss)
on investments -- 1 (1) -- -- -- --
Net change in unrealized
appreciation or
depreciation on
investments (512) 3,753 (3,741) 18,543 80 102 1,802
- --------------------------- -------- ------------- ---------- ---------- --------- ------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS (208) 3,625 (1,316) 18,212 70 95 1,726
- ---------------------------
Change From Unit
Transactions:
Accumulation Units:
Contract purchases 17,001 227,487 414,557 437,808 14,632 18,130 94,050
Terminated contracts
and transfers to
annuity reserves -- -- -- -- -- -- --
- --------------------------- -------- ------------- ---------- ---------- --------- ------- ------------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT
TRANSACTIONS 17,001 227,487 414,557 437,808 14,632 18,130 94,050
- --------------------------- -------- ------------- ---------- ---------- --------- ------- ------------
TOTAL INCREASE IN NET
ASSETS 16,793 231,112 413,241 456,020 14,702 18,225 95,776
- --------------------------- -------- ------------- ---------- ---------- --------- ------- ------------
NET ASSETS AT DECEMBER 31,
1998 $ 16,793 $231,112 $ 413,241 $ 456,020 $14,702 $18,225 $95,776
- --------------------------- -------- ------------- ---------- ---------- --------- ------- ------------
-------- ------------- ---------- ---------- --------- ------- ------------
<CAPTION>
DELAWARE DELAWARE
PREMIUM PREMIUM DELAWARE
SMALL CAP SOCIAL PREMIUM
VALUE AWARENESS TREND
SERIES SERIES SERIES
<S> <C> <C> <C>
- ---------------------------
Changes From Operations:
Net investment income $ (150) $ (288) $ (43)
Net realized gain (loss)
on investments 1 1 --
Net change in unrealized
appreciation or
depreciation on
investments 9,528 33,401 4,330
- --------------------------- ---------- ---------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS 9,379 33,114 4,287
- ---------------------------
Change From Unit
Transactions:
Accumulation Units:
Contract purchases 169,957 551,993 69,109
Terminated contracts
and transfers to
annuity reserves -- (2,866) --
- --------------------------- ---------- ---------- --------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT
TRANSACTIONS 169,957 549,127 69,109
- --------------------------- ---------- ---------- --------
TOTAL INCREASE IN NET
ASSETS 179,336 582,241 73,396
- --------------------------- ---------- ---------- --------
NET ASSETS AT DECEMBER 31,
1998 $179,336 $582,241 $73,396
- --------------------------- ---------- ---------- --------
---------- ---------- --------
</TABLE>
<TABLE>
<CAPTION>
LINCOLN OCC
KEMPER NATIONAL LINCOLN MFS MFS ACCUMULATION
GOVERNMENT MONEY NATIONAL EMERGING TOTAL MFS MFS GLOBAL
SECURITIES MARKET BOND GROWTH RETURN UTILITIES RESEARCH EQUITY
PORTFOLIO FUND FUND SERIES SERIES SERIES SERIES PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Changes From Operations:
Net investment income $ (365) $ 5,451 $ (229) $ (44) $ (270) $ (290) $ (62) $ 5,503
Net realized gain (loss)
on investments -- -- -- 1 2 26 1 1
Net change in unrealized
appreciation or
depreciation on
investments 1,207 -- 157 5,891 9,731 15,394 5,147 (1,722)
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS 842 5,451 (72) 5,848 9,463 15,130 5,086 3,782
- ---------------------------
Change From Unit
Transactions:
Accumulation Units:
Contract purchases 772,499 3,541,676 465,808 58,984 506,443 675,517 82,339 110,158
Terminated contracts
and transfers to
annuity reserves -- (55,850) -- -- -- (2,832) -- --
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT
TRANSACTIONS 772,499 3,485,826 465,808 58,984 506,443 672,685 82,339 110,158
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
TOTAL INCREASE IN NET
ASSETS 773,341 3,491,277 465,736 64,832 515,906 687,815 87,425 113,940
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
NET ASSETS AT DECEMBER 31,
1998 $773,341 $ 3,491,277 $ 465,736 $64,832 $ 515,906 $ 687,815 $ 87,425 $113,940
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
----------- ----------- --------- --------- --------- --------- -------- -------------
<CAPTION>
OCC
ACCUMULATION
MANAGED
PORTFOLIO
<S> <C>
- ---------------------------
Changes From Operations:
Net investment income $ (41)
Net realized gain (loss)
on investments --
Net change in unrealized
appreciation or
depreciation on
investments 237
- --------------------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS 196
- ---------------------------
Change From Unit
Transactions:
Accumulation Units:
Contract purchases 38,225
Terminated contracts
and transfers to
annuity reserves --
- --------------------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM UNIT
TRANSACTIONS 38,225
- --------------------------- -------------
TOTAL INCREASE IN NET
ASSETS 38,421
- --------------------------- -------------
NET ASSETS AT DECEMBER 31,
1998 $38,421
- --------------------------- -------------
-------------
</TABLE>
N-7
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
NOTES TO FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES & ACCOUNT INFORMATION
THE ACCOUNT:
Lincoln Life Variable Annuity Account N (the Variable Account) is a
segregated investment account of The Lincoln National Life Insurance Company
(the Company) and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended, as a unit investment
trust. The operations of the Variable Account, which commenced on November
24, 1998, are part of the operations of the Company.
The assets of the Variable Account are owned by the Company. The portion of
the Variable Account's assets supporting the annuity contracts may not be
used to satisfy liabilities arising out of any other business of the
Company.
BASIS OF PRESENTATION:
The accompanying financial statements have been prepared in accordance with
generally accepted accounting principles for unit investment trusts.
INVESTMENTS:
The assets of the Variable Account are divided into variable sub-accounts
each of which is invested in shares of thirty portfolios (the Funds) of
eleven diversified open-end management investment companies, each portfolio
with its own investment objective. The Funds are:
AIM Variable Insurance Funds:
AIM V.I. Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Fund
Banker's Trust Insurance Fund Trust:
Banker's Trust Equity 500 Index Fund
Liberty Variable Investment Trust:
Liberty Colonial US Stock Fund
Liberty Colonial Newport Tiger Fund
Delaware Group Premium Funds:
Delaware Premium Decatur Total Return Series
Delaware Premium Delchester Series
Delaware Premium Devon Series
Delaware Premium Emerging Markets Series
Delaware Premium International Equity Series
Delaware Premium Real Estate Series
Delaware Premium Small Cap Value Series
Delaware Premium Social Awareness Series
Delaware Premium Trend Series
Dreyfus Variable Investment Fund:
Dreyfus Small Cap Portfolio
Fidelity Variable Insurance Products Fund:
Fidelity VIP Equity Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Fidelity Variable Insurance Products Fund III:
Fidelity VIP III Growth Opportunities Portfolio
Investors Fund Series:
Kemper Small Cap Growth Portfolio
Kemper Government Securities Portfolio
Lincoln National:
Lincoln National Money Market Fund
Lincoln National Bond Fund
MFS Variable Insurance Trust:
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
MFS Research Series
OCC Accumulation Trust:
OCC Accumulation Global Equity Portfolio
OCC Accumulation Managed Portfolio
Investments in the Funds are stated at the closing net asset value per share
on December 31, 1998, which approximates fair value. The difference between
cost and fair value is reflected as unrealized appreciation and depreciation
of investments.
Investment transactions are accounted for on a trade date basis. The cost of
investments sold is determined by the average cost method.
DIVIDENDS:
Dividends paid to the Variable Account are automatically reinvested in
shares of the Funds on the payable date. Dividend income is recorded on the
ex-dividend date.
FEDERAL INCOME TAXES:
Operations of the Variable Account form a part of and are taxed with
operations of the Company, which is taxed as a "life insurance company"
under the Internal Revenue Code. The Variable Account will not be taxed as a
regulated investment company under Subchapter M of the Internal Revenue
Code. Using current federal income tax law, no federal income taxes are
payable with respect to the Variable Account's net investment income and the
net realized gain on investments.
N-8
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. ACCOUNTING POLICIES & ACCOUNT INFORMATION (CONTINUED)
ANNUITY RESERVES:
Reserves on contracts not involving life contingencies are calculated using
an assumed investment rate of 4%. Reserves on contracts involving life
contingencies are calculated using a modification of the 1971 Individual
Annuitant Mortality Table and an assumed investment rate of 4%.
2. MORTALITY AND EXPENSE GUARANTEES & OTHER TRANSACTIONS WITH AFFILIATE
Amounts are paid to the Company for mortality and expense guarantees at a
effective annual rate of 1.40% of each portfolio's average daily net assets
within the Variable Account. In addition, during 1998 no amounts were
retained by the Company for processing sales of annuity contracts for
contract charges and surrender charges. Accordingly, the Company is
responsible for all sales, general, and administrative expenses applicable
to the Variable Account.
N-9
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
3. NET ASSETS
The following is a summary of net assets owned at December
31, 1998.
<TABLE>
<CAPTION>
AIM V.I. BANKER'S LIBERTY
AIM V.I. INTERNATIONAL AIM V.I. TRUST EQUITY COLONIAL
GROWTH EQUITY VALUE 500 INDEX US STOCK
COMBINED FUND FUND FUND FUND FUND
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------
Unit Transactions:
Accumulation units $11,584,342 $258,564 $ 74,145 $ 382,502 $912,822 $18,120
Accumulated net investment
income 37,847 11,123 287 11,483 3,989 749
Accumulated net realized
gain (loss) on
investments 46 -- -- 1 1 --
- ---------------------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON
INVESTMENTS 236,643 8,483 2,328 10,765 28,725 250
- --------------------------- ----------- -------- -------------- ----------- ------------- ---------
$11,858,878 $278,170 $ 76,760 $ 404,751 $945,537 $19,119
----------- -------- -------------- ----------- ------------- ---------
----------- -------- -------------- ----------- ------------- ---------
</TABLE>
<TABLE>
<CAPTION>
FIDELITY FIDELITY
VIP FIDELITY FIDELITY VIP III KEMPER
DREYFUS EQUITY VIP VIP GROWTH SMALL CAP
SMALL CAP INCOME GROWTH OVERSEAS OPPORTUNITIES GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Unit Transactions:
Accumulation units $125,342 $ 363,261 $ 424,157 $ 132,461 $642,359 $45,784
Accumulated net investment
income (96) (209) (347) (88) (370) (23)
Accumulated net realized
gain (loss) on
investments -- 2 6 -- 3 --
- ---------------------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON
INVESTMENTS 10,278 14,833 27,814 3,051 23,185 3,603
- --------------------------- ---------- --------- --------- --------- -------------- ----------
$135,524 $ 377,887 $ 451,630 $ 135,424 $665,177 $49,364
---------- --------- --------- --------- -------------- ----------
---------- --------- --------- --------- -------------- ----------
</TABLE>
N-10
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
LIBERTY DELAWARE DELAWARE DELAWARE
COLONIAL PREMIUM DELAWARE DELAWARE PREMIUM PREMIUM DELAWARE
NEWPORT DECATUR PREMIUM PREMIUM EMERGING INTERNATIONAL PREMIUM
TIGER TOTAL RETURN DELCHESTER DEVON MARKETS EQUITY REAL ESTATE
FUND SERIES SERIES SERIES SERIES SERIES SERIES
<S> <C> <C> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Unit Transactions:
Accumulation units $ 17,001 $227,487 $ 414,557 $ 437,808 $14,632 $18,130 $ 94,050
Accumulated net investment
income 304 (129) 2,426 (331) (10) (7) (76)
Accumulated net realized
gain (loss) on
investments -- 1 (1) -- -- -- --
- ---------------------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON
INVESTMENTS (512) 3,753 (3,741) 18,543 80 102 1,802
- --------------------------- --------- ------------- ---------- ---------- --------- ------- ------------
$ 16,793 $231,112 $ 413,241 $ 456,020 $14,702 $18,225 $ 95,776
--------- ------------- ---------- ---------- --------- ------- ------------
--------- ------------- ---------- ---------- --------- ------- ------------
<CAPTION>
DELAWARE DELAWARE
PREMIUM PREMIUM DELAWARE
SMALL CAP SOCIAL PREMIUM
VALUE AWARENESS TREND
SERIES SERIES SERIES
<S> <C> <C> <C>
- ---------------------------
Unit Transactions:
Accumulation units $169,957 $549,127 $ 69,109
Accumulated net investment
income (150) (288) (43)
Accumulated net realized
gain (loss) on
investments 1 1 --
- ---------------------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON
INVESTMENTS 9,528 33,401 4,330
- --------------------------- ---------- ---------- ---------
$179,336 $582,241 $ 73,396
---------- ---------- ---------
---------- ---------- ---------
</TABLE>
<TABLE>
<CAPTION>
LINCOLN OCC
KEMPER NATIONAL LINCOLN MFS MFS ACCUMULATION
GOVERNMENT MONEY NATIONAL EMERGING TOTAL MFS MFS GLOBAL
SECURITIES MARKET BOND GROWTH RETURN UTILITIES RESEARCH EQUITY
PORTFOLIO FUND FUND SERIES SERIES SERIES SERIES PORTFOLIO
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Unit Transactions:
Accumulation units $ 772,499 $ 3,485,826 $ 465,808 $ 58,984 $ 506,443 $ 672,685 $ 82,339 $110,158
Accumulated net investment
income (365) 5,451 (229) (44) (270) (290) (62) 5,503
Accumulated net realized
gain (loss) on
investments -- -- -- 1 2 26 1 1
- ---------------------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON
INVESTMENTS 1,207 -- 157 5,891 9,731 15,394 5,147 (1,722)
- --------------------------- ----------- ----------- --------- --------- --------- --------- -------- -------------
$ 773,341 $ 3,491,277 $ 465,736 $ 64,832 $ 515,906 $ 687,815 $ 87,425 $113,940
----------- ----------- --------- --------- --------- --------- -------- -------------
----------- ----------- --------- --------- --------- --------- -------- -------------
<CAPTION>
OCC
ACCUMULATION
MANAGED
PORTFOLIO
<S> <C>
- ---------------------------
Unit Transactions:
Accumulation units $38,225
Accumulated net investment
income (41)
Accumulated net realized
gain (loss) on
investments --
- ---------------------------
NET UNREALIZED APPRECIATION
(DEPRECIATION) ON
INVESTMENTS 237
- --------------------------- -------------
$38,421
-------------
-------------
</TABLE>
N-11
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. PURCHASES AND SALES OF INVESTMENTS
The aggregate cost of investments purchased and the
aggregate proceeds from investments sold were as follows for
1998.
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
COST OF PROCEEDS
PURCHASES FROM SALES
------------------------
<S> <C> <C>
AIM V.I. Growth Fund $ 269,756 $ 59
--------------------------------------------------------------------------
AIM V.I. International Equity Fund 74,456 21
--------------------------------------------------------------------------
AIM V.I. Value Fund 394,084 85
--------------------------------------------------------------------------
Banker's Trust Equity 500 Index Fund 916,927 80
--------------------------------------------------------------------------
Liberty Colonial US Stock Fund 18,880 10
--------------------------------------------------------------------------
Liberty Colonial Newport Tiger Fund 17,314 9
--------------------------------------------------------------------------
Delaware Premium Decatur Total Return Series 227,427 60
--------------------------------------------------------------------------
Delaware Premium Delchester Series 416,262 282
--------------------------------------------------------------------------
Delaware Premium Devon Series 437,565 71
--------------------------------------------------------------------------
Delaware Premium Emerging Market Series 14,631 9
--------------------------------------------------------------------------
Delaware Premium International Equity Series 18,130 6
--------------------------------------------------------------------------
Delaware Premium Real Estate Series 94,027 49
--------------------------------------------------------------------------
Delaware Premium Small Cap Value Series 169,894 80
--------------------------------------------------------------------------
Delaware Premium Social Awareness Series 548,897 37
--------------------------------------------------------------------------
Delaware Premium Trend Series 69,089 20
--------------------------------------------------------------------------
Dreyfus Small Cap Portfolio 125,290 39
--------------------------------------------------------------------------
Fidelity VIP Equity Income Portfolio 363,136 69
--------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 424,059 232
--------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 132,431 53
--------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 642,170 158
--------------------------------------------------------------------------
Kemper Small Cap Growth Portfolio 45,774 12
--------------------------------------------------------------------------
Kemper Government Securities Portfolio 772,417 253
--------------------------------------------------------------------------
Lincoln National Money Market Fund 3,491,408 --
--------------------------------------------------------------------------
Lincoln National Bond Fund 465,639 42
--------------------------------------------------------------------------
MFS Emerging Growth Series 58,963 20
--------------------------------------------------------------------------
MFS Total Return Series 506,327 134
--------------------------------------------------------------------------
MFS Utilities Series 673,368 948
--------------------------------------------------------------------------
MFS Research Series 82,326 46
--------------------------------------------------------------------------
OCC Accumulation Global Equity Portfolio 115,717 51
--------------------------------------------------------------------------
OCC Accumulation Managed Portfolio 38,217 32
--------------------------------------------------------------------------
----------- -----------
$11,624,581 $ 2,967
----------- -----------
----------- -----------
</TABLE>
N-12
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
5. INVESTMENTS
The following is a summary of investments owned at December
31, 1998.
<TABLE>
<CAPTION>
SHARES NET ASSET VALUE OF COST OF
OUTSTANDING VALUE SHARES SHARES
------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund 11,217 $ 24.80 $ 278,180 $ 269,697
----------------------------------------------
AIM V.I. International Equity Fund 3,912 19.62 76,763 74,435
----------------------------------------------
AIM V.I. Value Fund 15,420 26.25 404,765 394,000
----------------------------------------------
Banker's Trust Equity 500 Index Fund 74,279 12.73 945,573 916,848
----------------------------------------------
Liberty Colonial US Stock Fund 1,018 18.79 19,120 18,870
----------------------------------------------
Liberty Colonial Newport Tiger Fund 10,696 1.57 16,793 17,305
----------------------------------------------
Delaware Premium Decatur Total Return Series 11,901 19.42 231,121 227,368
----------------------------------------------
Delaware Premium Delchester Series 48,728 8.46 412,238 415,979
----------------------------------------------
Delaware Premium Devon Series 29,536 15.44 456,037 437,494
----------------------------------------------
Delaware Premium Emerging Market Series 2,531 5.81 14,702 14,622
----------------------------------------------
Delaware Premium International Equity Series 1,106 16.48 18,226 18,124
----------------------------------------------
Delaware Premium Real Estate Series 10,525 9.10 95,780 93,978
----------------------------------------------
Delaware Premium Small Cap Value Series 10,902 16.45 179,343 169,815
----------------------------------------------
Delaware Premium Social Awareness Series 40,018 14.55 582,262 548,861
----------------------------------------------
Delaware Premium Trend Series 3,716 19.75 73,399 69,069
----------------------------------------------
Dreyfus Small Cap Portfolio 2,514 53.91 135,529 125,251
----------------------------------------------
Fidelity VIP Equity Income Portfolio 14,866 25.42 377,902 363,069
----------------------------------------------
Fidelity VIP Growth Portfolio 10,066 44.87 451,647 423,833
----------------------------------------------
Fidelity VIP Overseas Portfolio 6,755 20.05 135,429 132,378
----------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 29,073 22.88 665,200 642,015
----------------------------------------------
Kemper Small Cap Growth Portfolio 25,030 1.97 49,365 45,762
----------------------------------------------
Kemper Government Securities Portfolio 640,128 1.21 773,371 772,164
----------------------------------------------
Lincoln National Money Market Fund 349,141 10.00 3,491,408 3,491,408
----------------------------------------------
Lincoln National Bond Fund 36,705 12.69 465,754 465,597
----------------------------------------------
MFS Emerging Growth Series 3,020 21.47 64,835 58,944
----------------------------------------------
MFS Total Return Series 28,473 18.12 515,926 506,195
----------------------------------------------
MFS Utilities Series 34,704 19.82 687,840 672,446
----------------------------------------------
MFS Research Series 4,589 19.05 87,428 82,281
----------------------------------------------
OCC Accumulation Global Equity Portfolio 7,385 15.43 113,945 115,667
----------------------------------------------
OCC Accumulation Managed Portfolio 878 43.74 38,422 38,185
---------------------------------------------- ----------- -----------
$11,858,303 $11,621,660
----------- -----------
----------- -----------
</TABLE>
N-13
<PAGE>
REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS
Board of Directors of
The Lincoln National Life Insurance Company
and
Contract Owners of Lincoln Life Variable Annuity Account N
We have audited the accompanying statement of assets and
liability of Lincoln Life Variable Annuity Account N ("Variable
Account") (comprised of the AIM V.I. Growth, AIM V.I.
International Equity, AIM V.I. Value, Banker's Trust Equity 500
Index, Liberty Colonial U.S. Stock, Liberty Newport Tiger,
Delaware Premium Decatur Total Return, Delaware Premium
Delchester, Delaware Premium Devon, Delaware Premium Emerging
Markets, Delaware Premium International Equity, Delaware Premium
Real Estate, Delaware Premium Small Cap Value, Delaware Premium
Social Awareness, Delaware Premium Trend, Dreyfus Small Cap,
Fidelity VIP Equity-Income, Fidelity VIP Growth, Fidelity VIP
Overseas, Fidelity VIP III Growth Opportunities, Kemper Small
Cap Growth, Kemper Government Securities, Lincoln National Money
Market, Lincoln National Bond, MFS Emerging Growth, MFS Total
Return, MFS Utilities, MFS Research, OCC Accumulation Global
Equity, and OCC Accumulation Managed subaccounts) as of December
31, 1998, and the related statements of operations and changes
in net assets for the period from November 24, 1998
(commencement of operations) to December 31, 1998. These
financial statements are the responsibility of the Variable
Account's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our
procedures included confirmation of investments owned as of
December 31, 1998, by correspondence with the custodian. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of each of the respective subaccounts constituting the Lincoln
Life Variable Annuity Account N at December 31, 1998, the
results of their operations and the changes in their net assets
for the period from November 24, 1998 to December 31, 1998, in
conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Fort Wayne, Indiana
March 30, 1999
N-14
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) List of Financial Statements
1. Part A The Table of Condensed Financial Information is included in
Part A of this Registration Statement.
2. Part B The following Financial Statements for the Variable Account are
included in Part B of this Registration Statement.
Statement of Assets and Liability -- December 31, 1998
Statement of Operations -- Year ended December 31, 1998
Statements of Changes in Net Assets -- Year ended December 31, 1998
Notes to Financial Statements --
Report of Ernst & Young LLP, Independent Auditors
Part B The following statutory-basis financial statements of The
Lincoln National Life Insurance Company are included in the SAI:
Balance Sheets -- Statutory Basis -- December 31, 1998, 1997 and 1996
Statements of Operations -- Statutory Basis -- Years ended December 31,
1998, 1997, and 1996
Statements of Changes in Capital and Surplus -- Statutory Basis -- Years
ended December 31, 1998, 1997, and 1996
Statements of Cash Flows -- Statutory Basis -- Years ended December 31,
1998, 1997 and 1996.
Notes to Financial Statements.
Report of Ernst & Young LLP, Independent Auditors
(b) Exhibits
(1)
Resolution of Board of Directors and Memorandum from the President Of The
Lincoln National Life Insurance Company authorizing establishment of the
Variable Account are incorporated herein by reference to Registration
Statement on Form N-4 (333-40937) filed on November 24, 1997.
(2)
Not Applicable.
(3)
(a) Selling Agreement
(b) Wholesale Agreement
(c) Amendment to Selling Group
(4)
The Lincoln National Life Insurance Company Variable Annuity Contract is
incorporated herein by reference to Pre-Effective Amendment No. 1 to the
Registration Statement on Form N-4 (333-40937) filed on September 3,
1998.
(a) Settlement Contract Rider
(b) Form of Income Contract Rider is incorporated herein by reference to
Pre-Effective Amendment No. 1 to the Registration Statement on Form
N-4 (333-40937) filed on September 3, 1998.
(c) Nursing Care Waiver of Surrender/Withdrawal Charges Rider
(d) Section 403(b) Annuity Endorsement
(e) Section 457 Government Deferred Compensation Plan Endorsement
(f) IRA Contract Amendment
(g) Roth IRA Endorsement
(h) Contract Amendment
(5)
Application for the Contract is incorporated herein by reference
to Registration Statement on Form N-4 (333-40937) filed on November 24,
1997.
(6)
(a) Articles of Incorporation of The Lincoln National Life Insurance
Company are incorporated herein by reference to Registration
Statement on Form N-4 (33-27783) filed on December 5, 1996.
(b) By-Laws of The Lincoln National Life Insurance Company are
incorporated herein by reference to Post-Effective Amendment No. 1
to Registration Statement on Form N-4 (333-40937) Filed on
November 9, 1998.
(7)
Not Applicable.
(8)
(a) Fund Participation Agreements
Agreements between The Lincoln National Life Insurance Company and:
(i) AIM Variable Insurance Funds, Inc.
(a) Amendment to AIM FPA.
(b) Exhibit to AIM FPA.
(ii)BT Insurance Funds Trust
(a) Amendment to BT FPA.
C-1
<PAGE>
(iii)
Delaware Group Premium Fund, Inc. is incorporated herein by reference
to Registration Statement on Form N-4 (File No. 33-25990) filed on
April 22, 1998.
(iv)Dreyfus Variable Investment Fund is incorporated herein by reference
to Registration Statement on Form N-4 (333-05815) filed on September
26, 1996.
(v) Form of Agreement Investors Fund Series is incorporated herein by
reference to Registration Statement on Form N-4 (333-40937) filed
November 9, 1998.
(vi)Liberty Variable Investment Trust
(vii)
Lincoln National Bond Fund, Inc.
(a) Amendment to Bond FPA.
(viii)
Lincoln National Money Market Fund, Inc.
(a) Amendment to MM FPA.
(ix)Variable Insurance Products Fund is incorporated herein by reference
to Registration Statement on Form N-4 (File No. 333-04999) filed on
September 26, 1996.
(x) Variable Insurance Products Fund III
(xi)MFS-Registered Trademark- Variable Insurance Trust
(xii)
OCC Accumulation Trust
(a) Amendment to OCC FPA.
(b) Service agreement between Delaware Management Holdings, Inc.,
Delaware Services Company, Inc. and Lincoln National Life Insurance
Company is incorporated herein by reference to the registration
statement of Lincoln National Flexible Premium Variable Life Account
F, Form S-6 (333-40745) filed November 21, 1997.
(9)
Opinion and Consent of Jeremy Sachs, Senior Counsel of The Lincoln
National Life Insurance Company are incorporated herein by reference to
Pre-Effective Amendment No. 1 to the Registration Statement on Form N-4
(333-40937) filed on September 3, 1998.
(10)
Consent of Ernst & Young LLP, Independent Auditors.
(11)
Not Applicable.
(12)
Not Applicable.
(13)
Schedule for Computation of Performance Results are incorporated herein
by reference to Pre-Effective Amendment No. 1 to the Registration
Statement on Form N-4 (333-40937) filed on September 3, 1998.
(14)
Not Applicable.
(15)
(a) Organizational Chart of The Lincoln National Insurance Holding
Company System.
(b) Books and Records Report.
(16)
(a) Power of Attorney - Gabriel L. Shaheen
(16)
(b) Power of Attorney - Lawrence T. Rowland
(16)
(c) Power of Attorney - Keith J. Ryan
(16)
(d) Power of Attorney - H. Thomas McMeekin
(16)
(e) Power of Attorney - Richard C. Vaughn
(16)
(f) Power of Attorney - Jon A. Boscia
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME POSITIONS AND OFFICES WITH DEPOSITOR
- ------------------------------ ---------------------------------------------
Gabriel L. Shaheen* President, Chief Executive Officer and
Director
Jon A. Boscia** Director
John H. Gotta**** Senior Vice President
Stephen H. Lewis* Senior Vice President
C-2
<PAGE>
<TABLE>
<S> <C>
H. Thomas McMeekin** Director
Cynthia A. Rose** Secretary and Assistant Vice President
Lawrence T. Rowland*** Executive Vice President and Director
Keith J. Ryan* Senior Vice President, Chief Financial
Officer and Assistant Treasurer
Eldon J. Summers** Assistant Vice President and Treasurer
Richard C. Vaughan** Director
Roy V. Washington***** Vice President and Chief Compliance Officer
</TABLE>
* Principal business address is 1300 South Clinton Street, Fort
Wayne, Indiana 46802-3506.
** Principal business address is 200 East Berry Street, Fort Wayne,
Indiana 46802-2706.
*** Principal business address is 1700 Magnovox Way, One Reinsurance
Place, Fort Wayne, Indiana 46804-1538.
**** Principal business address is 350 Church Street, Hartford, CT
06103.
***** Principal business address is 915 S. Clinton Street, Fort Wayne,
IN 46802.
ITEM 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT
See Exhibit 15(a): Organizational Chart of The Lincoln National Life
Insurance Holding Company System.
ITEM 27. NUMBER OF PURCHASERS
As of March 31, 1999 there were 1,045 contract owners under Lincoln Life
Variable Annuity Account N.
ITEM 28. INDEMNIFICATION
(a) Brief description of indemnification provisions.
In general, Article VII of the By-Laws of The Lincoln National Life
Insurance Company (LNL) provides that LNL will indemnify certain persons
against expenses, judgments and certain other specified costs incurred by
any such person if he/she is made a party or is threatened to be made a
party to a suit or proceeding because he/she was a director, officer, or
employee of LNL, as long as he/she acted in good faith and in a manner he/
she reasonably believed to be in the best interests of, or not opposed to
the best interests of, LNL. Certain additional conditions apply to
indemnification in criminal proceedings.
In particular, separate conditions govern indemnification of directors,
officers, and employees of LNL in connection with suits by, or in the right
of, LNL.
Please refer to Article VII of the By-Laws of LNL (Exhibit No. 6(b) hereto)
for the full text of the indemnification provisions. Indemnification is
permitted by, and is subject to the requirements of, Indiana law.
(b) Undertaking pursuant to Rule 484 of Regulation C under the Securities Act of
1933.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the provisions described in Item 28(a) above 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 Act 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 such 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 Act and will be governed by the
final adjudication of such issue.
C-3
<PAGE>
ITEM 29. PRINCIPAL UNDERWRITER
(a) Lincoln National Variable Annuity Fund A (Group); Lincoln National Variable
Annuity Fund A (Individual); Lincoln National Variable Annuity Account C;
Lincoln National Flexible Premium Variable Life Account D; Lincoln National
Flexible Premium Variable Life Account F; Lincoln Life Flexible Premium
Variable Life Account J; Lincoln Life Flexible Premium Variable Life Account
K; Lincoln National Variable Annuity Account L; Lincoln Life Flexible
Premium Variable Life Account M; Lincoln Life Flexible Premium Variable Life
Account R; Lincoln Life Variable Annuity Account Q; Lincoln National
Variable Annuity Account 53.
(b) See Item 25.
(c) Commissions and other compensations received by The Lincoln National Life
Insurance Company from Lincoln Life Variable Annuity Account N during the
fiscal year which ended December 31, 1998.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Net Underwriting
Name of Principal Discounts and Compensation Brokerage
Underwriter Commissions on Redemption Commissions Compensation
- ----------------- ---------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
The Lincoln National
Life Insurance Company None $7,306 None 0
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
See Exhibit 15(b): Books and Records Report.
ITEM 31. MANAGEMENT SERVICES
Not applicable.
ITEM 32. UNDERTAKINGS
(a) Registrant undertakes that it will file a post effective amendment to this
Registration Statement under the Securities Act of 1933 as frequently as
necessary to ensure that the audited financial statements in the
Registration Statement are never more than 16 months old for so long as
Payments under the variable annuity contracts may be accepted.
(b) Registrant undertakes that it will include either (i) a postcard or similar
written communication affixed to or included in the Prospectus that the
applicant can remove to send for a Statement of Additional Information or
(ii) a space in the Contract application or order to purchase that an
applicant can check to request a Statement of Additional Information.
(c) Registrant undertakes to deliver promptly, upon written or oral request made
to The Lincoln National Life Insurance Company at the address or phone
number listed in the Prospectus, any Statement of Additional Information and
any financial statements required by Form N-4 to be made available to
applicants or owners.
(d) The Lincoln National Life Insurance Company hereby represents that the fees
and charges deducted under the Contracts, in the aggregate, are reasonable
in relation to the services rendered, the expenses expected to be incurred,
and the risks assumed by The Lincoln National Life Insurance Company.
(e) Registrant represents that it is relying on the American Council of Life
Insurance (avail. Nov. 28, 1988) no-action letter with respect to Contracts
used in connection with retirement plans meeting the requirements of Section
403(b) of the Internal Revenue Code, and represents further that it will
comply with the provisions of paragraphs (1) through (4) set forth in that
no-action letter.
(f) For Contracts sold in connection with the Texas Optional Retirement Program,
Registrant is relying on Rule 6c-7 and represents that paragraphs (a)
through (d) of that rule have been complied with.
C-4
<PAGE>
SIGNATURES
(a) As required by the Securities Act of 1933 and the Investment Company Act
of 1940, the Registrant certifies that it meets the requirements of Securities
Act Rule 485(b) for effectiveness of this Amendment and has caused the Amendment
to the Registration Statement to be signed on its behalf, in the City of Fort
Wayne, and State of Indiana on the 20th day of April, 1999.
LINCOLN LIFE VARIABLE ANNUITY
ACCOUNT N (Delaware-Lincoln ChoicePlus)
(Registrant)
By: /s/ STEPHEN H. LEWIS
-----------------------------------
Stephen H. Lewis
(SIGNATURE-OFFICER OF DEPOSITOR)
SENIOR VICE PRESIDENT, LNL
(TITLE)
By: THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
(Depositor)
By: /s/ KELLY D. CLEVENGER
-----------------------------------
Kelly D. Clevenger
VICE PRESIDENT, LNL
(TITLE)
<PAGE>
(b) As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed for the Depositor by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- -------------------------------------- --------------------
<C> <S> <C>
* Chief Executive Officer, President and April 20, 1999
------------------------------------ Director (Principal Executive
Gabriel L. Shaheen Officer)
*
------------------------------------
Lawrence T. Rowland Executive Vice President and Director April 20, 1999
Senior Vice President, Chief Financial April 20, 1999
* Officer and Assistant Treasurer
------------------------------------ (Principal Accounting Officer and
Keith J. Ryan Principal Financial Officer)
*
------------------------------------
H. Thomas McMeekin Director April 20, 1999
*
------------------------------------
Richard C. Vaughan Director April 20, 1999
*
------------------------------------
Jon A. Boscia Director April 20, 1999
</TABLE>
By: /s/ STEVEN M. KLUEVER Pursuant to a Power of Attorney
------------------------------------ filed with Registration
Steven M. Kluever Statement No. 2
<PAGE>
SELLING GROUP AGREEMENT
FOR LINCOLN FINANCIAL ADVISORS
Effective July 1, 1997 this Agreement is made between Lincoln Financial
Advisors [hereinafter called the "Broker"] and The Lincoln National Life
Insurance Company, located at 1300 South Clinton Street, Fort Wayne, Indiana
46802, an Indiana corporation [hereinafter called the "Company"].
In consideration of the mutual promises contained herein, the parties
hereto agree as follows:
A. Definitions
(1) Contract--variable annuity, and variable universal life insurance
contracts described in Schedule A attached hereto and issued by
the Company and for which the Company acts as the principal
underwriter. From time to time Schedule A may be amended. Such
amendments will be effective upon written notification to the
Broker that a new or amended Schedule A has been issued.
(2) Account--segregated investment accounts in which the Company sets
aside and invests the assets to fund the benefits under the
Contracts.
(3) Funds--Any of the mutual funds in which net purchase payments are
invested at net asset value pursuant to the directions of the
Contract owner.
(4) Registration Statement--the Registration Statements and
amendments thereto on file with the SEC relating to the
Contracts, the Account, and the Funds, including financial
statements and all exhibits, as applicable.
(5) Prospectus--the prospectus included within the Registration
Statements referred to herein.
(6) 1933 Act--the Securities Act of 1933, as amended.
(7) 1934 Act--the Securities and Exchange Act of 1934, as amended.
(8) 1940 Act--the Investment Company Act of 1940, as amended.
(9) SEC--the Securities and Exchange Commission.
<PAGE>
B. Agreements of Company
(1) Company hereby authorizes Broker during the term of this
Agreement to solicit applications for Contracts from eligible
persons, provided that there is an effective Registration
Statement relating to such Contracts and provided further that
Broker has been notified by Company that the contracts are
qualified for sale under all applicable securities and insurance
laws of the state or jurisdiction in all applicable
jurisdictions. In connection with the solicitation of
applications for Contracts, Broker is hereby authorized to offer
riders that are available with the Contracts in accordance with
instructions furnished by Company.
(2) Company, during the terms of this Agreement, will notify Broker
of the issuance by the SEC of any stop order with respect to the
Registration Statement or any amendments thereto or the
initiation of any proceedings for that purpose or for any other
purpose relating to the Registration and/or offering of the
Contracts and of any other action or circumstance that may
prevent the lawful sale of the Contracts in any state or
jurisdiction.
(3) During the term of this Agreement, Company shall advise Broker of
any amendment to the Registration Statement or any amendment or
supplement to any Prospectus.
C. Agreements of Broker
(1) Broker represents that it is a properly registered and licensed
broker or dealer under federal and state securities laws and
regulations and a member in good standing of the National
Association of Securities Dealers, Inc. [hereinafter "NASD"] and
agrees to notify Company immediately if Broker ceases to be so
registered or licensed or a member in good standing of the NASD.
Further, Broker represents that each of its agents licensed to
sell contracts [each respectively referred to hereinafter as "the
Agent"] will be soliciting applications for Contracts under this
Agreement. Broker represents that the Agent is a
fully-registered representative of the Broker and moreover that
the Agent is a registered representative in good standing with
the NASD, with accreditation to sell the Contracts as required by
the NASD.
(2) Commencing at such time as Company and Broker shall agree upon,
Broker agrees to use its best efforts to find purchasers for the
Contracts acceptable to the Company. In meeting its obligation
to use its best efforts to solicit applications for Contracts,
Broker shall, during the term of this Agreement, engage in the
following activities:
<PAGE>
(a) Continuously utilize training, sales, and only such
promotional materials which have been approved by Company
for those Contracts defined in this Agreement.
(b) Abide by all rules and regulations of the NASD, including
its Conduct Rules (which shall control and override any
provision to the contrary in this Agreement), and company
with all applicable federal and state laws, rules and
regulations. Broker is responsible for supervision of Agent
and other associated persons which will enable Broker to
assure that Agent and associated persons are in compliance
with applicable securities laws, rules, regulations and
statements of policy promulgated thereunder.
(c) After reasonable inquiry of each applicant, Broker shall
take reasonable steps to ensure that the Agent shall not
make recommendations to an applicant to purchase a Contract
in the absence of reasonable grounds to believe that the
purchase of the Contract is suitable for such applicant.
(3) All payments for Contracts collected by the Agent shall be held
at all times in a fiduciary capacity and shall be remitted
promptly, in full, together with such applications, forms, and
other required documentation to the designated office of the
Company. Checks or money orders in payment of initial premiums
shall be drawn to the order of The Lincoln National Life
Insurance Company. Broker acknowledges that the Company retains
the ultimate right to control the sale of the Contracts and that
the Company shall have the unconditional right to reject, in
whole or in part, any application for the Contract. In the event
Company rejects an application, Company will immediately return
all payments directly to the purchaser, and the Broker will be
notified of such action. In the event that any purchaser of a
Contract elects to return such Contract, as allowed by the
applicable state law, federal law or NASD Conduct Rules, the
purchaser will receive a refund in accordance with the provisions
of the applicable law or rule.
(4) Broker shall return any related sales commission to the Company,
if a Contract is tendered for redemption within seven business
days after acceptance of the Contract application.
(5) Broker shall act as an independent contractor, and nothing
contained herein shall make Broker or any one of its employees,
or the Agent, an employee of Company in connection with the
solicitation of, or applications for, Contracts. The Broker, the
Agent, and the employees of either the Broker or Agent shall not
hold themselves out to be employees of Company in this connection
or in any dealings with the public.
<PAGE>
(6) Broker agrees that any material it develops, approves or uses for
sales, training, explanatory or other purposes including
illustrations in connection with the solicitation of applications
for Contracts hereunder (other than generic advertising materials
which do not make specific reference to the Contracts) will not
be used without the prior written consent of Company and, where
appropriate, the endorsement of Company.
(7) Solicitation and other activities by Broker shall be undertaken
only in accordance with applicable laws and regulations. The
Agent shall not solicit applications for the Contracts until duly
licensed and appointed by the Company as a life insurance and
variable contract broker or agent of Company in the appropriate
states or other jurisdictions. Broker shall ensure that the
Agent fulfills any training requirements necessary to be licensed
to sell such products. Broker understands and acknowledges that
neither it nor the Agent is authorized by Company to give any
information or make any representation in connection with this
Agreement or the offering of the Contracts other than those
contained in the Prospectus or other solicitation material
authorized in writing by Company.
(8) Broker shall not have authority on behalf of Company to make,
alter, or discharge any Contract or other form; waive any
forfeiture; extend the time of paying any premium; or receive any
monies or premiums due, or to become due, to Company, except as
set forth in Section C(3) of this Agreement. Broker shall not
expend, nor contract for the expenditure of the funds of Company,
nor shall Broker possess or exercise any authority on behalf of
the Company under this Agreement.
(9) Broker shall have the responsibility for maintaining the records
of the Agent. Broker shall maintain such other records as are
required of it by applicable laws and regulations. The books,
accounts and records of Company, the Account and Broker relating
to the sale of the Contract shall be maintained so as to clearly
and accurately disclose the nature and details of the
transactions. All records maintained by the Broker in connection
with this Agreement shall be the property of the Company and
shall be returned to the Company upon termination of this
Agreement, free from any claims or retention of rights by the
Broker. Nothing in this Section C(9) shall be interpreted to
prevent the Broker from retaining copies of any such records
which the Broker, in its discretion, deems necessary or desirable
to keep. The Broker shall keep confidential any information
obtained pursuant to this Agreement, and shall disclose such
information, only if the Company has authorized such disclosure,
or if such disclosure is expressed or required by an applicable
federal or state regulatory authority.
<PAGE>
D. Compensation
(1) Company shall arrange for the payment of commissions to the Agent
as compensation for the sale of each Contract sold by the Agent.
Compensation shall be paid according to the terms of Section B of
the Broker and Agent Contracts entered into between the Company
and the Broker, and the Company and the Agent. No compensation
is payable unless the Broker and the Agent have first complied
with all applicable insurance laws, rules, and regulations.
Company shall identify to the Broker, with each such payment, the
name of the Agent as the one who solicited each Contract covered
by the payment.
(2) Neither Broker nor the Agent shall have any right to withhold or
deduct any part of any premium it shall receive for the purposes
of the payment of commission or otherwise.
(3) Upon termination of this Agreement, the Company will pay
commissions to the Agent only to the extent provided in Section B
of the Agent's Contract entered into between the Company and the
Agent. Furthermore, in the event of termination, Company will
pay commissions to the Broker only to the extent provided in
Section B of the Broker's contract entered into between the
Company and the Agent.
(4) No commissions will be paid for the sale of Contracts not listed
in Schedule A.
(5) No commissions will be paid for the sale of Contracts in
jurisdictions in which the Broker and/or its Agents are not duly
licensed.
E. Complaints and Investigations
(1) Broker and Company jointly agree to cooperate fully in any
insurance regulatory investigation or proceeding or judicial
proceeding arising in connection with the contracts marketed
under this Agreement. Broker and Company further agree to
cooperate fully in any securities regulatory investigation or
proceeding or judicial proceeding with respect to Broker,
Company, their affiliates and the Agent to the extent that such
investigation or proceeding is in connection with Contracts
marketed under this Agreement. Broker and Company shall furnish
applicable federal and state regulatory authorities with any
information or reports in connection with their services under
this Agreement which such authorities may request in order to
ascertain whether the Company's or Broker's operations are
<PAGE>
being conducted in a manner consistent with any applicable law or
regulation.
(2) Broker warrants and represents that as of the date of execution
of this Agreement, it has no knowledge of any pending or
threatened complaint or investigation instituted against any of
its Agents relating to the sale of any Contracts listed in
Schedule A.
F. Termination of Agreement
(1) This Agreement shall continue in force unless terminated by
either party pursuant to Section A of the Broker Contract entered
into between the Company and Broker.
(2) Upon termination of this Agreement, all authorizations, rights
and obligations themselves shall cease except (a) the agreements
contained in Section E hereof; and (b) the indemnity agreement
set forth in Section G hereof.
G. Indemnity
(1) Broker shall be held to the exercise of reasonable care in
carrying out the provisions of this Agreement.
(2) Company agrees to indemnify and hold harmless Broker and each
officer or director of Broker against any losses, claims, damages
or liabilities, joint or several, to which Broker or such officer
or director becomes subject, under the 1933 Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of, or are based upon, any
untrue statement or alleged untrue statement of a material fact,
required to be stated therein or necessary to make these
statements therein not misleading, contained in any Registration
Statement or any post-effective amendment thereof or in the
Prospectus, or any sales literature provided by the Company.
(3) Broker agrees to indemnify and hold harmless Company and each of
its current and former directors and officers and each person, if
any, who controls or has controlled the Company within the
meaning of the 1933 Act of the 1934 Act, against any losses,
claims, damages or liabilities to which Company and any such
director or officer or controlling person may become subject,
under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect there) arise out
of, or are based upon:
(a) Any unauthorized use of sales materials or any verbal or
written misrepresentations or any unlawful sales practices
concerning the Contracts by Broker, its agents and its
employees; or
<PAGE>
(b) Claims by the Agent, Broker or their employees for
commissions, service fees, development allowances or other
compensation or remuneration of any type; or
(c) The failure of Broker, its officers, employees, or the Agent
to comply with the provisions of this Agreement; or
(d) The fraudulent, malicious, intentional, reckless, knowing or
negligent acts or omissions of Broker's employees, officers,
agents or sales persons;
and Broker will reimburse Company and any director or officer or
controlling person of either for any legal or other expenses
reasonably incurred by Company, or such director, officer of
controlling person in connection with investigating or defending
any such loss, claim, damage, liability, or action. This
indemnity agreement will be in addition to any liability which
Broker may otherwise have.
H. Assignability
(1) This Agreement shall not be assigned by either party without the
written consent of the other.
I. Governing Law
(1) This Agreement shall be governed by and construed in accordance
with the laws of the State of Indiana.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed this 26th day of June, 1997.
The Lincoln National Life Insurance Company Lincoln Financial Advisors, Inc.
[COMPANY] [BROKER]
By: /s/ Kelly D. Clevenger By: /s/ Richard C. Boyles
----------------------------------- ----------------------------
Its: Vice President Its: Chief Financial Officer
---------------------------------- -----------------------------
<PAGE>
Schedule A
to the
Selling Group Agreement
Between
The Company and The Broker
The following is a list of Contracts that Broker has been granted authority
by the Company to sell:
1. Lincoln National Life Insurance Company
Multi Fund-Registered Trademark- Variable Annuity Contracts
2. Lincoln National Life Insurance Company
Variable Universal Life III Contracts
<PAGE>
WHOLESALING AGREEMENT
AGREEMENT dated as of November 20, 1998, by and between THE LINCOLN NATIONAL
LIFE INSURANCE COMPANY ("LINCOLN"), an Indiana insurance corporation, in its
capacity as principal underwriter for one or more of its insurance and/or
annuity separate accounts, and DELAWARE DISTRIBUTORS, L.P., a Delaware limited
partnership (hereinafter referred to as "DELAWARE").
WITNESSETH:
WHEREAS, LINCOLN issues and sells certain variable annuity and variable life
insurance contracts acting as its own principal underwriter for such contracts;
and
WHEREAS, LINCOLN and DELAWARE desire to establish an arrangement whereby
DELAWARE will act as a wholesaler for such variable annuity contracts and
variable life insurance contracts and, as such, will recruit business firms to
distribute such contracts;
NOW, THEREFORE, in consideration of their mutual promises, LINCOLN, and DELAWARE
hereby agree as follows:
1. DEFINITIONS
1. 1933 ACT -- The Securities Act of 1933, as amended.
2. 1934 ACT -- The Securities Exchange Act of 1934, as amended.
3. 1940 ACT -- The Investment Company Act of 1940, as amended.
4. ACCOUNT -- Each and any separate account established by LINCOLN and
listed on Schedule 1.d to this Agreement, as amended from time to time
in accordance with Section 2.e of this Agreement. The phrase "Account
supporting the Contracts" or "Account supporting a class of Contracts"
shall mean the separate account identified in such Contracts as the
separate account to which the Purchase Payments made under such
Contracts are allocated and as to which income, gains and losses,
whether or not realized, from assets allocated to such separate
account, are, in accordance with such Contracts, credited to or
charged against such separate account without regard to other income,
gains, or losses of LINCOLN or any other separate account established
by LINCOLN.
5. ASSOCIATED PERSON -- This term as used in this Agreement shall have
the meaning assigned to it in the 1934 Act.
6. BROKER -- An entity registered as a broker-dealer and licensed as a
life insurance agent or associated with an entity so licensed in
accordance with any applicable SEC no-action letter, and recruited by
DELAWARE and subsequently authorized by LINCOLN to distribute the
Contracts pursuant to a sales agreement with LINCOLN entered into in
accordance with Section 3 of this Agreement.
1.
7. CONTRACTS -- The variable annuity contracts or variable life insurance
contracts described more specifically on Schedule 1.g to this
Agreement, as amended from time to time pursuant to Section 2.e. The
term "Contracts" shall include any riders to such contracts and any
other contracts offered in connection therewith or any contracts for
which such Contracts may be exchanged or converted. The phrase "a
class of Contracts" shall mean those variable
<PAGE>
annuity contracts or variable life insurance contracts, as the case
may be, issued on the same policy form or forms and covered by the
same Registration Statement, as shown on Schedule 1.g to this
Agreement.
8. DISTRIBUTOR -- The LINCOLN National Life Insurance Company, principal
underwriter for the Contracts.
9. FUND -- Any fund or series thereof in which an Account supporting the
Contracts invests. (Plural, "Funds")
10. FUND PROSPECTUS -- At any time while this Agreement is in effect, the
prospectus for a Fund most recently filed with the SEC pursuant to
Rule 497 under the 1933 Act. (For purposes of Section 11 of this
Agreement, however, the term "Fund Prospectus" means any document that
is or at any time was a Fund Prospectus within the meaning of this
Section l.j.)
11. FUND REGISTRATION STATEMENT -- At any time while this Agreement is in
effect, the currently effective registration statement filed with the
SEC under the 1933 Act, or currently effective post-effective
amendment thereto, for shares of a Fund. (For purposes of Section 11
of this Agreement, however, the term "Fund Registration Statement"
means any document that is or at any time was a Fund Registration
Statement within the meaning of this Section 1.k.)
a. NASD -- The National Association of Securities Dealers, Inc.
12. PARTICIPATION AGREEMENT -- An agreement between LINCOLN and a Fund
relating to the investment of assets of LINCOLN separate accounts in
such Fund.
13. PROCEDURES -- The administrative procedures prepared and distributed
by LINCOLN, as such may be amended or supplemented from time to time,
relating to the solicitation, sale, issue and delivery of the
Contracts.
14. PROSPECTUS -- At any time while this Agreement is in effect, the
current prospectus relating to the Contracts most recently filed with
the SEC pursuant to Rule 497 of the 1933 Act. (For purposes of
Sections 5.a and 11 of this Agreement, however, the term "any
Prospectus" means any document that is or at any time was a Prospectus
within the meaning of this Section 1.o.)
15. PURCHASE PAYMENT -- A payment made under a Contract by an applicant or
purchaser to purchase benefits under the Contract.
16. REGISTRATION STATEMENT -- At any time while this Agreement is in
effect, the pending registration statement filed with the SEC under
the 1933 Act, the currently effective registration statement, or
currently effective post-effective amendment thereto, as applicable,
relating to a class of Contracts, including financial statements
included in, and all exhibits to, such registration statement or
post-effective amendment. (For purposes of Sections 5.a and 11 of this
Agreement, however, the term "Registration Statement" means any
document that is or at any time was a Registration Statement within
the meaning of this Section 1.q.
17. REGULATIONS -- The rules and regulations promulgated by the SEC under
the 1933 Act, the 1934 Act and the 1940 Act as in effect at the time
this Agreement is executed or thereafter promulgated, and as they may
be amended from time to time.
1.
18. REPRESENTATIVE -- An Associated Person of DELAWARE or a Broker
registered with the NASD as a registered representative or
<PAGE>
principal of DELAWARE or Broker, as the case may be.
19. SEC -- The Securities and Exchange Commission
20. STATE -- any state or commonwealth of the United States, the District
of Columbia or any other territory of the United States.
21. TERRITORY -- Any State or territory of the United States (including
the District of Columbia) where the contracts have been filed and
approved for sale by the appropriate regulatory authorities.
22. WHOLESALER -- Delaware Distributors, L.P., when it performs the
functions assigned to it in this agreement (including, but not by way
of limitation, those functions set forth in Sections 2, 3 and 4
hereof).
2. APPOINTMENT AND WHOLESALING DUTIES
1. LINCOLN hereby authorizes DELAWARE under applicable securities laws to
engage in the activities contemplated in this Agreement relating to the
wholesaling of the Contracts for which LINCOLN acts as principal
underwriter.
2. DELAWARE undertakes to use its best efforts to contact, recruit, screen,
and recommend Brokers in accordance with Section 3 of this Agreement,
consistent with market conditions and compliance with its responsibilities
under the federal securities laws and NASD rules and regulations.
3. (1) The appointment and authorization of DELAWARE to engage in wholesaling
activities pursuant to this Agreement is exclusive as to the Contracts
listed on Schedule 1.g, as amended from time to time in accordance with
Section 2.e of this Agreement. LINCOLN shall not authorize any other
person (as principal underwriter or otherwise) to engage in wholesaling or
distribution activities with respect to the Contracts or to recruit
business firms to engage in wholesaling or distribution activities with
respect to the Contracts (other than business firms recommended by DELAWARE
pursuant to Section 3 of this Agreement) without DELAWARE's prior written
consent, nor shall LINCOLN separately engage in wholesaling or distribution
activities relating to the Contracts.
(2) To the extent that any Contract offers a general account option,
LINCOLN shall, if required, register that option under the 1933 Act.
(3) LINCOLN shall register each Account with the SEC. The subaccounts of
each Account available under the Contracts or a class of Contracts are
listed on Schedule 1.a to this Agreement, as amended from time to time in
accordance with Section 2.e of this Agreement.
4. LINCOLN shall obtain appropriate authorizations, to the extent necessary,
whether by registration, qualification, approval or otherwise, for the
issuance and sale of the Contracts in each State (provided, however, that
it shall be within LINCOLN's discretion whether to obtain such
authorization in Hawaii, Guam, the U.S. Virgin Islands, Puerto Rico or
American Samoa, or for any U.S. military base). From time to time LINCOLN
shall notify DELAWARE in writing of all States in which each class of
Contracts may then lawfully be offered.
1.
5. The parties to this Agreement may amend Schedules 1.d and 1.g to this
Agreement from time to time by mutual agreement to reflect changes in or
relating to the Contracts and the Accounts and to add new classes of
variable annuity contracts and variable life insurance contracts to be
issued by LINCOLN for which DELAWARE will act as wholesaler. The
provisions of this Agreement shall be equally applicable to each such
<PAGE>
class of Contracts, unless the context otherwise requires. Schedule 9.a to
this Agreement may be amended only by mutual agreement of the parties to
this Agreement pursuant to Section 9 of this Agreement.
f. Either party may recommend the addition of funding options for one or more
Accounts. DELAWARE will have final approval of fund additions as long as
each such addition satisfies LINCOLN's then current selection criteria.
With respect to substitutions of funds, the final decision about whether to
substitute rests with LINCOLN; however, DELAWARE will have final approval
of any fund to be added as a result of a substitution, as long as that fund
meets LINCOLN's then current selection criteria. The final decision about
eliminating funding options rests with LINCOLN.
3. RECRUITMENT OF BROKERS AND RELATED RESPONSIBILITIES
1. LINCOLN hereby authorizes DELAWARE to contact, recruit, screen, and
recommend to LINCOLN business firms appropriate to act as Brokers for the
sale of the Contracts, and Delaware agrees to do so. Delaware will use its
best efforts, upon diligent inquiry, to recruit only brokers which are
members in good standing of the NASD, and which are under no legal
restriction that would prevent them from selling the Contracts. LINCOLN
shall have the right to reject any such recommendation, but shall not do so
arbitrarily or unreasonably.
2. LINCOLN shall have the responsibility for and bear the cost of : (i)
executing appropriate sales agreements with the business firms recommended
by DELAWARE; and (ii) appointing and renewing appointments for, such
business firms, and/or Associated Persons of such firms, as insurance
agents of LINCOLN in those states where such business firms and/or
Associated Persons possess insurance agent licenses (except as provided in
Section 9.c. hereof). DELAWARE shall provide LINCOLN with such information
as LINCOLN requests for this process. Neither DELAWARE nor LINCOLN shall
have responsibility for, or bear the cost of, any registration or licensing
of Brokers or any of their Associated Persons with the SEC, NASD or any
state insurance governmental or regulatory agency. LINCOLN shall maintain
the appointment records of all agents appointed by LINCOLN to distribute
the Contracts contemplated by this Agreement.
3. Any sales agreement entered into by LINCOLN with a Broker shall provide
that:
(1) The Broker (or an affiliated person duly registered as a broker-dealer
with the SEC) shall train, supervise, and be solely responsible for the
conduct of, all of its Associated Persons in the proper method of
solicitation, sale and delivery of the Contracts for the purpose of
complying on a continuous basis with the NASD Conduct Rules and with
federal and state securities and insurance law requirements applicable in
connection with the offering and sale of the Contracts;
(2) Purchase Payments shall be made payable to LINCOLN and shall be
delivered together with all applications and related information in
accordance with the Procedures;
(3) The Broker shall be solely responsible for all compensation paid to
its Representatives and all related tax reporting that may be required
under applicable law;
(4) The Broker and its Representatives shall not use, develop or
distribute any promotional, sales or advertising material that has not been
approved in writing by LINCOLN and filed with the appropriate governmental
or regulatory agencies; and
(5) The Broker shall not have authority, on behalf of LINCOLN or
<PAGE>
DELAWARE, to make, alter or discharge any Contract or other contract
entered into pursuant to a Contract; to waive any Contract forfeiture
provision; to extend the time of paying any Purchase Payment; to receive
any monies or Purchase Payments (except for the sole purpose of forwarding
monies or Purchase Payments to LINCOLN); or to expend, or contract for the
expenditure of, funds of LINCOLN or DELAWARE.
4. DELAWARE shall provide assistance to LINCOLN at a level acceptable to
LINCOLN, to facilitate the appointment of Brokers and their
Representatives.
5. DELAWARE shall train, supervise, and be solely responsible for the conduct
of, all of its Associated Persons (but not Brokers or their Representatives
unaffiliated with DELAWARE), for the purpose of complying on a continuous
basis with the NASD Conduct Rules and with federal securities laws and
state securities and insurance laws applicable to the wholesaling
activities contemplated in this Agreement. DELAWARE shall be responsible
for the maintenance and updating of broker-dealer or agent registrations
that they determine to be necessary for themselves and/or their Associated
Persons pursuant to any federal or state securities law or state insurance
law.
6. Neither DELAWARE nor LINCOLN will have any supervisory responsibility (as
such supervision is contemplated by the 1934 Act or the NASD's Conduct
Rules) with respect to Brokers or their Representatives. Under no
circumstances will DELAWARE be responsible for Brokers' or Brokers'
Representatives' failure to comply with the Procedures.
7. DELAWARE shall not have authority on behalf of LINCOLN to make, alter or
discharge any Contract or other contract entered into pursuant to a
Contract; to waive any Contract forfeiture provision; to extend the time of
paying any Purchase Payment; or to receive any monies or Purchase Payments.
DELAWARE shall not expend, nor contract for the expenditure of, funds of
LINCOLN; nor shall DELAWARE possess or exercise any authority on behalf of
LINCOLN other than that expressly conferred on DELAWARE by this Agreement.
8. DELAWARE shall act as an independent contractor in the performance of its
duties and obligations under this Agreement, and nothing contained in this
Agreement shall constitute DELAWARE or its respective Associated Persons
employees of LINCOLN in connection with the wholesaling activities
contemplated by this Agreement or otherwise.
9. DELAWARE shall not purchase Contracts from, nor sell Contracts for,
LINCOLN, nor shall it have any direct or indirect participation in such
undertakings, and nothing contained in this Agreement shall constitute
DELAWARE an "underwriter" or a "principal underwriter" of any of the
Contracts, as those terms are defined in the 1933, 1934 or 1940 Acts.
10. The Distributor of the Contracts, as the term "Distributor" is customarily
used in the variable insurance products industry, shall be LINCOLN, and
LINCOLN shall be identified as such in all sales, promotional, and
advertising materials for the Contracts.
1.
4. MARKETING AND SALES MATERIAL
1. (1) DELAWARE shall be responsible for drafting and designing all
promotional, sales and advertising materials to be developed for filing
pursuant to Section 4(a)(3). LINCOLN will cooperate with DELAWARE in the
development of these materials. No such materials shall be used without
the prior approval of LINCOLN, which approval shall not be unreasonably
withheld.
(2) DELAWARE shall be responsible for maintaining that portion of any
<PAGE>
World Wide Web site(s) relating to the Contracts and their distribution.
DELAWARE will not, without prior authorization in writing from LINCOLN,
establish direct or indirect hyperlinks or other electronic connections
between the Web site(s) described in the preceding sentence and any current
or future Web site(s) in use or to be used for or in connection with any
other products or services.
(3) (a.) DELAWARE shall be responsible for filing with the NASD, as
required, all promotional, sales and advertising material developed for use
with the Contracts, and shall be responsible for doing any necessary
followup. LINCOLN shall provide DELAWARE with final copies of all such
material developed by LINCOLN, and shall not use such material until
DELAWARE has informed LINCOLN that such material has been filed with the
NASD. LINCOLN and DELAWARE agree to cooperate in implementing requests for
subsequent changes received from the NASD.
(b.) LINCOLN shall be responsible for filing, as required, all
promotional, sales and advertising material, developed for use with the
Contracts, with any other federal or state securities governmental or
regulatory agencies, or with any state insurance governmental or regulatory
agencies.
(4) With respect to all promotional, sales and advertising material
developed by DELAWARE, LINCOLN shall have a reasonable period of time,
not to exceed five full business days, for review of each initial
manuscript. In response to this manuscript, LINCOLN may provide to
DELAWARE: (1) changes, if any, which LINCOLN deems mandatory; and (2)
changes which LINCOLN deems optional. DELAWARE will make the
mandatory changes. In addition, DELAWARE may make the optional
changes, at its discretion. Once DELAWARE has completed the
processing of all changes, DELAWARE will provide proof copy to LINCOLN
for LINCOLN's final approval before the materials are filed with the
NASD and disseminated to Brokers and/or to the public.
2. DELAWARE acknowledges that LINCOLN shall have the unconditional right to
reject, in whole or in part, any application for a Contract. In the event
an application is rejected, any Purchase Payment submitted will be returned
by or on behalf of LINCOLN. In that event, LINCOLN will use its best
efforts to so notify DELAWARE when it notifies the Broker/Dealer which
submitted the Purchase Payment.
In the event that a purchaser exercises the free look right under the
Contract, any amount to be refunded as provided in such Contract will be so
refunded to the purchaser by or on behalf of LINCOLN. LINCOLN will follow
the same notification procedure that it uses for rejected applications.
3. (1). DELAWARE will bear the cost of printing and mailing:
(a) all preliminary and definitive Contract Prospectuses used for sales
purposes; and
(b) all preliminary and definitive Fund Prospectuses used for sales
purposes, except to the extent that these expenses are borne by a Fund
pursuant to the relevant Fund Participation Agreement.
(2). LINCOLN will bear the cost of:
(a) preparing, printing and mailing all preliminary and definitive
Contract Prospectuses used for other than sales purposes; and
(b) printing and mailing all preliminary and definitive Fund Prospectuses
used for
<PAGE>
other than sales purposes, except to the extent that these expenses are
borne by a Fund pursuant to the relevant Fund Participation Agreement.
4. DELAWARE will pay the following expenses contemplated by this Agreement
for: (i) the compensation, if any, of its Associated Persons; (ii) expenses
associated with the initial and ongoing NASD licensing and training of its
Associated Persons involved in the wholesaling activities; (iii) the
drafting, design, printing and mailing of all promotional, sales or
advertising material developed by DELAWARE for use in connection with the
distribution of the Contracts; (iv) expenses associated with
telecommunications with LINCOLN at the sites of DELAWARE or its Associated
Persons, including site installations and purchases, leases or rentals of
modems, terminals and other hardware, and lease line telephone charges for
their Associated Persons; (v) continuing education courses sponsored by
DELAWARE for all Brokers and relating to the Contracts; (vi) fees
associated with NASD filings of promotional, sales or advertising material
developed by DELAWARE; (vii) development and maintenance of DELAWARE's
Internet Web sites and related functions; (viii) media advertising and
promotion (e.g., broker trade journals) for use in connection with the
distribution of the Contracts; and (ix) any other expenses incurred by
DELAWARE or its Associated Persons for the purpose of carrying out the
obligations of DELAWARE hereunder.
5. LINCOLN will pay all expenses in connection with: (i) the preparation and
filing with appropriate governmental or regulatory agencies of the
Registration Statement and each preliminary Prospectus and definitive
Prospectus; (ii) the preparation and issuance of the Contracts; (iii) any
authorization, registration, qualification or approval of the Contracts
required under the securities, blue-sky laws or insurance laws of the
States; (iv) registration fees for the Contracts payable to the SEC or to
any other governmental or regulatory agency; (v) the mailing of
Prospectuses for the Contracts and Fund Prospectuses and any supplements
thereto, as required by federal securities laws, and proxy soliciting
materials and periodic reports relating to a Fund or the Accounts to
Contract owners; (vi) the printing of applications, the Procedures and any
other administrative forms utilized in connection with the servicing of the
Contracts; (vii) compensation as provided in Section 9 hereof; (viii) the
design and maintenance of any product-specific Web site for the contracts,
if LINCOLN determines that such a Web site is necessary or advisable; and
(ix) any other expenses related to the distribution of the Contracts except
as provided in Sections 4.c and 4.d of this Agreement.
6. Except to the extent for which DELAWARE is responsible under section 6.5
hereof, LINCOLN alone shall be responsible for and bear the cost of
administration of the Contracts following their issuance, including all
Contractowner service and communication activities.
1.
7. LINCOLN will confirm to each owner of a Contract, in accordance with Rule
10b-10 under the 1934 Act, its acceptance of Purchase Payments and such
other transactions as are required by Rule 10b-10 or administrative
interpretations thereunder and in accordance with Release 8389 under the
1934 Act. Except for material which is required by law to accompany these
confirmations, nothing shall be included with them that has not been
approved in advance by LINCOLN and DELAWARE.
<PAGE>
5. REPRESENTATIONS AND WARRANTIES
1. LINCOLN represents and warrants to DELAWARE, on the effective date of each
Registration Statement for the Contracts (or class of Contracts) and at
each time that a Contract is sold and on the date of this Agreement, as
follows:
(1) The Registration Statement has been declared effective by the SEC or
has become effective in accordance with the Regulations.
(2) The Registration Statement and the Prospectus each comply in all
material respects with the provisions of the 1933 Act and the 1940 Act and
the Regulations, and neither the Registration Statement nor the Prospectus
contains an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading, in light of the circumstances in which
they were made; provided, however, that none of the representations and
warranties in this Section 5.a(2) shall apply to statements in or omissions
from the Registration Statement or Prospectus made in reliance upon and in
conformity with information furnished to LINCOLN in writing by DELAWARE
expressly for use in the Registration Statement.
(3) LINCOLN has not received notice from the SEC with respect to the
Registration Statement or the Account supporting the Contracts described in
the Registration Statement pursuant to Section 8(e) of the 1940 Act and no
stop order under the 1933 Act has been issued and no proceeding therefor
has been instituted or threatened by the SEC.
(4) The accountants who certified the financial statements included in
the Registration Statement and Prospectus are independent public
accountants as required by the 1933 Act, the 1940 Act and the Regulations.
(5) The financial statements included in the Registration Statement for
the Account and for LINCOLN present fairly the respective financial
positions of LINCOLN and the Account supporting the Contracts described in
the Registration Statement as of the dates indicated; and , for the
Account, such financial statements have been prepared in conformity with
generally accepted accounting principles in the United States applied on a
consistent basis, and for LINCOLN, such financial statements have been
prepared in conformity with statutory accounting principles in the United
States applied on a consistent basis.
(6) Subsequent to the respective dates as of which information is given in
the Registration Statement or the Prospectus, there has not been any
material adverse change in the condition, financial or otherwise, of
LINCOLN or the Account supporting the Contracts described in the
Registration Statement that would cause such information to be materially
misleading.
(7) LINCOLN has been duly organized and is validly existing as a
corporation in good standing under the laws of Indiana, with full power and
authority to own, lease and operate its properties and conduct its business
in the manner described in the Prospectus, is duly qualified to transact
the business of a life insurance company and is validly existing or in good
standing in each State in which the Contracts are or will be offered.
(8) Each Account supporting the Contracts described in the Registration
Statement has been duly authorized and established and is validly existing
as an insurance company separate account under the laws
<PAGE>
of Indiana and is duly registered with the SEC as a unit investment trust
under the 1940 Act.
(9) The form of the Contracts has been (or, before it is offered for sale,
will be) approved to the extent required by the Indiana Insurance
Commissioner and by the governmental agency responsible for regulating
insurance companies in each other State in which the Contracts are offered.
(10) The execution and delivery of this Agreement and the consummation of
the transactions contemplated in this Agreement have been duly authorized
by all necessary corporate action by LINCOLN and when so executed and
delivered this Agreement will be the valid and binding obligation of
LINCOLN enforceable in accordance with its terms.
(11) LINCOLN has filed with the SEC all statements and other documents
required for registration under the provisions of the 1940 Act and the
Regulations thereunder for the Account supporting the Contracts described
in the Registration Statement, and such registration is (or, prior to being
offered to the public, will be) effective; there are no agreements or
documents required by the 1933 Act, the 1940 Act or the Regulations to be
filed with the SEC as exhibits to the Registration Statement that have not
been so filed; and LINCOLN has obtained all exemptive or other orders of
the SEC necessary to make the public offering and consummate the sale of
the Contracts pursuant to this Agreement and to permit the operation of the
Account supporting the Contracts described in the Registration Statement,
as contemplated in the Prospectus.
(12) The Contracts have been duly authorized by LINCOLN and conform to the
descriptions thereof in the Registration Statement and the Prospectus and,
when issued as contemplated by the Registration Statement, will constitute
legal, validly issued and binding obligations of LINCOLN in accordance with
their terms.
b. DELAWARE represents and warrants to LINCOLN on the date hereof as follows:
(1) DELAWARE has been duly organized and is validly existing as a limited
partnership in good standing under the laws of DELAWARE with full power and
authority to own, lease and operate its properties and conduct its business
as a broker-dealer registered with the SEC and with the securities
commission of every State where such registration is required, and is a
member in good standing of the NASD.
(2) DELAWARE has taken all action including, without limitation, those
necessary under its limited partnership agreement, by-laws and applicable
state law, necessary to authorize the execution, delivery and performance
of this Agreement and all transactions contemplated hereunder.
(3) DELAWARE is and during the term of this Agreement shall remain duly
registered as a broker-dealer under the 1934 Act, a member in good standing
with the NASD, and duly registered as a broker-dealer under applicable
state securities laws.
6. ADDITIONAL RESPONSIBILITIES OF LINCOLN
1. LINCOLN shall:
(1) maintain the registration of the Contracts with the SEC and any
<PAGE>
state securities commissions of any State where the securities or blue-sky
laws of such State require registration of the Contracts, including without
limitation using its best efforts to prevent a stop order from being issued
or if a stop order has been issued using its best efforts to cause such
stop order to be withdrawn;
(2) maintain the approval or other authorization of the Contract forms
where required under the insurance laws and regulations of each State
(provided, however, that it shall be within LINCOLN's discretion whether to
obtain such approval or authorization in Hawaii, Guam, the U.S. Virgin
Islands, Puerto Rico, and American Samoa);
(3) keep such registration, approval and authorization in effect
thereafter so long as the Contracts are outstanding, to the extent required
by law; and
(4) build, maintain and pay for the origination of illustration and asset
allocation software programs for the Contracts.
2. During the term of this Agreement, LINCOLN shall take all action required
to cause each class of Contracts to comply, and to continue to comply, as
annuity contracts or life insurance contracts, as the case may be, and to
cause the Registration Statement and the Prospectus for each class of
Contracts to comply, and to continue to comply, with all applicable federal
laws and regulations and all applicable laws and regulations of each State.
3. LINCOLN, during the term of this Agreement, shall notify DELAWARE
immediately:
(1) When each Registration Statement (or amendment or supplement to it)
has become effective;
(2) Of the initiation of any legal proceeding commenced by any regulatory
body or by any third party alleging that any material statement made in a
Registration Statement or a Prospectus is untrue in any material respect or
results in a material omission in a Registration Statement or a Prospectus;
(3) Of the issuance by the SEC of any stop order with respect to a
Registration Statement or any amendment thereto; or the initiation by the
SEC of any proceedings for that purpose or for any other purpose relating
to the registration and/or offering of the Contracts (or class of
Contracts);
(4) Of all those States in which registration of the Contracts (or class
of Contracts) is required under the securities or blue-sky laws, and the
date on which such registrations have become effective.
4. LINCOLN shall furnish to DELAWARE without charge, promptly after filing,
one copy of each Registration Statement as originally filed, including
financial statements and all exhibits (including exhibits incorporated
therein by reference).
5. LINCOLN shall file in a timely manner all reports, statements and
amendments required to be filed by or for each Account or class of
Contracts under the 1933 Act and/or the 1940 Act or the Regulations.
6. LINCOLN shall provide DELAWARE access to such records, officers and
employees of LINCOLN and of each Account at reasonable times as is
necessary to enable DELAWARE to fulfill its obligations under the federal
securities laws, Regulations and NASD rules.
1.
6.5 ADDITIONAL RESPONSIBILITIES OF DELAWARE
DELAWARE shall:
1. assist LINCOLN with certain administrative activities relating to the
Contracts, to the extent agreed upon from time to time by LINCOLN and
<PAGE>
DELAWARE.
2. provide LINCOLN access to such of its records, officers and employees at
reasonable times as is necessary to enable LINCOLN to fulfill its
obligations under the federal securities laws, Regulations and NASD rules.
3. be responsible for duplication and distribution of illustration and asset
allocation software programs originated by LINCOLN.
7. CONFIDENTIALITY AND INTELLECTUAL PROPERTY RIGHTS OF DELAWARE AND LINCOLN
a. LINCOLN acknowledges that the names and addresses of all customers and
prospective customers (for purposes of this Section 7.a, the terms "customers"
and "prospective customers" shall not mean Brokers) of any Broker that may come
to the attention of LINCOLN as a result of its relationship with any Broker and
not from any independent source, are confidential and shall not be used by
LINCOLN for any purpose whatsoever, EXCEPT (1) as agreed upon between LINCOLN
and any Broker; and (2) as may be necessary in connection with the
administration of the Contracts sold by the Brokers, including responses to
specific requests made to LINCOLN for service by Contractowners or efforts to
prevent the replacement of such Contracts or to encourage the exercise of
options under the terms of the Contracts. The restrictions set forth in the
previous sentence do not apply if and to the extent a Broker knowingly discloses
the names and addresses of its customers or prospective customers to LINCOLN
outside the operation of this Agreement. In no event shall the names and
addresses of such customers and prospective customers be furnished by LINCOLN to
any other person not affiliated with LINCOLN. The intent of this paragraph is
that LINCOLN shall not utilize or permit to be utilized (other than as provided
above) its knowledge of any Broker, derived as a result of the relationship
created through the funding and sale of the Contracts, for the solicitation of
sales of any product or service other than the Contracts. This paragraph shall
remain operative and in full force and effect regardless of the termination of
this Agreement, and shall survive any such termination.
b. The intellectual property rights of the parties are set forth in
Exhibit A of this Agreement, which is hereby incorporated herein by this
reference.
8. RECORDS. LINCOLN and DELAWARE each shall maintain such accounts, books and
other documents as are required to be maintained by each of them by applicable
laws and regulations and shall preserve such accounts, books and other documents
for the periods prescribed by such laws and regulations. The accounts, books
and records of LINCOLN, the Account and DELAWARE as to all transactions
hereunder shall be maintained so as to clearly and accurately disclose the
nature and details of the transactions, including such accounting information as
necessary to support the reasonableness of the amounts paid by LINCOLN
hereunder. Each party shall have the right to inspect and audit such accounts,
books and records of the other party during normal business hours upon
reasonable written notice to the other party. Each party shall keep
confidential all information obtained pursuant to such an inspection or audit,
and shall disclose such information to third parties only upon receipt of
written authorization from the other party, except as required under compulsion
of law.
9. COMPENSATION
1. BASIS. (1) LINCOLN shall compensate DELAWARE for sales of the Contracts by
<PAGE>
the Brokers pursuant to Schedule 9.a to this Agreement, as such Schedule
may be amended from time to time upon mutual agreement of the parties to
this Agreement. Such compensation shall be based on Purchase Payments
received and accepted by LINCOLN for all Contracts issued on applications
obtained by the Brokers or any of their respective Representatives.
LINCOLN will pay compensation due DELAWARE in accordance with the
procedures set forth on Schedule 9.a. The compensation provided for in this
Section 9 shall cease after the termination date of the Agreement.
(2) If LINCOLN informs DELAWARE that any State, by insurance rule,
regulation or statute, prohibits any payment of compensation by LINCOLN to
a class of business entities including DELAWARE, DELAWARE shall designate
in writing a business entity or natural person, including an insurance
agency affiliate of DELAWARE meeting the requirements of such State, to
receive any amounts that may otherwise be payable to DELAWARE hereunder,
and LINCOLN shall have the right to rely upon the legality of all such
designations. DELAWARE may change such designation from time to time, upon
prior written notice to LINCOLN. Any payments made by LINCOLN to any
person or entity so designated by DELAWARE shall discharge LINCOLN's
liability to DELAWARE hereunder.
(3) If a purchaser rescinds a Contract or exercises a right to surrender a
contract for return of all Purchase Payments, DELAWARE will repay to
LINCOLN, on demand, the amount of any compensation it received on the
Purchase Payments returned.
1. INDEBTEDNESS. Nothing in this Agreement shall be construed as giving
DELAWARE the right to incur any indebtedness on behalf of LINCOLN.
2. RENEWAL APPOINTMENT FEES FOR LOW-PRODUCING FIRMS AND ASSOCIATED PERSONS.
LINCOLN shall consult with DELAWARE prior to any refusal by LINCOLN, on
grounds of insufficient production of premium income for LINCOLN products,
to renew the appointment of any firm or Associated Person appointed to
LINCOLN under Section 3.b. above.
1. REPORTING. DELAWARE shall be responsible for all tax reporting information
that DELAWARE is required to provide under applicable tax law to its
Associated Persons with respect to the Contracts. Nothing contained in
this Agreement or any sales agreement with a Broker is to be construed to
require DELAWARE to provide any tax reporting information directly or
indirectly to any unaffiliated Broker or its Representatives.
10. INVESTIGATION AND PROCEEDINGS
1. LINCOLN and DELAWARE will cooperate fully in any securities or insurance
regulatory investigation or proceeding, or judicial proceeding brought by
any regulatory authority, arising in connection with the offering, sale or
distribution of the Contracts for which DELAWARE acts as wholesaler
pursuant to this Agreement. Without limiting the foregoing, each party
agrees to furnish to the other party any official notices received about
these proceedings.
1. (1) In the case of a complaint involving the terms of the Contract,
DELAWARE will provide LINCOLN with all available information and will
cooperate generally in LINCOLN's investigation of the complaint.
2.
(2) In the case of a complaint involving DELAWARE, LINCOLN will provide
DELAWARE with all available information and will cooperate generally in
DELAWARE's investigation of the complaint.
11. INDEMNIFICATION.
1. LINCOLN shall indemnify and hold harmless DELAWARE and any officer,
director,
<PAGE>
employee or agent of DELAWARE, against any and all losses, claims, damages
or liabilities (including reasonable investigative and legal expenses
incurred in connection with any action, suit or proceeding, or any amount
paid in settlement thereof with the prior approval of LINCOLN), to which
DELAWARE and/or any such person may become subject under any statute or
regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities:
(1) arise out of or are based upon: (a) any untrue statement or alleged
untrue statement of a material fact contained in (i) any Registration
Statement, Prospectus, Blue Sky application or other document executed by
LINCOLN specifically for the purpose of qualifying any or all of the
Contracts for sale under the securities laws of the United States or any
State; (ii) any promotional, sales or advertising material for the
Contracts; (iii) the Contracts themselves; or (iv) any amendment or
supplement to any of the foregoing; or (b) the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances in which they were made; PROVIDED THAT in the case of (a) or
(b) above this obligation to indemnify shall not apply if such untrue
statement or omission or such alleged untrue statement or alleged omission
was made in reliance upon and in conformity with information furnished in
writing to LINCOLN by DELAWARE specifically for use in the preparation of
any such Registration Statement, Prospectus or Blue-Sky application or
other document, material, or Contract (or any such amendment or supplement
thereto);
(2) arise out of or are based upon any untrue statement or alleged untrue
statement or omission or alleged omission of a material fact by or on
behalf of LINCOLN (other than statements or representations contained in
any Fund Registration Statement, Fund Prospectus or promotional, sales or
advertising material of a Fund that were not supplied by LINCOLN or by
persons under its control) or the gross negligence or intentional
misconduct of LINCOLN or persons under its control with respect to the sale
or distribution of the Contracts; or
(3) result because of the terms of any Contract or because of any
material breach by LINCOLN of any terms of this Agreement or of any
Contract or that proximately result from any activities of LINCOLN's
officers, directors, employees or agents or their failure to take action in
connection with the sale of a Contract, to the extent of LINCOLN's
obligations under this Agreement or otherwise, or the processing or
administration of the Contracts.
This indemnification obligation will be in addition to any liability that
LINCOLN may otherwise have; provided, however, that DELAWARE shall not be
entitled to indemnification pursuant to this Section 11.a if such loss,
claim, damage or liability is due to the willful misfeasance, bad faith,
gross negligence or reckless disregard of duty by DELAWARE.
1. DELAWARE shall indemnify and hold harmless LINCOLN and any officer,
director, employee or agent of LINCOLN, against any and all losses, claims,
damages or liabilities (including reasonable investigative and legal
expenses incurred in connection with, any action, suit or proceeding or any
amount paid in settlement thereof with the prior approval of DELAWARE), to
which LINCOLN and/or any such person may become subject under any statute
or regulation, at common law or otherwise, insofar as
<PAGE>
such losses, claims, damages or liabilities arise out of or are based upon:
(1) (a) any untrue statement or alleged untrue statement of a material
fact contained in any Registration Statement, Prospectus or Blue-Sky
application or other document executed by LINCOLN specifically for the
purposes of qualifying any or all of the Contracts for sale under the
securities law of any State (or any amendment or supplement to the
foregoing), or (b) omission or alleged omission to state therein a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, in light of the circumstances in which
they were made; in the case of (a) and (b) to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in reliance upon and in conformity with
information furnished in writing to LINCOLN by DELAWARE specifically for
use in the preparation of any such Registration Statement, Prospectus, such
Blue-Sky application or other document (or any such amendment or supplement
thereto); or
(2) any use of promotional, sales or advertising material for the
Contracts not authorized by LINCOLN pursuant to Section 4.a of this
Agreement or any verbal or written misrepresentations or any unlawful sales
practices concerning the Contracts by DELAWARE under federal securities
laws or NASD regulations (but not including state insurance laws,
compliance with which is a responsibility of LINCOLN under this Agreement
or otherwise); or
(3) claims by agents, representatives or employees of DELAWARE for
commissions or other compensation or remuneration of any type; or
(4) any material breach by DELAWARE of any provision of this Agreement.
This indemnification obligation will be in addition to any liability that
DELAWARE may otherwise have; provided, however, that LINCOLN shall not be
entitled to indemnification pursuant to this Section 11.b if such loss,
claim, damage or liability is due to the willful misfeasance, bad faith,
gross negligence or reckless disregard of duty by LINCOLN.
1. After receipt by a party entitled to indemnification ("indemnified party")
under this Section 11 of notice of the commencement of any action, if a
claim in respect thereof is to be made by the indemnified party against any
person obligated to provide indemnification under this Section 11
("indemnifying party"), such indemnified party will notify the indemnifying
party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party
will not relieve it from any liability under this Section 11, except to the
extent that the omission results in a failure of actual notice to the
indemnifying party and such indemnifying party is damaged solely as a
result of the failure to give such notice. The indemnifying party, upon
the request of the indemnified party, shall retain counsel reasonably
satisfactory to the indemnified party to represent the indemnified party
and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of
<PAGE>
such counsel, or (ii) the named parties to any such proceeding (including
any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party shall indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment.
1. The indemnification provisions contained in this Section 11 shall remain
operative and in full force and effect, regardless of (i) any investigation
made by or on behalf of LINCOLN or by or on behalf of any controlling
person thereof, (ii) delivery of any Contracts and Purchase Payments
therefor, or (iii) any termination of this Agreement. A successor by law
of DELAWARE or LINCOLN, as the case may be, shall be entitled to the
benefits of the indemnification provisions contained in this Section 11.
12. TERMINATION
This Agreement may be terminated at the option of any party upon 90 calendar
days advance written notice to the other party;
This Agreement shall terminate automatically if it is assigned; PROVIDED,
HOWEVER, that a transaction will not be deemed an assignment if it does not
result in a change of actual control or management of a party. This
Agreement may be terminated at the option of one party upon the other
party's material breach of any provision of this Agreement.
Upon termination of this Agreement all authorizations, rights and obligations
shall cease except: (i) the obligation to settle accounts hereunder,
including incurred compensation; and (ii) the provisions contained in
Sections 7 and 11 of this Agreement.
13. RIGHTS, REMEDIES, ETC, ARE CUMULATIVE. The rights, remedies and
obligations contained in this Agreement are cumulative and are in addition to
any and all rights, remedies and obligations, at law or in equity, which the
parties to this Agreement are entitled to under state and federal laws. Failure
of one party to insist upon strict compliance by the other party with any of the
conditions of this Agreement in any one instance shall not be construed as a
waiver of any of the conditions for any subsequent instance, but the same shall
remain in full force and effect. No waiver of any of the provisions of this
Agreement shall be deemed, or shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver.
14. NOTICES. All notices hereunder are to be in writing and shall be given,
if to LINCOLN, to:
- --------------------------------------------------------
Michael Antrobus
Annuities Product Management
Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, Indiana 46802
if to DELAWARE:
- --------------------------------------------------------
Daniel J. O'Brien
Delaware Distributors, L.P.
<PAGE>
1818 Market Street
Philadelphia, PA 19103
Any party may specify another name and/or address in writing. Each such notice
to a party shall be hand-delivered; or transmitted by postage prepaid registered
or certified United States mail, with return receipt requested; or sent by an
overnight courier service.
15. INTERPRETATION, JURISDICTION, ETC. (a.) This Agreement constitutes the
whole agreement between the parties to this Agreement relating to the
wholesaling activities contemplated in this Agreement, and supersedes all prior
oral or written negotiations between the parties to this Agreement with respect
to the subject matter of this Agreement. The parties acknowledge that LINCOLN
and the Funds have entered into Participation Agreements and that it may be
necessary to construe the terms of such Participation Agreements and this
Agreement together. This Agreement shall be construed and the provisions of
this Agreement interpreted under and in accordance with the internal laws of the
State of Indiana without giving effect to its principles of conflict of laws
(b) Anything in this Agreement to the contrary notwithstanding, (i) in no event
will DELAWARE, in performing its services for LINCOLN under this Agreement,
interpose itself into the contractual relationship between LINCOLN and any of
its contractowners; and (ii) in no event will DELAWARE, in performing its
services for LINCOLN under this Agreement, intervene in the relationship between
LINCOLN and any of its Brokers and/or Brokers' Associated Persons in such a
manner as to directly or indirectly cause any Broker(s) to breach its/their
Selling Group Agreement(s) with LINCOLN.
16. HEADINGS. The headings in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions of this
Agreement or otherwise affect their construction or effect.
17. COUNTERPARTS. This Agreement may be executed in two or more counterparts,
each of which taken together shall constitute one and the same instrument.
18. SEVERABILITY. This is a severable agreement and in the event that any part
or parts of this Agreement shall be held to be unenforceable to its or their
full extent, then it is the intention of the parties to this Agreement that such
part or parts shall be enforced to the extent permitted under the law, and, in
any event, that all other parts of this Agreement shall remain valid and duly
enforceable as if the unenforceable part or parts had never been a part of this
Agreement.
19. REGULATION. This Agreement shall be subject to all applicable provisions
of state law and to the 1933 Act; 1934 Act; 1940 Act; and the Regulations and
the rules and regulations of the NASD, from time to time in effect; including
such exemptions from the 1940 Act as the SEC may grant. The terms of this
Agreement shall be interpreted and construed in accordance therewith. Without
limiting the generality of the foregoing, the term "assigned" shall not include
any transaction exempted from Section 15(b)(2) of the 1940 Act.
<PAGE>
IN WITNESS WHEREOF, each party hereto represents that the officer signing
this Agreement on the party's behalf is duly authorized to execute this
Agreement; and each party has caused this Agreement to be duly executed by such
authorized officer as of the date first set forth above.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: /S/ G. MICHAEL ANTROBUS
-----------------------------------------------
Name: G. Michael Antrobus
Title: Second Vice President
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.
(General Partner)
By: /S/ WAYNE A. STORK
----------------------------------------------
Name: Wayne A. Stork
Title: Chairman, President and
Chief Executive Office
<PAGE>
Schedule 1.d
Separate Account Subaccounts
Available under the Contracts
Subject to the Wholesaling Agreement
Effective November 20, 1998
NAME OF SEPARATE ACCOUNT SUBACCOUNTS
Lincoln Life Variable Annuity
Account N AIM V.I. Growth Subaccount
AIM V.I. Value Subaccount
AIM V.I. International Equity
Subaccount
BT Insurance Trust Equity 500
index Subaccount
Delaware Group Decatur Total
Return Subaccount
Delaware Group Devon
Subaccount
Delaware Group Social
Awareness Subaccount
Delaware Group REIT Subaccount
Delaware Group Small Cap Value
Subaccount
Delaware Group Trend
Subaccount
Delaware Group International
Equity Subaccount
Delaware Group Emerging
Markets Subaccount
Delaware Group Delchester
Subaccount
Dreyfus Variable Fund Small
Cap Subaccount
Fidelity VIP Equity-Income
Subaccount
Fidelity VIP Growth Subaccount
Fidelity VIP Overseas
Subaccount
Fidelity VIP III Growth
Opportunities Subaccount
Investors Fund Kemper Govt.
Securities Subaccount
Investors Fund Kemper Small
Cap Growth Subaccount
Liberty Variable Trust
Colonial U.S. Stock Subaccount
Liberty Variable Trust Newport
Tiger Subaccount
Lincoln National Bond
Subaccount
Lincoln National Money Market
Subaccount
MFS Variable Trust Total
Return Subaccount
MFS Variable Trust Utilities
Subaccount
MFS Variable Trust Emerging
Growth Subaccount
MFS Variable Trust Research
Subaccount
OCC Trust Global Equity Subaccount
OCC Trust Managed Subaccount
<PAGE>
Schedule 1.g
Contracts Subject to Wholesaling Agreement
Effective November 20, 1998
<TABLE>
<CAPTION>
SEC ('33 Act)
Marketing Policy Registration Name of
Name of Contract Form No. No. Separate Account
- ---------------- -------- --- ----------------
<S> <C> <C> <C>
Delaware-Lincoln Choice AN425-LL* 333-40937 Lincoln Life
Plus Variable Annuity
Account N
Delaware-Lincoln Choice AN425-LL* 33-62819 Lincoln Life
Plus XL Variable Annuity
Account N
</TABLE>
*There are multiple versions by state.
<PAGE>
SCHEDULE 9.a
COMPENSATION SCHEDULE
EFFECTIVE November 20, 1998
COMPENSATION PAYABLE BY LINCOLN TO DELAWARE FOR WHOLESALING ACTIVITY
Both ChoicePlus and ChoicePlus XL pay the same wholesaling allowances, which
vary by year of deposit. All wholesaling allowances are paid as a percent of
new deposits; no trail of any kind is paid.
<TABLE>
<CAPTION>
Year of Deposit Allowance*
- --------------- ----------
(Calendar Year) (Percent of New Deposit)
<S> <C>
1998 0.75%
1999 2.08%
2000 1.50%
2001 1.00%
2002 0.75%
</TABLE>
Compensation will be paid to DELAWARE according to then current Lincoln
practice, but no less frequently than weekly.
On all business produced through the LFA distribution system, the allowance
shown in the table above will be reduced by the estimated cost of the bonus
program for LFA producers. The amount will be determined annually prior to the
beginning of the calendar year.
* To the extent that the full gross dealer compensation available under
compensation options 1, 2, or 3 as shown below is not paid to a broker/dealer,
the difference between what is paid and the amount available under options 1, 2,
or 3 will be paid to DELAWARE. This is in addition to the percentage shown in
the table above.
To the extent more than the full gross dealer compensation available under
compensation options 1, 2, or 3 as shown below is paid to a broker/dealer, the
excess over the amount available under options 1, 2, or 3 will be paid to
LINCOLN. This will be a deduction from the percentage shown in the table above.
<TABLE>
<CAPTION>
Option Age 80 or Less Ages 81-85
------ -------------- ----------
<S> <C> <C>
1 6.50% 4.50%
2 4.00% 2.50%
3 4.75% 3.25%
</TABLE>
<PAGE>
EXHIBIT A
Intellectual Property Rights of the Parties
I. DELAWARE. Delaware Management Holdings, Inc. owns all right, title and
interest, including the good will associated therewith, in and to the marks
DELAWARE, DELAWARE GROUP, DELAWARE INVESTMENTS and DELAWARE GROUP PREMIUM FUND,
which may be used in connection with one or more of the underlying investment
media for the Contracts, and in and to the name DELAWARE in whatever manner used
in connection with the performance of this Agreement (such marks are hereinafter
referred to as "Delaware Licensed Marks"). Delaware Management Holdings, Inc.
has granted to DELAWARE the right and license to use the Delaware Licensed Marks
and the right to sublicense to others. DELAWARE hereby grants to LINCOLN a
revokable, nonexclusive license to use the Delaware Licensed Marks in connection
with the Contracts and LINCOLN's performance of the services as set forth under
this Agreement.
A. TERM. The grant of limited license as specified in this Exhibit A
shall terminate with respect to Delaware Licensed Marks on the earlier of the
following events:
1. A change of name of such Delaware Licensed Mark to a name that
does not include the term "Delaware"; or
2. Solely at the option of DELAWARE, with respect to any or all
Delaware Licensed Marks and respecting only new business, upon a
termination of this Agreement. In the case of existing business, the grant
of limited license as specified in this Exhibit A shall survive the
termination of the Agreement, but only to the extent necessary to allow the
continuance of any business written prior to such termination wherein the
Delaware Licensed Marks were previously used, and so long as such use was
made in conformity and continues to conform with the terms of this
Agreement.
Upon termination of the grant of limited license, LINCOLN shall, within ten (10)
business days of the effective termination date, cease to issue new Contracts or
to use or disseminate any promotional, sales or advertising material relating to
the Contracts or service existing Contracts except as provide in A.2 above under
such Delaware Licensed Mark, and shall likewise cease any new business activity
that suggests that it has any right under such Delaware Licensed Mark or that it
has any association with DELAWARE in connection with any such Contracts with
respect to such Delaware Licensed Mark. In addition, LINCOLN shall cease to use
the mark DELAWARE-LINCOLN CHOICEPLUS, except to the extent permitted for
DELAWARE Licensed Marks under A.2 above.
B. PRE-RELEASE APPROVAL OF TRADEMARK-BEARING MATERIALS.
1. LINCOLN agrees that it will display the Delaware Licensed
Marks only in such form and manner as are specifically approved by
DELAWARE and that it will cause them to appear on all promotional,
sales or advertising material used in connection with the Contracts or
related services with such legends, markings and notices as DELAWARE
may request in order to give appropriate notice of service mark
registration when effected. All such materials will be submitted by
LINCOLN to DELAWARE for the purpose of service mark reviews and
approval at least ten business days before their intended use by
LINCOLN.
<PAGE>
2. During the term of this limited license, DELAWARE may
request that LINCOLN submit samples of any material bearing any of the
Delaware Licensed Marks that were previously approved by DELAWARE or
that were not previously approved in the manner set forth above. If,
on reconsideration or on initial review, respectively, any such sample
fails to meet with the written approval of DELAWARE, then LINCOLN
shall immediately cease using or disseminating such disapproved
material. LINCOLN shall obtain the prior written approval of DELAWARE
for the use of any new material developed to replace the disapproved
material, in the manner set forth above. All costs associated with
any such reconsideration will be borne by LINCOLN.
C. ASSIGNMENT. This limited license is personal to LINCOLN and may not
be assigned without the prior written consent of DELAWARE.
D. BREACH. If LINCOLN shall violate or fail to perform any of its
obligations under this limited license, DELAWARE shall have the right to
terminate this limited license upon thirty (30) days written notice, and
such notice of termination shall become effective unless LINCOLN shall
completely remedy the default within such 30-day period. Termination of
the license under the provisions of this paragraph shall be without
prejudice to any other rights that DELAWARE may have against LINCOLN.
E. DELAWARE'S RIGHTS. All rights in the Delaware Licensed Marks other
than those specifically granted herein are reserved by DELAWARE for its own
use and benefit. LINCOLN shall at any time, whether during or after the
term of this limited license, execute any documents reasonably required by
DELAWARE to confirm DELAWARE's ownership of all such rights.
II. LINCOLN. Lincoln National Corporation owns all right, title and interest,
including the good will associated therewith, in and to the marks LINCOLN
NATIONAL, LINCOLN SILHOUETTE DESIGN, and LINCOLN FINANCIAL GROUP which may be
used in connection with one or more of the underlying investment media for the
Contracts, and in and to the name LINCOLN in whatever manner used in connection
with the performance of this Agreement (such marks are hereinafter referred to
as "LNC Marks"). Lincoln National Corporation has granted to LINCOLN the right
and license to use the LNC Marks and the right to sublicense to others. In
addition, LINCOLN owns all right, title and interest, including the good will
associated therewith, in and to the marks, LINCOLN LIFE, A.LINCOLN Signature
Design, and DELAWARE-LINCOLN CHOICEPLUS (such marks are hereinafter referred to
as "Lincoln Marks"). For the purpose of this Agreement, the LNC Marks and the
Lincoln Marks shall be collectively referred to as the "Lincoln Licensed Marks".
LINCOLN hereby grants to DELAWARE a revokable, nonexclusive limited license to
use the Lincoln Licensed Marks in connection with the Contracts and DELAWARE's
performance of the services as set forth under this Agreement.
A. TERM. The grant of limited license as specified in this Exhibit A
shall terminate with respect to Lincoln Licensed Marks on the earlier of
the following events:
1. A change of name of such Lincoln Licensed Marks to a name
that does not include the term "LINCOLN"; or
<PAGE>
2. Solely at the option of LINCOLN, with respect to any or all
Lincoln Licensed Marks and respecting only new business, upon a
termination of this Agreement. In the case of existing business, the
grant of limited license as specified in this Exhibit A shall survive
the termination of the Agreement, but only to the extent necessary to
allow the continuance of any business written prior to such
termination wherein the Lincoln Licensed Marks were previously used,
and so long as such use was made in conformity and continues to
conform with the terms of this Agreement.
Upon termination of the grant of limited license, DELAWARE shall, within
ten (10) business days of the effective termination date, cease its
wholesaling activities hereunder and suspend all dissemination of
promotional, sales and advertising material relating to the Contracts or
service existing Contracts except as provided in A.2 above under such
Lincoln Licensed Marks, and shall likewise cease any new business activity
that suggests that it has any right under such Lincoln Licensed Marks or
that it has any association with LINCOLN in connection with any such
Contracts with respect to such Lincoln Licensed Marks.
B. PRE-RELEASE APPROVAL OF TRADEMARK-BEARING MATERIALS.
1. DELAWARE agrees that it will display the Lincoln Licensed
Marks only in such form and manner as are specifically approved by
LINCOLN and that it will cause them to appear on all promotional,
sales or advertising material used in connection with the Contracts or
related services with such legends, markings and notices as LINCOLN
may request in order to give appropriate notice of service mark
registration when effected. All such materials will be submitted by
DELAWARE to LINCOLN for the purpose of service mark reviews and
approval at least ten business days before their intended use by
DELAWARE.
2. During the term of this limited license, LINCOLN may request
that DELAWARE submit samples of any material bearing any of the
Lincoln Licensed Marks that were previously approved by LINCOLN or
that were not previously approved in the manner set forth above. If,
on reconsideration or on initial review, respectively, any such sample
fails to meet with the written approval of LINCOLN, then DELAWARE
shall immediately cease using or disseminating such disapproved
material. DELAWARE shall obtain the prior written approval of LINCOLN
for the use of any new material developed to replace the disapproved
material, in the manner set forth above. All costs associated with
any such reconsideration will be borne by DELAWARE.
C. ASSIGNMENT. This limited license is personal to DELAWARE and may not
be assigned without the prior written consent of LINCOLN.
D. BREACH. If DELAWARE shall violate or fail to perform any of its
obligations under this limited license, LINCOLN shall have the right to
terminate this limited license upon thirty (30) days written notice, and
such notice of termination shall become effective unless DELAWARE shall
completely remedy the default within such 30-day period. Termination of
the license under the provisions of this paragraph shall be without
prejudice to any other rights that LINCOLN may have against DELAWARE.
E. LINCOLN'S RIGHTS. All rights in the Lincoln Licensed Marks other than
those specifically granted herein are reserved by LINCOLN for its own use
and benefit. DELAWARE shall at any time, whether during or after the term
of this limited license,
<PAGE>
execute any documents reasonably required by LINCOLN to confirm LINCOLN's
ownership of all such rights.
<PAGE>
Amendment to Schedule A
To the Selling Group Agreement
Between
The Company and The Broker
Effective February 9, 1999
The following is a list of Contracts that Broker has been granted authority
by the Company to sell:
1. Lincoln National Life Insurance Company
Multi-Fund-Registered Trademark- Variable Annuity Contracts
(Lincoln National Variable Annuity Account C)
2. Lincoln National Life Insurance Company
Variable Universal Life III Contracts
(Lincoln Life Flexible Premium Variable Life Account G)
3. Lincoln National Life Insurance Company
Multi-Fund-Registered Trademark- Variable Life
(Lincoln Life Flexible Premium Variable Life Account K)
4. Lincoln National Life Insurance Company
VUL I
(Lincoln Life Flexible Premium Variable Life Account M)
5. Lincoln National Life Insurance Company
Delaware-Lincoln ChoicePlus
Delaware-Lincoln ChoicePlus XL
(Lincoln National Variable Annuity Account N)
6. Lincoln National Life Insurance Company
Group Multi-Fund-Registered Trademark-
(Lincoln Life Variable Annuity Account Q)
7. Lincoln National Life Insurance Company
SVUL
(Lincoln Life Flexible Premium Variable Life Account R)
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule A to be executed in its name and behalf by its duly authorized officer
specified below.
THE LINCOLN NATIONAL LIFE LINCOLN FINANCIAL
INSURANCE COMPANY [COMPANY] ADVISORS, INC. [BROKER]
By: /s/ Kelly D. Clevenger By: /s/ Richard C. Boyles
----------------------- ---------------------
Kelly D. Clevenger Richard C. Boyles
Vice President Chief Financial Officer
<PAGE>
OPTIONAL METHODS OF SETTLEMENT
This rider is made part of the contract to which it is attached as of the Date
of Issue. Upon written request, the Company will agree to pay the net proceeds
that may be payable under the contract in accordance with any one of the options
shown below.
While the Owner is alive, the request, including the designation of the payee,
may be made by the Owner. At the time a Death Benefit becomes payable under the
contract, the request, including the designation of the payee, may then be made
by the Beneficiary. Once Income Payments have begun, no surrender of the Annuity
Account Value can be made and the Annuitant(s) cannot be changed, nor can the
settlement option be changed.
ANNUITY DATE. The Annuity Date is the date on which the contract is annuitized.
This definition replaces the definition of Annuity Date under the Definitions
section of the contract to which this rider is attached.
PAYMENT DATES. The Income Payment Date shall be the date on which the Owner is
entitled to the Income Payment. Income Payments may be payable monthly,
quarterly, semi-annually, or annually. If the Income Payment is a 100% Fixed
Income Payment, the first Income Payment Date under the settlement option
selected will be at least 30 days after the Annuity Date as selected by the
Owner. If the Income Payment is in any part a Variable Income Payment, the first
Income Payment Date under the settlement option selected will be 14 days after
the Valuation Period which ends immediately preceding the Annuity Date as
selected by the Owner. Subsequent Income Payments will be made on the same day
of the month as the first Income Payment Date in accordance with the manner of
payment selected (monthly, quarterly, semi-annually, annually). The valuation of
all subsequent Variable Income Payments will be made at the end of the Valuation
Period that is 14 days prior to each Variable Income Payment Date.
MINIMUM PAYMENT AMOUNT. The settlement option elected must result in an Income
Payment per Sub-Account of at least $50 and/or a Fixed Income Payment of at
least $50. If at any time this minimum is not met, the Company has the right to
change the frequency to an interval that will provide the minimum required. If
any amount due is less than the minimum per year, the Company may make other
arrangements that are equitable.
EVIDENCE OF SURVIVAL. The Company has the right to ask for proof that the
Annuitant(s) on whose life the Income Payment is based is alive on each Income
Payment Date.
PROOF OF AGE. Commencement of Income Payments will be subject to proof of age,
acceptable to the Company, such as a certified copy of a birth certificate.
FIXED INCOME OPTIONS
FIXED INCOME PAYMENTS. Fixed Income Payments will remain level pursuant to the
terms of the fixed settlement option(s) selected. The amount of the Fixed Income
Payment shall be determined in accordance with the terms of the settlement
option, the Annuitant's settlement age and gender, and the table of Income
Payment Rates Under A Fixed Income Option set forth in this rider, as
applicable. The mortality table used is the 1983 'a' Individual Annuitant
Mortality Table, modified, with a 3% interest rate. In determining the Fixed
Income Payment, the Annuitant's settlement age will be adjusted according to the
Age Adjustment Table set forth in this rider.
FIRST OPTION: LIFE ANNUITY. An annuity which provides annuity Income Payments
during the lifetime of the Annuitant, ceasing with the last Income Payment due
prior to the death of the Annuitant.
SECOND OPTION: LIFE ANNUITY WITH CERTAIN PERIOD An annuity which provides
annuity Income Payments during the lifetime of the Annuitant and further
provides that if at the death of the Annuitant Income Payments have been made
for less than the elected certain period, which may be 120 or 240 months, the
annuity Income Payments will continue for the remainder of the elected certain
period.
THIRD OPTION: CASH REFUND LIFE ANNUITY. An annuity which provides annuity Income
Payments during the lifetime of the Annuitant, ceasing with the last Income
Payment due prior to the death of the Annuitant, with the guarantee that upon
the death of the Annuitant, if: (a) the total dollar amount applied to purchase
this Fixed Income Payment option is greater than (b) the Fixed Income Payment
multiplied by the number of Income Payments paid prior to death; then a refund
payment equal to the dollar amount of (a) minus (b) will be made after the death
claim is approved by the Company for payment and the Company is in receipt of:
(a) proof of death acceptable to the Company; (b) written authorization for
payment; and (c) all claim forms, fully completed.
<PAGE>
FOURTH OPTION: JOINT LIFE ANNUITY. An annuity which provides annuity Income
Payments during the joint lifetime of the Annuitant and a Joint Annuitant,
ceasing with the last Income Payment due prior to the last death of the joint
annuitants.
FIFTH OPTION: JOINT LIFE AND TWO-THIRDS TO SURVIVOR ANNUITY. An annuity which
provides annuity Income Payments during the joint lifetime of the Annuitant and
a Joint Annuitant, with two-thirds of such Income Payment payable during the
remaining lifetime of the survivor and ceasing with the last Income Payment due
prior to the last death of the joint annuitants.
SIXTH OPTION: JOINT LIFE ANNUITY WITH CERTAIN PERIOD. An annuity which provides
annuity Income Payments during the joint lifetime of the Annuitant and a Joint
Annuitant and further provides that if after the death of both Annuitants Income
Payments have been made for less than the elected certain period, which may be
120 or 240 months, the annuity Income Payments will continue for the remainder
of the elected certain period.
SEVENTH OPTION: JOINT LIFE AND TWO-THIRDS TO SURVIVOR ANNUITY WITH CERTAIN
PERIOD. An annuity which provides annuity Income Payments during the joint
lifetime of the Annuitant and a Joint Annuitant, with two-thirds of such Income
Payment payable during the remaining lifetime of the survivor, further providing
that should one or both Annuitants die during the elected certain period, which
may be 120 or 240 months, the full annuity Income Payment will continue for the
remainder of the elected certain period.
VARIABLE INCOME OPTIONS
VARIABLE INCOME PAYMENTS. The amount of the first Variable Income Payment shall
be determined in accordance with the terms of the settlement option, the
Annuitant's settlement age and gender, and the table of Income Payment Rates
Under A Variable Income Option set forth in this rider, as applicable. The
mortality table used is the 1983 'a' Individual Annuitant Mortality Table,
modified, with a 4% assumed interest rate. In determining the first Variable
Income Payment, the Annuitant's settlement age will be adjusted according to the
Age Adjustment Table set forth in this rider.
The first Variable Income Payment is sub-divided into components each of which
represents the product of: (a) the percentage elected by the Owner of a specific
Sub-Account the performance of which will determine future Variable Income
Payments, and (b) the entire first Variable Income Payment. On the Annuity Date,
the Contract is credited with Annuity Units for each Sub-Account. The number of
Annuity Units credited is computed by dividing the component of the first
Variable Income Payment attributable to a specific Sub-Account by the Annuity
Unit value for that Sub-Account. Each Variable Income Payment after the first
attributable to a specific Sub-Account will be determined by multiplying the
Annuity Unit value at the end of the Valuation Period that is 14 days prior to
each Variable Income Payment Date for the Sub-Account by a constant number of
Annuity Units. The total Variable Income Payment will be the sum of the payments
attributable to each SubAccount.
The number of Annuity Units of each Sub-Account remains fixed unless an exchange
of Annuity Units is made pursuant to the "Exchange of Variable Annuity Units"
section. The dollar amount of each Variable Income Payment after the first may
increase, decrease or remain level.
ANNUITY UNIT VALUE. The Annuity Unit Value for each Sub-Account was arbitrarily
established at the inception of the Sub-Account. The Annuity Unit Value for the
particular Sub-Account for any subsequent Valuation Period is determined by
multiplying the Annuity Unit Value for the particular Sub-Account for the
immediately preceding Valuation Period by the Net Investment Factor for the
current Valuation Period and then multiplying that product by a factor to
neutralize the assumed interest rate of 4% per year to establish the Income
Payment Rates Under A Variable Income Option set forth in this rider. The factor
is 0.9998926 for a one-day valuation period.
EXCHANGE OF VARIABLE ANNUITY UNITS. After the Annuity Date the Owner may, by
filing a written request with the Company at its Home Office, exchange a
designated number of Annuity Units of particular Variable SubAccounts for other
Annuity Units, the value of which would be such that the dollar amount of an
Income Payment made on the date of the exchange would be unaffected by the
exchange. Unless otherwise authorized by the Company in writing, no more than
three (3) exchanges may be made in any Contract Year.
Exchanges may only be made among the Variable Sub-Accounts or from the Variable
Sub-Accounts to a Fixed Income Payment. Exchanges shall be made using the
Annuity Unit Values for the Valuation Period during which the request for
exchange is received by the Company at its Home Office.
OPTION 1: VARIABLE LIFE ANNUITY. A variable annuity which provides annuity
Income Payments during the lifetime of the Annuitant, ceasing with the last
Income Payment due prior to the death of the Annuitant.
<PAGE>
INCOME PAYMENT RATES UNDER A FIXED INCOME OPTION
DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS
PURCHASED WITH EACH $1,000 APPLIED
SINGLE LIFE ANNUITIES
<TABLE>
<CAPTION>
No 120 240
Period Months Months Cash
Age Certain Certain Certain Refund
<S> <C> <C> <C> <C>
60 $4.42 $4.38 $4.22 $4.18
61 4.52 4.47 4.29 4.26
62 4.62 4.56 4.36 4.34
63 4.73 4.66 4.43 4.42
64 4.85 4.77 4.50 4.51
65 4.97 4.89 4.57 4.60
66 5.11 5.01 4.64 4.69
67 5.25 5.13 4.71 4.79
68 5.41 5.27 4.78 4.90
69 5.57 5.41 4.85 5.01
70 5.75 5.56 4.91 5.13
71 5.95 5.71 4.98 5.25
72 6.16 5.88 5.04 5.38
73 6.38 6.05 5.09 5.52
74 6.63 6.23 5.14 5.66
75 6.90 6.42 5.19 5.81
<CAPTION>
JOINT AND SURVIVOR ANNUITIES
Joint and Full to Survivor Joint and Two-Thirds Survivor
Certain Period Certain Period
Joint
None 120 240 Age None 120 240
<S> <C> <C> <C> <C> <C> <C>
$4.01 $4.01 $3.98 60 $4.43 $4.38 $4.22
4.09 4.08 4.05 61 4.52 4.47 4.29
4.17 4.16 4.12 62 4.63 4.57 4.36
4.25 4.25 4.19 63 4.74 4.67 4.43
4.34 4.34 4.26 64 4.85 4.78 4.50
4.44 4.43 4.34 65 4.98 4.89 4.57
4.54 4.54 4.42 66 5.11 5.01 4.64
4.66 4.64 4.50 67 5.26 5.13 4.71
4.77 4.76 4.58 68 5.41 5.27 4.78
4.90 4.88 4.66 69 5.57 5.41 4.85
5.04 5.01 4.74 70 5.75 5.55 4.91
5.18 5.15 4.82 71 5.94 5.70 4.98
5.34 5.30 4.89 72 6.14 5.86 5.03
5.51 5.45 4.96 73 6.35 6.03 5.09
5.69 5.62 5.03 74 6.59 6.20 5.14
5.89 5.79 5.09 75 6.84 6.38 5.18
<CAPTION>
Age Adjustment Table
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
<S> <C> <C> <C>
Before 1920 + 2 1960-1969 -3
1920-1929 + 1 1970-1979 -4
1930-1939 0 1980-1989 -5
1940-1949 -1 1990-1999 -6
1950-1959 -2 ETC. ETC.
</TABLE>
<PAGE>
OPTION II: VARIABLE LIFE ANNUITY WITH CERTAIN PERIOD. A variable annuity which
provides annuity Income Payments during the lifetime of the Annuitant and
further provides that if at the death of the Annuitant Income Payments have been
made for less than the elected certain period, which may be 120 or 240 months,
the annuity Income Payments will continue for the remainder of the elected
certain period.
OPTION III: VARIABLE UNIT REFUND LIFE ANNUITY. A variable annuity which provides
annuity Income Payments during the lifetime of the Annuitant, ceasing with the
last Income Payment due prior to the death of the Annuitant, with the guarantee
that upon the death of the Annuitant, if- (a) the number of Annuity Units
initially purchased (determined by dividing the total dollar amount applied to
purchase this Variable Income Payment option by the Annuity Unit value on the
Valuation Period which ends immediately preceding the Annuity Date) is greater
than (b) the number of Annuity Units paid as part of each Variable Income
Payment multiplied by the number of Income Payments paid prior to death; then a
refund payment equal to the number of Annuity Units determined by (a) minus (b)
will be made. The refund payment value will be determined using the Annuity Unit
value on the Valuation Date on which the death claim is approved by the Company
for payment after the Company is in receipt of: (a) proof of death acceptable to
the Company; (b) written authorization for payment; and (c) all claim forms,
fully completed.
OPTION IV: VARIABLE JOINT LIFE ANNUITY. A variable annuity which provides
annuity Income Payments during the joint lifetime of the Annuitant and a Joint
Annuitant, ceasing with the last Income Payment due prior to the last death of
the joint annuitants.
OPTION V: VARIABLE JOINT LIFE AND TWO-THIRDS TO SURVIVOR ANNUITY. A variable
annuity which provides annuity Income Payments during the joint lifetime of the
Annuitant and a Joint Annuitant, with two-thirds of such Income Payment payable
during the remaining lifetime of the survivor and ceasing with the last Income
Payment prior to the last death of the joint annuitants.
OPTION VI: VARIABLE JOINT LIFE ANNUITY WITH CERTAIN PERIOD. A variable annuity
which provides annuity Income Payments during the joint lifetime of the
Annuitant and a Joint Annuitant and further provides that if after the death of
both Annuitants Income Payments have been made for less than the elected certain
period, which may be 120 or 240 months, the annuity Income Payments will
continue for the remainder of the elected certain period.
OPTION VII: VARIABLE JOINT LIFE AND TWO-THIRDS TO SURVIVOR ANNUITY WITH CERTAIN
PERIOD. A variable annuity which provides annuity Income Payments during the
joint lifetime of the Annuitant and a Joint Annuitant, with twothirds of such
Income Payment payable during the remaining lifetime of the survivor, further
providing that should one or both Annuitants die during the elected certain
period, which may be 120 or 240 months, the full annuity Income Payment will
continue for the remainder of the elected certain period.
ADDITIONAL FIXED AND VARIABLE BENEFIT OPTIONS. Any proceeds payable under the
contract may also be settled under any other method of settlement agreed upon by
the Company at the time of the request.
The Lincoln National Life Insurance Company
Gabriel L. Shaheen, President
<PAGE>
INCOME PAYMENT RATES UNDER A VARIABLE INCOME OPTION
DOLLAR AMOUNT OF FIRST MONTHLY PAYMENT WHICH IS
PURCHASED WITH EACH $1,000 APPLIED
SINGLE LIFE ANNUITIES
<TABLE>
<CAPTION>
No 120 240
Period Months Months Unit
Age Certain Certain Certain Refund
<S> <C> <C> <C> <C>
60 $4.78 $4.73 $4.56 $4.56
61 4.87 4.81 4.63 4.63
62 4.97 4.90 4.69 4.71
63 5.07 5.00 4.75 4.78
64 5.19 5.10 4.82 4.87
65 5.30 5.21 4.88 4.98
66 5.43 5.32 4.95 5.04
67 5.57 5.44 5.01 5.14
68 5.72 5.56 5.08 5.24
69 5.88 5.70 5.14 5.34
70 6.05 5.84 5.20 5.46
71 6.23 5.99 5.26 5.57
72 6.44 6.14 5.31 5.69
73 6.66 6.30 5.36 5.82
74 6.89 6.47 5.40 5.96
75 7.15 6.65 5.44 6.10
<CAPTION>
JOINT AND SURVIVOR ANNUITIES
Joint and Full to Survivor Joint and Two-Thirds Survivor
Certain Period Certain Period
Joint
None 120 240 Age None 120 240
<S> <C> <C> <C> <C> <C> <C>
$4.37 $4.37 $4.34 60 $4.78 $4.74 $4.57
4.44 4.44 4.40 61 4.88 4.82 4.63
4.52 4.51 4.46 62 4.97 4.91 4.69
4.60 4.59 4.53 63 5.08 5.00 4.76
4.68 4.68 4.60 64 5.19 5.10 4.82
4.77 4.77 4.67 65 5.31 5.21 4.88
4.87 4.86 4.74 66 5.44 5.32 4.95
4.98 4.96 4.82 67 5.57 5.44 5.01
5.09 5.07 4.89 68 5.72 5.56 5.08
5.21 5.19 4.96 69 5.87 5.69 5.14
5.34 5.31 5.04 70 6.04 5.83 5.20
5.47 5.44 5.11 71 6.22 5.97 5.25
5.62 5.58 5.18 72 6.42 6.12 5.31
5.78 5.73 5.24 73 6.62 6.28 5.36
5.96 5.88 5.30 74 6.85 6.44 5.40
6.14 6.05 5.36 75 7.09 6.61 5.44
<CAPTION>
Age Adjustment Table
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
<S> <C> <C> <C>
Before 1920 + 2 1960-1969 -3
1920-1929 + 1 1970-1979 -4
1930-1939 0 1980-1989 -5
1940-1949 -1 1990-1999 -6
1950-1959 -2 ETC. ETC.
</TABLE>
<PAGE>
NURSING CARE WAIVER OF SURRENDER/WITHDRAWAL CHARGES RIDER
This rider is made part of the contract to which it is attached. It remains in
effect until the date the Original Owner is no longer the Owner of the contract
(see "Termination" provision).
BENEFIT. The provision of the contract pertaining to Penalty-Free Partial
Withdrawals or Transfers is hereby amended to provide for the following
additional benefit:
Subsequent to the first Contract Anniversary and prior to the Annuity Date, the
Original Owner may, upon request in writing, surrender/withdraw up to 75% of the
Annuity Account Value at the time of request without the imposition of any
surrender/withdrawal charges provided the Original Owner at the time of the
request is confined in a Hospital or Licensed Nursing Facility, as set forth
below. However, any surrenders/withdrawals will be subject to a Market Value
Adjustment.
This benefit may be taken annually provided the following conditions are met.
CONDITIONS AND LIMITATIONS. The payment of the benefit under this rider is
subject to the following conditions and limitations:
1. The Company must be furnished with evidence, satisfactory to the
Company, that the Original Owner is confined in a Hospital or Licensed
Nursing Facility and has been so confined continuously for all of the 180
days immediately preceding the request. Proof of confinement may be a
Licensed Physician's statement, hospital statement or nursing home
statement.
2. The 180-day confinement period in a Hospital or Licensed Nursing
Facility must have commenced after the first Contract Anniversary and be
for a minimum of 180 consecutive days.
3. The Original Owner must not be confined in a Hospital or Licensed
Nursing Facility on the Date of Issue of the contract.
4. Payment(s) made under this rider are payable to the Original Owner and
may either be taken as a lump sum or, upon consent of the Company, spread
throughout a Contract Year.
5. The Company places no restriction on the use of the benefit payment(s)
payable under this rider.
6. The Company makes no statement or representation concerning the tax
treatment of any payments made under this rider.
7. The request for surrender/withdrawal must be made within 91 days of
the last day of confinement.
DEFINITIONS. The "Definitions" section of the contract is hereby amended to
include the following:
CUSTODIAL CARE. Custodial Care is daily care that is required to assist a person
with living requirements of eating, bathing and dressing. The person(s)
providing the care need not have medical training, but must be under the
supervision of registered nurse (R.N.) or licensed practical nurse (L.P.N.).
HOSPITAL. A Hospital means an institution which:
a. is operated pursuant to the law of the jurisdiction in which it is located;
b. operates primarily for the care and treatment of sick and injured persons
on an inpatient basis;
c. provides 24-hour a day nursing service by or under the supervision of
registered graduate professional nurses;
d. is supervised by a staff of one or more Licensed Physicians; and
e. has medical, surgical and diagnostic facilities or access to such
facilities.
<PAGE>
INTERMEDIATE NURSING CARE. Intermediate Nursing Care is nursing care prescribed
by a physician and supervised by a registered graduate nurse. Such care includes
nursing and rehabilitation services available 24-hours a day.
LICENSED NURSING FACILITY. A Licensed Nursing Facility means a facility which:
a. is licensed by the jurisdiction in which it is located;
b. provides Skilled Nursing Care, Intermediate Nursing Care or
Custodial Care;
c. primarily provides nursing care under the direction of a Licensed
Physician, registered graduate professional nurse or licensed practical
nurse except when receiving custodial nursing care; and
d. is not other than incidentally a hospital, a home for the aged, a
retirement home, a rest home, or a community living center.
LICENSED PHYSICIAN. A person who is state licensed to give medical care or
treatment and is acting within the scope of that license.
ORIGINAL OWNER. The Owner on the Date of Issue of the contract.
SKILLED NURSING CARE. Skilled Nursing Care is nursing care prescribed by a
Licensed Physician and performed by a registered graduate nurse. Such care
includes nursing and rehabilitation services available 24-hours a day.
TERMINATION. This rider terminates as of the date the Original Owner exercises a
change in ownership of the contract. On such date the rider terminates
irrespective of whether or not the Original Owner once again becomes the Owner
of the contract.
CONTRACT PROVISIONS. Except as provided above, this rider is subject to all the
terms of the contract.
EFFECTIVE DATE. This rider becomes effective as of its date of issue which is
the Date of Issue of the contract unless a later date is shown here or in the
Contract Specifications.
The Lincoln National Life Insurance Company
Gabriel L. Shaheen, President
<PAGE>
SECTION 403(b) ANNUITY ENDORSEMENT
MADE A PART OF THE CONTRACT TO WHICH IT IS ATTACHED ("THIS CONTRACT")
This Endorsement is attached to an annuity contract ("Contract") described in
Section 403(b) of the Internal Revenue Code of 1986 and applicable regulations
("IRC"). The Contract will be governed by this Endorsement and Section 403(b)
annuity rules and any contrary provisions in the Contract are amended as
follows. If the Section 403(b) arrangement ("Arrangement") in which you
participate is subject to the requirements of the Employee Retirement Income
Security Act of 1974 and applicable regulations ("ERISA,"), the provisions of
Section 10 below shall also apply.
OWNER AND ANNUITANT
1. The Owner must be either an organization described in IRC Section
403(b)(1)(A) ("Employer") or an employee of such an Employer. If the Owner
is the Employer, the term ("Employee") will mean the individual for whose
benefit the Employer established an annuity program under IRC Section
403(b). This Employee will be the Annuitant under the Contract. If the
Owner is an Employee of the Employer, the Annuitant under the Contract will
be that Employee.
If this Contract is used to accept a rollover under IRC Sections 403(b)(8)
or 408(d)(3) ("Rollover") or a nontaxable direct transfer from another
Arrangement ("Direct Transfer"), the Owner will be the Employer or the
individual for whose benefit the Section 403(b) program was established,
who will also be the Annuitant.
A Contingent Owner or a Joint Owner cannot be named.
NONTRANSFERABLE
2. The Employee's interest in this Contract is nontransferable within the
meaning of IRC Section 401(g). This Contract may not be sold, assigned,
discounted, or pledged as collateral for a loan and may not be alienated
except under the terms of a qualified domestic relations order within the
meaning of IRC Section 414(p) ("QDRO").
PURCHASE PAYMENTS
3. Purchase payments must be made by an Employer or an Employee, except
in the case of a Rollover or a Direct Transfer.
Purchase payments must not exceed the limits in IRC Sections 415 or 403(b),
and if made under the terms of a salary reduction agreement ("Agreement")
also will be limited as provided in IRC Section 402(g). Purchase payments
in excess of such amounts may be distributed by The Lincoln National Life
Insurance Company ("LL") as permitted by law.
Minimum purchase payments will not exceed $200 annually under this
Contract, except in the case of a Rollover or a Direct Transfer. LL may not
surrender the Contract.
REQUIRED DISTRIBUTIONS
4. The Contract account value will be distributed as required under IRC
Section 403(b)(10) including the requirement that payments to persons other
than the Employee are incidental.
REQUIRED BEGINNING DATE: The term "Required Beginning Date" will mean the
following:
a) For years beginning before 1997, "Required Beginning Date" means
April I of the calendar year following the calendar year the Employee
attains age 70 1/2. For an Employee who attains age 70 1/2 before
January 1, 1988, OR FOR an Employee in a governmental plan or a church
plan (as defined in IRC Section 401(a)(9)(C)), Required Beginning Date
means April 1 of the calendar year following the later of (i) the
calendar year the Employee attains age 70 1/2, or (ii) the calendar
year the Employee retires.
<PAGE>
b) For years beginning in 1997 and after, "Required Beginning Date" means
April 1 of the calendar year following the later of (i) the calendar
year the Employee attains age 70 1/2, or (ii) the calendar year the
Employee retires. Except in the case of a governmental plan or a
church plans (as defined in IRC Section 401(a)(9)(C)), for an Employee
who is a "five-percent owner" (as defined in IRC Section 416),
"Required Beginning Date" means April I of the calendar year following
the calendar year the Employee attains age 70 1/2.
DISTRIBUTIONS DURING EMPLOYEE'S LIFE: If required by Section 403(b)(10), the
Employee's entire interest will be distributed by the Required Beginning Date,
or will be distributed, beginning by the Required Beginning Date, over (a) the
life of the Employee, or the lives of the Employee and the Employee"s designated
beneficiary as defined in IRC Section 401(a)(9) ("Designated Beneficiary"), or
(b) a period certain not longer than the life expectancy of the Employee or the
joint and last survivor expectancy of the Employee and the Designated
Beneficiary.
If the Employee's interest is to be distributed over a period greater than one
year, the amount to be distributed by December 31 of each year (including the
year in which the Required Beginning Date occurs) will be governed by IRC
Section 401(a)(9) including the incidental death benefit requirement and
Regulation 1.401(a)(g)-2 as required by IRC Section 403(b)(1G).
DISTRIBUTIONS AFTER EMPLOYEE'S DEATH: If the Employee dies on or after the
Required Beginning Date (or after irrevocable annuity distributions have begun
before the required beginning date), any remaining interest will be distributed
at least as rapidly as under the distribution method in effect at the Employee's
death.
If required by Section 403(b)(10) and if the Employee dies before the Required
Beginning Date and an irrevocable annuity distribution has not begun, the entire
interest will be distributed by December 31 of the calendar year containing the
fifth anniversary of the Employee's death ("End of the Fifth Year"), except:
a) if the interest is payable to an individual who is the Designated
Beneficiary, the Designated Beneficiary may elect to receive the entire
interest over life or a period that is no longer than the life expectancy
of the Designated Beneficiary, starting by December 31 of the calendar year
immediately following the calendar year of the Employees death; or,
b) if the Designated Beneficiary is the Employee's surviving spouse ("Spousal
Designated Beneficiary"), the surviving spouse may elect to receive the
entire interest over life or any period no longer than life expectancy
starting at any date on or before the later of:
i) December 31 of the calendar year immediately following the calendar year in
which the Employee died; and
ii) December 31 of the calendar year in which the Employee would have attained
age 70 1/2.
If the surviving spouse dies before distributions begin, the limitations of this
Section (other than this paragraph (b)) will be applied as if the surviving
spouse were the Employee.
An irrevocable election of the method of distribution by a Spousal Designated
Beneficiary must be made by the earlier of End of the Fifth Year or the date
distributions are required to begin under this paragraph (b). If no election is
made, the entire interest will be distributed by the End of the Fifth Year.
An irrevocable election of the method of distribution by a non-spouse Designated
Beneficiary must be made by December 31 of the calendar year immediately
following the calendar year in which the employee died. If no election is made,
the entire interest will be distributed by the End of the Fifth Year.
LIFE EXPECTANCY CALCULATIONS: Life expectancies will be calculated using the
Employee's (and the Desig nated Beneficiarys) attained age as of the Employee's
birthday (and the Designated Beneficiary's birthday) in the calendar year the
Employee attains age 70 1/2. Life expectancies will be calculated in accordance
with Federal tax requirements and will not be recalculated unless the Employee,
or for distributions beginning after the Employee"s death, the Spousal
Designated Beneficiary, makes an Election, prior to the date distributions are
required to begin, to have life expectancies recalculated annually.
<PAGE>
ANNUITY OPTIONS AND WITHDRAWALS
5. All Annuity Payment Options ("Options") and Withdrawals under the
Contract must meet the required distributions of Section 4, including the
requirement that payments to persons other than the employee are
incidental.
The amount of Annuity Payments will be based on unisex rates.
DISTRIBUTION OF SALARY REDUCTION CONTRIBUTIONS
6. Any contributions made after 1988, under an Agreement and the earnings on
such contributions and on amounts held on December 31, 1988, may not be
distributed unless the Employee has reached age 59 1/2, separated from
service, died, become disabled (within the meaning of IRC Section 72(m)(7))
or incurred a hardship. Hardship distributions will be limited to
contributions (not the earnings) made under an Agreement. Also, amounts may
be distributed under the terms of a QDRO.
Direct Transfers to another Arrangement may be made only as permitted by
applicable law. Amounts subject to withdrawal restrictions under the IRC
may only be transferred to an Arrangement with the same or stricter
restrictions.
DISTRIBUTION OF CUSTODIAL ACCOUNT CONTRIBUTIONS
7. Purchase payments made by Direct Transfer which are subject to the
withdrawal restrictions of IRC Section 403(b)(7)(A)(ii) and earnings on
such payments will continue to be subject to the same legal restrictions.
NO LOANS
8. You may not borrow any amount under the Contract.
DIRECT ROLLOVERS
9. The Employee, the Employee's spouse, or the Employee's spouse or former
spouse, who is the alternate payee under a QDRO ("Distributee"), may
elect to have any portion of an eligible rollover distribution paid
directly to an eligible retirement plan. This is called a direct rollover.
An eligible rollover distribution ("Distribution") is any distribution
unless it is:
a) one of a series of substantially equal periodic payments (made at least
annually) for the life (or life expectancy) of the Distributee or the joint
lives (or joint life expectancies) of the Distributee and the Distributee's
Designated Beneficiary, or for a specified period of ten years or more;
b) any required distribution under IRC Section 403(b)(10); or
c) any part of a distribution that is not includible in income.
An eligible retirement plan is an IRC Section 403(b) annuity or an individual
retirement plan as defined in IRC Section 7701(a)(37) ("IRA") that accepts
Distributions. However, in the case of a Distribution to the surviving spouse,
an eligible retirement plan is an IRA.
This Section 9 applies to all Distributions made after December 31, 1992.
ERISA REQUIREMENTS
10. If this Contract is subject to the requirements of ERISA, the following
applies, but only to the extent consistent with your Employer's 403(b)
plan.
a) In the event of the Employee's death prior to the Annuity Date, the
death benefit shall be paid to (i) the surviving spouse of the
Employee in the form required by Section 205 of ERISA ("SECTION 205"),
unless the spouse elects otherwise within the requirements of Section
205 ("Consent"), or (ii) if there is no
surviving spouse, or if the surviving spouse has Consented or if ERISA permits,
to the Designated Beneficiary under the Contract.
b) Unless ERISA permits, only Option (c) with no certain period is available
to a married Employee, and the Joint Annuitant must be the Employee's
spouse. A married Employee may elect another Option or designate another
Joint Annuitant provided his or her spouse Consents, or if such election is
permitted under ERISA. An unmarried
<PAGE>
Employee will be deemed to have elected Option (a) with no period certain
unless he or she makes a different Election.
c) Elections and Consents may be revoked as permitted by ERISA and must be in
the form required by ERISA.
d) No partial or total withdrawal may be made without Consent of the Employee
and the Employee's spouse, except to the extent not required by ERISA. Any
withdrawal must be made as required by ERISA unless the Employee (and
spouse, if any) makes an Election to receive the benefit in another form.
Employer consent for partial or total withdrawals may also be required.
e) If the Employee's contract value is $3,500 or less as determined on the
first day of the month preceding the Annuity Date, LL will pay the Contract
value to the Employee on the Annuity Date in one lump sum as required by
Section 205.
The Lincoln National Life Insurance Company
Gabriel L. Shaheen, President
<PAGE>
LINCOLN NATIONAL LIFE INSURANCE CO.
A part of LINCOLN NATIONAL CORPORATION 1300 South Clinton St. Fort Wayne, IN
46801
SECTION 457 GOVERNMENTAL
DEFERRED COMPENSATION PLAN ENDORSEMENT
MADE A PART OF THE CONTRACT TO WHICH IT IS ATTACHED ("THIS CONTRACT)
This Endorsement is attached to an annuity contract (the "Contract") described
in Section 401(f) of the Internal Revenue Code of 1986, as amended (the "Code")
that provides a funding instrument for an eligible governmental deferred
compensation plan within the meaning of Section 457 of the Code, including
without limitation Section 457(g) of the Code. The Contract will be governed by
this Endorsement and Section 457 of the Code, including without limitation
Section 457(g) of the Code, and any contrary provisions in the Contract are
amended as follows.
1. OWNER, PLAN, PARTICIPANT (ANNUITANT) AND BENEFICIARY
The Owner is an eligible governmental employer described in Section
457(e)(1)(A) of the Code which maintains a Deferred Compensation Plan (the
"Plan") which is intended to be an eligible governmental deferred
compensation plan within the meaning of Section 457 of the Code, including
without limitation Section 457 (g) of the Code. The Annuitant (also
referred to herein as the "Participant") is an employee of the Owner who
participates in the Plan. The Beneficiary or Beneficiaries shall be the
person, persons or entity designated by the Participant in accordance with
the terms of the Plan to receive benefits under the plan or, in the absence
of such designation, the person, persons or entity specified under the
terms of the Plan. If the Plan requires a designated Beneficiary to survive
the Participant by a specified period in order for the designation to be
effective, and the designated Beneficiary fails to so survive the
Participant, then the Beneficiary shall be the person, persons or entity
determined in accordance with or specified under the terms of the Plan.
2. PURPOSE OF CONTRACT
This Contract provides a funding instrument for the Plan and provides for
the payment of benefits determined in accord with the terms of the Plan.
This Contract is intended to constitute a contract described in Section
401(f) of the Code that satisfies the requirements of Section 457(g) of the
Code, and shall be interpreted so as to be consistent therewith.
3. ACTIONS OF OWNER FOR EXCLUSIVE BENEFIT OF PARTICIPANT AND
BENEFICIARIES
All directions, elections and other actions authorized to be made by the
Owner under this Contract shall be for the exclusive benefit of the
Participant and his or her Beneficiaries.
4. ANNUITY PAYMENTS
An election to receive proceeds under an Annuity Payment Option shall be
made at the time or times and in the manner specified in the Plan, and
shall in all other respects be in accord with the terms of the Plan. If an
Annuity Payment Option is not chosen within the time or in the manner
specified in the Plan, payments under this Contract will commence at such
time and will be paid in such manner to such person or persons as is
provided for in the Plan.
5. CHOICE OF ANNUITY PAYMENT OPTION
The choice of any Annuity Payment Option or the change of any previously
elected Annuity Payment Option shall be made at the time or times and in
the manner specified in the Plan, and shall in all other respects be in
accord with the terms of the Plan.
6. ANNUITY PAYMENT OPTIONS
The Annuity Payment Options shall be as described in the Plan subject to
the limitations of the Contract.
7. SURRENDER OF OR WITHDRAWAL FROM CONTRACT
No surrender of or withdrawal from this Contract shall be effected other
than for the exclusive benefit of the Participant and his or her
Beneficiaries in accordance with the terms of the Plan.
<PAGE>
8. EXCLUSIVE BENEFIT OF PARTICIPANT AND BENEFICIARIES
This Contract is issued, and shall be held, administered, interpreted and
applied, for the exclusive benefit of the Participant and his or her
Beneficiaries. In no event shall this Contract or any of the rights or
interests in or under this Contract be subject to the rights or claims of
any creditor of the Owner, nor shall this Contract or any of the rights or
interests in or under this Contract be used for, or diverted to, purposes
other than for the exclusive benefit of the Participant and his or her
Beneficiaries.
9. CHANGES TO CONTRACT
The Owner, acting for the exclusive benefit of the Participant and his or
her Beneficiaries may change this Contract with the consent of LNL;
provided, however, that no such change shall authorize or permit at any
time this Contract or any of the rights or interests in or under this
Contract to be used in any manner for, or diverted to, purposes other than
for the exclusive benefit of the Participant and his or her beneficiaries.
The Lincoln National Life Insurance Company
Gabriel L. Shaheen, President
<PAGE>
IRA CONTRACT AMENDMENT
MADE A PART OF THE CONTRACT TO WHICH IT IS
ATTACHED ("THIS CONTRACT)
1. This amendment shall be controlling and overrides any contradictory
provision in the Contract.
2. If the Contract is a Single Premium Immediate Annuity (SPIA), certain
provisions of this IRA Contract Amendment may not apply because
distributions will have already commenced under the Contract.
3. The Contract will not be transferable except to the Company on
surrender or settlement. It may not be sold, assigned, discounted or
pledged as collateral for a loan or as security for the performance of an
obligation or for any other purpose.
4. The entire interest of the Owner/Annuitant in this Contract shall be
nonforfeitable.
5. The annual purchase payment under a periodic contract will not exceed the
lesser of.
100% of the Owner/Annuitant's gross compensation (earned income) for
the taxable year or $2,000 for an Owner/Annuitant under an Individual
Retirement Annuity (IRA).
15% of the Owner/Annuitant's gross compensation for the taxable year
or $30,000 under a Simplified Employee Pension (SEP).
15% of the Owner/Annuitant's gross compensation for the taxable year
or $7,000 (as adjusted) under a Salary Reduction SEP.
6. The minimum contribution under a single payment or SPIA contract is
determined under the Contract provisions and is generally only available
for rollovers and transfers equal to or greater than the minimum amount.
Except in the case of a rollover contribution (as permitted by section
402(c), 403(a)(4), 403(b)(8), or 408(d)(3)) or a contribution made in
accordance with the terms of a Simplified Employee Pension (SEP) as
described in section 408(k), no contributions will be accepted unless they
are in cash, and the total of such contributions shall not exceed $2,000
for any taxable year. This Contract may not require fixed premiums.
7. No contribution will be accepted under a SIMPLE plan established by any
employer pursuant to Code section 408(p). No transfer or rollover of funds
attributable to contributions made by a particular employer under its
SIMPLE plan will be accepted from a SIMPLE IRA, that is, an IRA used in
conjunction with a SIMPLE plan, prior to the expiration of the 2-year
period beginning on the date the individual first participated in that
employer's SIMPLE plan.
8. Purchase payments made pursuant to this Contract shall be from
"compensation" of the Owner/Annuitant. "Compensation" means wages,
salaries, professional fees, or other amounts derived from or received for
personal service actually rendered (including, but not limited to
commissions paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips, and
bonuses) and includes earned income, as defined in section 401(c)(2)
(reduced by the deduction the self-employed individual takes for
contributions made to KEOGH plan). Compensation does not include amounts
derived from or received as earnings or profits from property (including,
but not limited to, interest and dividends) or amounts not includible in
gross income. Compensation also does not include any amount received as a
pension or annuity or as deferred compensation. The term "compensation"
shall include any amount includible in the individual's gross income under
section 71 with respect to a divorce or separation instrument described in
subparagraph (A) of section 71(b)(2). For purposes of this definition,
section 401(c)(2) shall be applied as if the term trade or business for
purposes of section 1402 included service described in subsection (c)(6).
9. The entire interest (value of the account or annuity) of the individual for
whose benefit the account (contract) is maintained (Owner/Annuitant) will
be distributed or commence to be distributed, no later than the first day
of April following the calendar year in which such individual attains age
70 1/2 (required beginning date), in equal or substantially equal amounts,
over (a) the life of the Owner/Annuitant, or the lives of such individual
(Owner/Annuitant) and his or her designated beneficiary, or (b) a period
not extending beyond the life expectancy of such individual
(Owner/Annuitant), or the joint and last survivor expectancy of such
individual (Owner/Annuitant) and his or her designated beneficiary.
Payments must be made in periodic payments at intervals of no longer than
one year. In addition, payments must be either nonincreasing or they may
increase only as provided in Q&A F-3 of section 1.401(a)(9)-l of the
Proposed Income Tax Regulations.
10. All distributions made hereunder shall be made in accordance with the
requirements of section 401(a)(9) of the Code, including the incidental
death benefit requirements of section 401(a)(9)(G) of the Code, and the
<PAGE>
regulations thereunder, including the minimum distribution incidental
benefit requirement of section 1.401(a)(g)-2 of the Proposed Income Tax
Regulations.
11. Life expectancy is computed by use of the expected return multiples in
Tables V and VI of section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the individual by the time distributions are required
to begin, life expectancies shall be recalculated annually. Such election
shall be irrevocable by the individual and shall apply to all subsequent
years. The life expectancy of a non-spouse beneficiary may not be
recalculated. Instead, life expectancy will be calculated using the
attained age of such beneficiary during the calendar year in which the
individual attains ages 70 1/2, and payments for subsequent years shall be
calculated based on such life expectancy reduced by one for each calendar
year which has elapsed since the calendar year life expectancy was first
calculated.
12. At the time a distribution from the Contract is requested, the
Owner/Annuitant is advised to provide the Company with a declaration in
writing of the Owner/Annuitant's intention as to the disposition of the
amount distributed, so that the Company may properly report the amount to
the Internal Revenue Service. Such declaration is not required, however, in
the case of the Owner/Annuitant's death or disability or attainment of age
59 1/2.
13. With respect to any amount which becomes payable under this Contract, or
any supplementary contract is issued in exchange for this Contract during
the lifetime of the Owner/Annuitant, no provision of this Contract or such
supplementary contract shall be applicable to the extent that it permits or
provides for settlement of such amount in a manner other than as set forth
in a, b, c, or d below:
a. To the Owner/Annuitant in one sum;
b. To the Owner/Annuitant as a life annuity (which may provide for a
term certain not extending beyond the life expectancy of the
Owner/Annuitant);
c. To the Owner/Annuitant and his/her designated beneficiary as a
joint and survivor annuity (which may provide for a term certain not
extending beyond the joint life and last survivor expectancy of the
Owner/Annuitant and his/her designated beneficiary);
d. To the Owner/Annuitant as an annuity certain not extending beyond
the life expectancy of the Owner/Annuitant, or, if the Owner/Annuitant
has a living designated beneficiary, the joint life and last survivor
expectancy of the Owner/Annuitant and his/her designated beneficiary.
14. Any payment made under b, c, or d above shall be in equal or substantially
equal amounts or units except for joint and survivor annuities which
provide for reduced payments to a survivor.
15. If the Owner/Annuitant dies before the entire interest is distributed, the
following distributions provisions shall apply:
a. If the Owner/Annuitant dies after distribution of his or her
interest has commenced, the remaining portion of such interest will
continue to be distributed at least as rapidly as under the method of
distribution being used prior to the Owner/Annuitant's death.
b. If the Owner/Annuitant dies before distribution of his or her
interest begins, distribution of the Owner/Annuitant's entire interest
shall be completed by December 31 of the calendar year containing the
fifth anniversary of the Owner/Annuitant's death except to the extent
that an election is made to receive distributions in accordance with
1) or 2) below:
1) The Owner/Annuitant's interest is payable to a designated
beneficiary, then the entire interest of the Owner/Annuitant may
be distributed over the life or over a period certain not greater
than the life expectancy of the designated beneficiary commencing
on or before December 31 of the calendar year immediately
following the calendar year in which the Owner/Annuitant died.
2) If the designated beneficiary is the Owner/Annuitant's surviving
spouse, the date distributions are required to begin in
accordance with 1) above shall not be earlier than the later of:
A) December 31 of the calendar year immediately following the
calendar year in which the Owner/Annuitant died or B) December 31
of the calendar year in which the Owner/Annuitant would have
attained age 70 1/2.
c. If the designated beneficiary is the Owner/Annuitant"s surviving
spouse, the spouse may treat the Contract as his or her own individual
retirement arrangement (IRA). This election will be deemed to have
been made if such surviving spouse makes a regular IRA contribution to
the Contract, makes a rollover to or from such Contract, or fails to
elect any of the above provisions.
d. Life expectancy is computed by use of the expected return
multiples in Tables V and VI of section 1.72-9 of the Income Tax
Regulations. For purposes of distributions beginning after the
individual's death, unless otherwise elected by the surviving spouse
by the time distributions are required to begin, life expectancies
shall be recalculated annually. Such election shall be irrevocable by
the surviving spouse and shall apply to all subsequent years. In the
case of any other designated beneficiary, life expectancies shall be
calculated using the attained age of such beneficiary during the
calendar year in which distributions are required to begin pursuant to
this section, and payments for any subsequent calendar
<PAGE>
year shall be calculated based on such life expectancy reduced by one
for each calendar year which has elapsed since the calendar year life
expectancy was first calculated.
e. Distributions under this section are considered to have begun if
distributions are made on account of the individual reaching his or
her required beginning date or if prior to the required beginning date
distributions irrevocably commence to an individual over a period
permitted and in an annuity form acceptable under section 1.401(a)(9)
of the Regulations.
16. If the Owner/Annuitant discontinues payments the Contract will remain in
full force and effect. Any accrued interest on Guaranteed Interest Accounts
will be applied to the Contract Value and any increases or decreases in the
value of units under variable Contracts will be applied to the Contract
Value. LNL does not impose a penalty upon the Owner/Annuitant if the
Owner/Annuitant resumes making purchase payments.
17. This Contract is for the exclusive benefit of the Owner/Annuitant and
his/her beneficiary.
18. This Contract shall be amended from time to time if required to reflect any
changes in the Internal Revenue Code, Internal Revenue Service regulations,
or published revenue rulings.
19. At least once each Contract Year, it is hereby agreed that LNL shall mail
to the Owner/Annuitant of this Contract a report which shall include a
statement of the dollar value of such Contract. The report shall be mailed
to the last address known to LNL. The information in the report shall be as
of a date not more than two months previous to the date of mailing the
report.
The Lincoln National Life Insurance Company
Gabriel L. Shaheen, President
<PAGE>
ROTH INDIVIDUAL RETIREMENT ANNUITY ENDORSEMENT
(Under section 408A of the Internal Revenue Code)
<TABLE>
<CAPTION>
<S><C>
Name of issuer: Check if this endorsement supersedes
The Lincoln National Life Insurance Company a Prior Roth IRA endorsement
--------------------------------
Check if Roth Conversion IRA
--------------------------------
</TABLE>
This endorsement is made a part of the annuity contract to which it is attached,
and the following provisions apply in lieu of any provisions in the contract to
the contrary.
The annuitant is establishing a Roth individual retirement annuity (Roth IRA)
under section 408A to provide for his or her retirement and FOR THE SUPPORT OF
HIS or her beneficiaries after death.
ARTICLE I
1. If this Roth IRA is not designated as a Roth Conversion IRA, then,
except in the case of a rollover contribution described in section 408A(e),
the issuer will accept only cash contributions and only up to a maximum
amount of $2,000 for any tax year of the annuitant.
2. If this Roth IRA is designated as a Roth Conversion IRA, no
contributions other than IRA Conversion Contributions made during the same
tax year will be accepted.
ARTICLE I I
The $2,000 limit described in Article I is gradually reduced to $0 between
certain levels of adjusted gross income (AGI). For a single annuitant, the
$2,000 annual contribution is phased out between AGI of $95,000 and $110,000;
for a married annuitant who files jointly, between AGI of $150,000 and $160,000;
and for a married annuitant who files separately, between $0 and $10,000. In the
case of a conversion, the issuer will not accept IRA Conversion Contributions in
a tax year if the annuitant's AGI for that tax year exceeds $100,000 or if the
annuitant is married and files a separate return. Adjusted gross income is
defined in section 408A(c)(3) and does not include IRA Conversion Contributions.
ARTICLE III
The annuitant's interest in the contract is nonforfeitable and nontransferable.
ARTICLE IV
1. The contract does not require fixed contributions.
2. Any dividends (refund of contributions other than those attributable
to excess contributions) arising under the contract will be applied before
the close of the calendar year following the year of the dividend as
contributions toward the contract.
ARTICLE V
1. If the annuitant dies before his or her entire interest in the contract is
distributed to him or her and the annuitant's surviving spouse is not the
sole beneficiary, the entire remaining interest will, at the election of
the annuitant or, if the annuitant has not so elected, at the election of
the beneficiary, either:
a) Be distributed by December 31 of the calendar year containing the
fifth anniversary of the annuitant's death, or
b) Be distributed over the life, or a period not longer than the
life expectancy, of the designated beneficiary starting no later than
December 31 of the calendar year following the calendar year of the
annuitant"s death. Life expectancy is computed using the expected
return multiples in Table V of section 1.72-9 of the Income Tax
Regulations.
If distributions do not begin by the date described in (b), distribution
method (a) will apply.
2. If the annuitant"s spouse is the sole beneficiary on the annuitant's date
of death, such spouse will then be treated as the annuitant.
ARTICLE VI
1. The annuitant agrees to provide the issuer with information necessary for
the issuer to prepare any reports required under sections 408(i) and
408A(d)(3)(E), and Regulations section 1.408-5 and 1.408-6, and under
guidance published by the Internal Revenue Service.
2. The issuer agrees to submit reports to the Internal Revenue Service and the
annuitant as prescribed by the Internal Revenue Service.
<PAGE>
ARTICLE VII
Notwithstanding any other articles which may be added or incorporated, the
provisions of Articles I through IV and this sentence will be controlling. Any
additional articles that are not consistent with section 408A, the related
regulations, and other published guidance will be invalid.
ARTICLE VI I I
This endorsement will be amended from time to time to comply with the provisions
of the Code, related regulations, and other published guidance. Other amendments
may be made with the consent of the persons whose signatures appear on the
contract.
ARTICLE IX
Article V, item 2 of this endorsement is changed to read, "if the annuitant's
spouse is the sole beneficiary on the annuitant's date of death, SUCH SPOUSE MAY
THEN be treated as the annuitant.
GENERAL INSTRUCTIONS
(Section references are to the Internal Revenue Code unless otherwise noted.)
PURPOSE OF FORM
Form 5305-RB is a model annuity endorsement that meets the requirements of
section 408A and has been automatically approved by the IRS. A Roth individual
retirement annuity (Roth IRA) is established after the contract, which includes
this endorsement, is fully executed by both the individual (annuitant) and the
issuer. The contract must be for the exclusive benefit of the annuitant or his
or her beneficiaries.
Do not file Form 5305-RB with the IRS. Instead, keep it for records purposes.
Unlike contributions to traditional individual retirement arrangements,
contributions to a Roth IRA are not deductible from the annuitant's gross
income; and distributions after 5 years that are made when the annuitant is 59
1/2 years of age or older or on account of death, disability, or the purchase of
a home by a first-time homebuyer (limited to $10,000), are not includible in
gross income. For more information on Roth IRAs, including the required
disclosure the annuitant can get from the issuer, get Pub. 590, Individual
Retirement Arrangements (IRAs).
This Roth IRA can be used by an annuitant to hold: (1) IRA Conversion
Contributions, amounts rolled over or transferred from another Roth IRA, and
annual cash contributions of up to $2,000 from the annuitant; or (2) if
designated as a Roth Conversion IRA (by checking the box on page 1), only IRA
Conversion Contributions for the same tax year.
To simplify the identification of funds distributed from Roth IRAs, annuitants
are encouraged to maintain IRA Conversion Contributions for each tax year in a
separate Roth IRA.
DEFINITIONS
ROTH CONVERSION IRA. A Roth Conversion IRA is a Roth IRA that accepts only IRA
Conversion Contributions made during the same tax year.
IRA CONVERSION CONTRIBUTIONS. IRA Conversion Contributions are amounts rolled
over, transferred, or considered transferred from a nonRoth IRA to a Roth IRA. A
nonRoth IRA is an individual retirement account or annuity described in section
408(a) or 408(b), other than a Roth IRA.
ISSUER. The issuer is the insurance company providing the annuity contract. The
insurance company may use other terms besides "issuer" to refer to itself, such
as, "company," "insurer," or "us."
ANNUITANT. The annuitant is the person who establishes the annuity contract. The
insurance company may use other terms besides "annuitant" to refer to the person
who establishes the annuity contract, such as, "owner," ,applicant," "insured,"
or "you."
SPECIFIC INSTRUCTIONS
ARTICLE 1. The annuitant may be subject to a 6-percent tax on excess
contributions if (1) contributions to other individual retirement arrangements
of the annuitant have been made for the same tax year, (2) the annuitant's
adjusted gross income exceeds the applicable limits in Article 11 for the tax
year, or (3) the annuitant's and spouse's compensation does not exceed the
amount contributed for them for the tax year. The annuitant should see the
disclosure statement or Pub. 590 for more information.
<PAGE>
ARTICLE IX. Article IX and any that follow it may incorporate additional
provisions that are agreed to by the annuitant and issuer to complete the
contract. They may include, for example, definitions, investment powers, voting
rights, exculpatory provisions, amendment and termination, removal of the
issuer, issuer's fees, state law requirements, beginning date of distributions,
accepting only cash, treatment of excess contributions, prohibited transactions
with the annuitant, etc. Use ADDITIONAL PAGES if NECESSARY AND attach them to
this form.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Calvin King, Second Vice President
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
CONTRACT AMENDMENT
The "Amount of Death Benefit" provision of the contract is hereby amended to
read as follows:
Amount of Death Benefit. The Death Benefit is determined as of the
effective date or deemed effective date of the Death Benefit election and
is equal to the greatest of
a) the Annuity Account Value for the Valuation Period during which the
Death Benefit election is effective or is deemed to become effective;
b) the sum of all the Premium Payment(s) made under the contract less the
sum of all partial withdrawals; or
c) the highest Annuity Account Value ever attained on a Contract
Anniversary date, occurring on or before the then current Owner's 80th
birthday (or the Annuitant's 80th birthday in the case of a
non-natural Owner), with adjustments for any subsequent Premium
Payments, partial withdrawals and charges made since such Contract
Anniversary Date provided that if there has been a transfer of
Ownership, the highest Annuity Account Value must occur after the date
of such transfer of Ownership.
However, the Death Benefit on or after the then current Owner's 90th birthday
(if a natural person) is the greater of (a) the Annuity Account Value for the
Valuation Period during which the Death Benefit election is effective or is
deemed to become effective, or (b) the sum of all the Premium Payment(s) with
adjustments for any partial withdrawals and charges made under the contract
since the Date of Issue.
This amendment is attached to and forms a part of the policy as of its Date of
Issue and is to take effect on such date. Except as specifically altered by this
amendment, all of the provisions, limitations and exclusions of the policy
remain in full force and effect.
Gabriel L. Shaheen, President
<PAGE>
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.,
AND
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS
<PAGE>
TABLE OF CONTENTS
DESCRIPTION PAGE
Section 1. Available Funds 2
1.1 Availability 2
1.2 Addition, Deletion or Modification of Funds 2
1.3 No Sales to the General Public 2
Section 2. Processing Transactions 2
2.1 Timely Pricing and Orders 2
2.2 Timely Payments 3
2.3 Applicable Price 3
2.4 Dividends and Distributions 4
2.5 Book Entry 4
Section 3. Costs and Expenses 4
3.1 General 4
3.2 Parties To Cooperate 4
Section 4. Legal Compliance 4
4.1 Tax Laws 4
4.2 Insurance and Certain Other Laws 7
4.3 Securities Laws 7
4.4 Notice of Certain Proceedings and Other Circumstances 8
4.5 LIFE COMPANY To Provide Documents; Information About AVIF 9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY 10
Section 5. Mixed and Shared Funding 11
5.1 General 11
5.2 Disinterested Directors 12
5.3 Monitoring for Material Irreconcilable Conflicts 12
5.4 Conflict Remedies 13
5.5 Notice to LIFE COMPANY 14
5.6 Information Requested by Board of Directors 14
5.7 Compliance with SEC Rules 14
5.8 Other Requirements 14
Section 6. Termination 15
6.1 Events of Termination 15
6.2 Notice Requirement for Termination 16
6.3 Funds To Remain Available 16
i
<PAGE>
DESCRIPTION PAGE
6.4 Survival of Warranties and Indemnifications 16
6.5 Continuance of Agreement for Certain Purposes 16
Section 7. Parties To Cooperate Respecting Termination 17
Section 8. Assignment 17
Section 9. Notices 17
Section 10. Voting Procedures 18
Section 11. Foreign Tax Credits 18
Section 12. Indemnification 18
12.1 Of AVIF and AIM by LIFE COMPANY 18
12.2 Of LIFE COMPANY by AVIF and AIM 20
12.3 Effect of Notice 23
12.4 Successors 23
Section 13. Applicable Law 23
Section 14. Execution in Counterparts 23
Section 15. Severability 23
Section 16. Rights Cumulative 24
Section 17. Headings 24
Section 18. Confidentiality 24
Section 19. Trademarks and Fund Names 25
Section 20. Parties to Cooperate 26
ii
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the __ day of __________, 1998
("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), A I M Distributors, Inc., a Delaware corporation ("AIM"),
The Lincoln National Life Insurance Company, an Indiana life insurance company
("LIFE COMPANY"), on behalf of itself and each of its segregated asset accounts
listed in Schedule A hereto, as the parties hereto may amend from time to time
(each, an "Account," and collectively, the "Accounts"); and the principal
underwriter of the Accounts and the Contracts (collectively, the "Parties").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of thirteen separate series ("Series"),
shares ("Shares") of each of which are registered under the Securities Act of
1933, as amended (the " 1933 Act") and are currently sold to one or more
separate accounts of life insurance companies to fund benefits under variable
annuity contracts and variable life insurance policies; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto
as the Parties hereto may amend from time to time (each a "Fund"; reference
herein to "AVIF" includes reference to each Fund, to the extent the context
requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts" or Policies") as
set forth on Schedule A hereto, as the Parties hereto may amend from time to
time, which Contracts, if required by applicable law, will be registered under
the 1933 Act; and
WHEREAS, LIFE COMPANY will fund the Contracts through the Accounts, each of
which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each of
which is registered as a unit investment trust investment company under the 1940
Act (or exempt therefrom), and the security interests deemed to be issued by the
Accounts under the Policies will be registered as securities under the 1933 Act
(or exempt therefrom); and
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WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Policies; and
WHEREAS, LIFE COMPANY is a broker-dealer registered with the SEC under the
Securities Exchange Act of 1934 (" 1934 Act") and a member in good standing of
the National Association of Securities Dealers, Inc. ("NASD");
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to LIFE COMPANY for purchase
and redemption at net asset value and with no sales charges, subject to the
terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
The Parties hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Policies, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund or Fund resulting from a
deletion or modification. Schedule A, as amended from time to time, is
incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or will
be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide LIFE
COMPANY with the net asset value per Share for each Fund by 6:00 p.m. Central
Time on each Business Day.
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As used herein, "Business Day" shall mean any day on which (i) the New York
Stock Exchange is open for regular trading and (ii) AVIF calculates the Fund's
net asset value.
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; PROVIDED, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) With respect to payment of the purchase price by LIFE COMPANY and of
redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and
redemption orders with respect to each Fund and shall transmit one net payment
per Fund in accordance with Section 2.2, below.
(d) If AVIF provides materially incorrect Share net asset value information
(as determined under SEC guidelines), LIFE COMPANY shall be entitled to an
adjustment to the number of Shares purchased or redeemed to reflect the correct
net asset value per Share. Any material error in the calculation or reporting of
net asset value per Share, dividend or capital gain information shall be
reported promptly upon discovery to LIFE COMPANY.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE.
(a) Share purchase payments and redemption orders that result from purchase
payments, premium payments, surrenders and other transactions under Policies
(collectively, "Policy transactions") and that LIFE COMPANY receives prior to
the close of regular trading on the New York Stock Exchange on a Business Day
will be executed at the net asset values of the appropriate Funds next computed
after receipt by AVIF or its designated agent of the orders. For purposes of
this Section 23(a), LIFE COMPANY shall be the designated agent of AVIF for
receipt of orders relating to Policy transactions on each Business Day and
receipt by such designated agent shall constitute receipt by AVIF; PROVIDED that
AVIF receives notice of such orders by 9:00 a.m. Central Time on the next
following Business Day or such later time as computed in accordance with Section
2.1 (b) hereof.
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(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice by wire or telephone (followed by written
confirmation) on or prior to the payment date to LIFE COMPANY of any income
dividends or capital gain distributions payable on the Shares of any Fund. LIFE
COMPANY hereby elects to reinvest all dividends and capital gains distributions
in additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear all expenses incident to its
performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in arranging
to print, mail and/or deliver, in a timely manner, combined or coordinated
prospectuses or other materials of AVIF and the Accounts.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified as a
regulated investment company ("RIC") under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), and represents that it will use its best
efforts to qualify and to maintain qualification of each Fund as a RIC. AVIF
will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
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(b) AVIF represents that it will use its best efforts to comply and to
maintain each Fund's compliance with the diversification requirements set forth
in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under
the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable
basis for believing that a Fund has ceased to so comply or that a Fund might not
so comply in the future. In the event of a breach of this Section 4. 1 (b) by
AVIF, it will take all reasonable steps to adequately diversify the Fund so as
to achieve compliance within the grace period afforded by Section 1.817-5 of the
regulations under the Code.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure:
(i) LIFE COMPANY shall promptly notify AVIF of such assertion or
potential claim (subject to the Confidentiality provisions of Section 18 as
to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize any
liability that may arise as a result of such failure or alleged
failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any liability
of AVIF or its affiliates resulting from such failure, including,
without limitation, demonstrating, pursuant to Treasury
Regulations Section 1.817-5(a)(2), to the Commissioner of the IRS
that such failure was inadvertent;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal
and accounting advisors to participate in any conferences,
settlement discussions or other administrative or judicial
proceeding or contests (including judicial appeals thereof) with
the IRS, any Participant or any other claimant regarding any
claims that could give rise to liability to AVIF or its
affiliates as a result of such a failure or alleged failure;
PROVIDED, however, that LIFE COMPANY will retain control of the
conduct of such conferences discussions, proceedings, contests or
appeals;
(v) any written materials to be submitted by LIFE COMPANY to the IRS,
any Participant or any other claimant in connection with any
of the foregoing proceedings or contests (including, without
limitation, any such materials
to
be submitted to the IRS pursuant to Treasury Regulations
Section 1.817-5(a)(2)), (a) shall be provided by LIFE COMPANY to
AVIF (together with any supporting information or analysis);
subject to the confidentiality provisions of Section 18, at least
ten (10) business days or such shorter period to which the
Parties hereto agree prior to the day on which such proposed
materials are to be submitted, and (b) shall not be submitted by
LIFE
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COMPANY to any such person without the express written consent of AVIF
which shall not be unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and their
accounting and legal advisors with such cooperation as AVIF shall
reasonably request (including, without limitation, by permitting
AVIF and its accounting and legal advisors to review the relevant
books and records of LIFE COMPANY) in order to facilitate review
by AVIF or its advisors of any written submissions provided to it
pursuant to the preceding clause or its assessment of the
validity or amount of any claim against its arising from such a
failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the IRS or
any Participant that would give rise to a claim against AVIF or
its affiliates (a) compromise or settle any claim, (b) accept any
adjustment on audit, or (c) forego any allowable administrative
or judicial appeals, without the express written consent of AVIF
or its affiliates, which shall not be unreasonably withheld,
PROVIDED that LIFE COMPANY shall not be required, after
exhausting all administrative penalties, to appeal any adverse
judicial decision unless AVIF or its affiliates shall have
provided an opinion of independent counsel to the effect that a
reasonable basis exists for taking such appeal; and PROVIDED
FURTHER that the costs of any such appeal shall be borne equally
by the Parties hereto; and
(viii) AVIF and its affiliates shall have no liability as a result of
such failure or alleged failure if LIFE COMPANY fails to comply
with any of the foregoing clauses (i) through (vii), and such
failure could be shown to have materially contributed to the
liability.
Should AVIF or any of its affiliates refuse to give its written consent to
any compromise or settlement of any claim or liability hereunder, LIFE COMPANY
may, in its discretion, authorize AVIF or its affiliates to act in the name of
LIFE COMPANY in, and to control the conduct of, such conferences, discussions,
proceedings, contests or appeals and all administrative or judicial appeals
thereof, and in that event AVIF or its affiliates shall bear the fees and
expenses associated with the conduct of the proceedings that it is so authorized
to control; PROVIDED, that in no event shall LIFE COMPANY have any liability
resulting from AVIF's refusal to accept the proposed settlement or compromise
with respect to any failure caused by AVIF. As used in this Agreement, the term
"affiliates" shall have the same meaning as "affiliated person" as defined in
Section 2(a)(3) of the 1940 Act.
(d) LEE COMPANY represents and warrants that the Contracts currently are
and will be treated as annuity contracts or life insurance policies under
applicable provisions of the Code and that it will use its best efforts to
maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a
reasonable basis for believing that any of the Contracts have ceased to be so
treated or that they might not be so treated in the future.
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<PAGE>
(e) LIFE COMPANY represents and warrants that each Account is a "segregated
asset account" and that interests in each Account are offered exclusively
through the purchase of or transfer into a "variable contract," within the
meaning of such terms under Section 817 of the Code and the regulations
thereunder. LIFE COMPANY will use its best efforts to continue to meet such
definitional requirements, and it will notify AVIF immediately upon having a
reasonable basis for believing that such requirements have ceased to be met or
that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best. efforts to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY, including, the furnishing of information not otherwise
available to LIFE COMPANY which is required by state insurance law to enable
LIFE COMPANY to obtain the authority needed to issue the Contracts in any
applicable state.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing under the laws of the State of Indiana
and has full corporate power, authority and legal right to execute, deliver and
perform its duties and comply with its obligations under this Agreement, (ii) it
has legally and validly established and maintains each Account as a segregated
asset account under Indiana Insurance Law and the regulations thereunder, and
(iii) the Contracts comply in all material respects with all other applicable
federal and state laws and regulations.
(c) AVIF represents and warrants that it is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Maryland
and has full power, authority, and legal right to execute, deliver, and perform
its duties and comply with its obligations under this Agreement.
(d) AIM represents and warrants that it is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has full power, authority and right to execute, deliver and perform its
duties and comply with its obligations under this agreement.
4.3 SECURITIES LAWS.
(a) LIFE COMPANY represents and warrants that (i) interests in each Account
pursuant to the Contracts will be registered under the 1933 Act to the extent
required by the 1933 Act, (ii) the Contracts will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Indiana law, (iii) each Account is and will remain registered under the 1940
Act, to the extent required by the
1940 Act, (iv) each Account does and will comply in all material respects with
the requirements of the 1940 Act and the rules thereunder, to the extent
required; (v) each Account's 1933 Act registration statement relating to the
Contracts (to the extent required), together with any amendments thereto, will
at all times comply in all material respects with the requirements of the
1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend any registration
statement for its Contracts under the 1933 Act and for its Accounts under the
1940 Act from time to time to the
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extent required in order to effect the continuous offering of its Policies or as
may otherwise be required by applicable law, and (vii) each Account Prospectus
will at all times comply in all material respects with the requirements of the
1933 Act and the rules thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIFs 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will at its expense register and qualify its Shares for sale in
accordance with the laws of any state or other jurisdiction if and to the extent
reasonably deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b- I under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
l2b-1 to finance distribution expenses.
(e) AVIF represents and warrants that all of its trustees, officers,
employees, investment advisers, and other individuals/entities having access to
the funds and/or securities of the Fund are and continue to be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund in an amount not less than the minimal coverage as required currently by
Rule 17g-(I) of the 1940 Act or related provisions as may be promulgated from
time to time. The aforesaid bond includes coverage for larceny and embezzlement
and is issued by a reputable bonding company.
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings against AVIF, AIM or the
investment adviser to AVIF for that purpose or for any other purpose relating to
the registration or offering of AVIF's Shares, or (iv) any other action or
circumstances that may prevent the lawful offer or sale of Shares of any Fund in
any state or jurisdiction, including, without limitation, any circumstances in
which (a) such Shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law, or (b) such law
precludes the use of such Shares as an underlying investment medium of the
Policies issued or to be issued by LIFE COMPANY. AVIF will make every reasonable
effort to prevent the issuance, with respect to any Fund, of any such stop
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order, cease and desist order or similar order and, if any such order is issued,
to obtain the lifting thereof at the earliest possible time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Policies or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Policies,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF
(a) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Contracts and to one (1)
or more Funds, within twenty (20) calendar days of the filing of such document
with the SEC or other regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which AVIF or any of its affiliates is named, at least ten (10)
Business Days prior to its use or such shorter period as the Parties hereto may,
from time to time, agree upon. No such material shall be used if AVIF or its
designated agent objects to such use within five (5) Business Days after receipt
of such material or such shorter period as the Parties hereto may, from time to
time, agree upon. AVIF hereby designates AIM as the entity to receive such sales
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Policies other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF or AIM.
(d) LIFE COMPANY shall adopt and implement procedures reasonably designed
to ensure that information concerning AVIF and its affiliates that is intended
for use only by brokers
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or agents selling the Policies (I.E., information that is not intended for
distribution to Participants) ("broker only materials") is so used, and neither
AVIF nor any of its affiliates shall be liable for any losses, damages or
expenses relating to the improper use of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (E.G.,
on-line networks such as the Internet or other electronic messages), sales
literature (I.E., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY.
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of all
SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to one (1) or more
Funds, within twenty (20) calendar days of the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY camera ready copies of all AVIF
prospectuses relating to the Funds and printed copies, in an amount specified by
LIFE COMPANY, of AVIF statements of additional information, proxy materials,
periodic reports to shareholders and other materials required by law to be sent
to Participants who have allocated any Contract value to a Fund. AVIF will
provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE
COMPANY, as the case may be, to print and distribute such materials within the
time required by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least one
(1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its respective affiliates is named, or
that refers to the Policies, at least ten (10) Business Days prior to its use or
such shorter period as the Parties hereto may, from time to time, agree upon. No
such material shall be used if LIFE COMPANY or its designated agent objects to
such use within five (5) Business Days after receipt of such material or such
shorter period as the Parties hereto may, from time to time, agree upon. LIFE
COMPANY shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Contracts other than (i) the information or representations
contained- in the registration statement,
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including each Account Prospectus contained therein, relating to the Contracts,
as such registration statement and Account Prospectus may be amended from time
to time; or (ii) in published reports for the Account or the Contracts that are
in the public domain and approved by LIFE COMPANY for distribution; or (iii) in
sales literature or other promotional material approved by LIFE COMPANY or its
affiliates, except with the express written permission of LIFE COMPANY.
(e) AIM shall adopt and implement procedures reasonably designed to ensure
that information concerning LIFE COMPANY, and its respective affiliates that is
intended for use only by brokers or agents selling the Policies (I.E.,
information that is not intended for distribution to Participants) ("broker only
materials") is so used, and neither LIFE COMPANY, nor any of its respective
affiliates shall be liable for any losses, damages or expenses relating to the
improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, or other public media, (E.G., on-line
networks such as the Internet or other electronic messages), sales literature
(I.E., any written communication distributed or made generally available to
customers or the public, including brochures, circulars, research reports,
market letters, form letters, seminar texts, reprints or excerpts of any other
advertisement, sales literature, or published article), educational or training
materials or other communications distributed or made generally available to
some or all agents or employees, registration statements, prospectuses,
statements of additional information, shareholder reports, and proxy materials
and any other material constituting sales literature or advertising under the
NASD rules, the 1933 Act or the 1940 Act.
SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain provisions
of the 1940 Act and rules thereunder so that AVIF may be available for
investment by certain other entities, including, without limitation, separate
accounts funding variable annuity contracts or variable life insurance policies,
separate accounts of insurance companies unaffiliated with LIFE COMPANY, and
trustees of qualified pension and retirement plans (collectively, "Mixed and
Shared Funding"). The Parties recognize that the SEC has imposed terms and
conditions for such orders that are substantially identical to many of the
provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVER AVIF hereby notifies LIFE
COMPANY that AVIF has implemented Mixed and Shared Funding and it may be
appropriate to include in the prospectus pursuant to which a Contract is offered
disclosure regarding the potential risks of Mixed and Shared Funding.
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5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence of
any material irreconcilable conflict between the interests of the Participants
in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity contract
and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SECs requirements in connection with exemptive orders
of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the
Board of Directors in carrying out its responsibilities by providing the Board
of Directors, upon their request, with all information reasonably necessary for
the Board of Directors to consider any issue raised, including information as to
a decision by LIFE COMPANY to disregard voting instructions of Participants.
LIFE
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COMPANY's responsibilities in connection with the foregoing shall be carried out
with a view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members of
the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the Accounts
from AVIF or any Fund and reinvesting such assets in a different
investment medium, including, but not limited to, another Fund of
AVIF, or submitting the question whether such segregation should
be implemented to a vote of all affected Participants and, as
appropriate, segregating the assets of any particular group
(E.G., annuity Participants, life insurance Participants or all
Participants) that votes in favor of such segregation, or
offering to the affected Participants the option of making such a
change; and
(ii) establishing a new registered investment company of the type
defined as a "management company" in Section 4(3) of the 1940 Act
or a new separate account that is operated as a management
company.
(b) If the material irreconcilable conflict arises because of LIFE COMPANY's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, LIFE COMPANY
may be required, at AVIF's election, to withdraw each Account's investment in
AVIF or any Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six (6) months after AVIF
gives notice to LIFE COMPANY that this provision is being implemented, and until
such withdrawal AVIF shall continue to accept and implement orders by LIFE
COMPANY for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular state
insurance regulator's decision applicable to LIFE COMPANY conflicts with the
majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict, and until such withdrawal AVIF shall
continue to accept and implement orders by LIFE COMPANY for the purchase and
redemption of Shares of AVIF. No charge or penalty will be imposed as a result
of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in resolving
any material irreconcilable conflict will be carried out at its expense and with
a view only to the interests of Participants.
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(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Contracts. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Contracts if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4. 1 (b), 4. 1 (d), 4.3(a),
4.4(b), 4.5(a), 5, and 10 of this Agreement.
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SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a Fund:
(a) at the option of any party, with or without cause with respect to the
Fund, upon six (6) months advance written notice to the other parties, or, if
later, upon receipt of any required exemptive relief (i.e., a substitution
order) from the SEC, unless otherwise agreed to in writing by the parties; or
(b) at the option of AVIF upon institution of formal proceedings against
LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Contracts, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal proceedings
against AVIF, AIM or the Fund's investment adviser by the NASD, the SEC, or any
state insurance regulator or any other regulatory body regarding AVIFs
obligations under this Agreement or related to the operation or management of
AVIF or the purchase of AVIF Shares, if, in each case, LIFE COMPANY reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on LIFE C OMPANY, or the Subaccount corresponding to the Fund with respect to
which the Agreement is to be terminated; or
(d) at the option of any Party in the event that (i) the Fund's Shares are
not registered and, in all material respects, issued and sold in accordance with
any applicable federal or state law, or (ii) such law precludes the use of such
Shares as an underlying investment medium of the Policies issued or to be issued
by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with Section
817(h) of the Code or with successor or similar provisions, or if LIFE COMPANY
reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Policies issued by LIFE COMPANY cease to
qualify as annuity contracts or life insurance policies under the Code (other
than by reason of the Fund's
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noncompliance with Section 8 17(h) or Subchapter M of the Code) or if interests
in an Account under the Contracts are not registered, where such registration is
required, and, in all material respects, are not issued or sold in accordance
with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the, effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
6.3 FUNDS TO REMAIN AVAILABLE.
Notwithstanding any termination of this Agreement, AVIF will, at the option
of LIFE COMPANY, continue to make available additional shares of the Fund
pursuant to the terms and conditions of this Agreement, for all Policies in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Policies"). Specifically, without limitation, the
owners of the Existing Policies will be permitted to reallocate investments in
the Fund (as in effect on such date), redeem investments in the Fund and/or
invest in the Fund upon the making of additional purchase payments under the
Existing Policies. The parties agree that this Section 6.3 will not apply to any
terminations under Section 5 and the effect of such terminations will be
governed by Section 5 of this Agreement.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant to
Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, this
Agreement shall nevertheless continue in effect as to any Shares of that Fund
that are outstanding as of the date of such termination (the
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"Initial Termination Date"). This continuation shall extend to the earlier of
the date as of which an Account owns no Shares of the affected Fund or a date
(the "Final Termination Date") six (6) months following the Initial Termination
Date, except that LIFE COMPANY may, by written notice shorten said six (6) month
period in the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g),
6.1(h) or 6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to one
another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6. 1 (a), the termination date specified in the notice of termination. Such
steps may include combining the affected Account with another Account,
substituting other mutual fund shares for those of the affected Fund, or
otherwise terminating participation by the Policies in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
SECTION 9. NOTICES
Notices and communications required or permitted by Section 9 hereof will
be given by means mutually acceptable to the Parties concerned. Each other
notice or communication required or permitted by this Agreement will be given to
the following persons at the following addresses and facsimile numbers, or such
other persons, addresses or facsimile numbers as the Party receiving such
notices or communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
A I M DISTRIBUTORS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
1300 S. Clinton Street
Fort Wayne, IN 46802
Facsimile: (219) 455-1773
Attn: Kelly D. Clevenger
Vice President
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SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants. Notwithstanding the foregoing, LIFE COMPANY
reserves the right to vote shares held in any Account in its own right, to the
extent permitted by law. LIFE COMPANY shall be responsible for assuring that
each of its Accounts holding Shares calculates voting privileges in a manner
consistent with that of other Participating Insurance Companies or in the manner
required by the Mixed and Shared Funding exemptive order obtained by AVIF. AVIF
will notify LIFE COMPANY of any changes of interpretations or amendments to
Mixed and Shared Funding exemptive order it has obtained. AVIF will comply with
all provisions of the 1940 Act requiring voting by shareholders, and in
particular, AVIF either will provide for annual meetings (except insofar as the
SEC may interpret Section 16 of the 1940 Act not to require such meetings) or
will comply with Section 16(c) of the 1940 Act (although AVIF is not one of the
trusts described in Section 16(c) of that Act) as well as with Sections 16(a)
and, if and when applicable, 16(b. Further, AVIF will act in accordance with the
SEC's interpretation of the requirements of Section 16(a) with respect to
periodic elections of directors and with whatever rules the SEC may promulgate
with respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any decision
to elect or not to elect pursuant to Section 853 of the Code to pass through the
benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF AND AIM BY LIFE COMPANY.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c), below,
LIFE COMPANY agrees to indemnify and hold harmless AVIF, AIM, their affiliates,
and each person, if any, who controls AVIF, AIM, or their affiliates within the
meaning of Section 15 of the 1933 Act and each of their respective directors and
officers, (collectively, the "Indemnified Parties" for purposes of this Section
12.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of LIFE COMPANY or actions
in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified
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Parties may become subject under any statute, regulation, at common law or
otherwise; PROVIDED, the Account owns shares of the Fund and insofar as such
losses, claims, damages, liabilities or actions:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any Account's 1933 Act
registration statement, any Account Prospectus, the Contracts, or
sales literature or advertising for the Contracts (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading; PROVIDED, that this agreement to indemnify
shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to LIFE COMPANY by
or on behalf of AVIF for use in any Account's 1933 Act registration
statement, any Account Prospectus, the Contracts, or sales literature
or advertising or otherwise for use in connection with the sale of
Contracts or Shares (or any amendment or supplement to any of the,
foregoing); or
(ii) arise out of or as a result of any other statements or representations
(other than statements or representations contained-in AVIF's 1933
Act registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of LIFE
COMPANY or its affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of LIFE
COMPANY or its respective affiliates or persons under their control
(including, without limitation, their employees and "persons
associated with a member", as that term is defined in paragraph (q)
of Article I of the NASD's By-Laws), in connection with the sale or
distribution of the Contracts or Shares; or
(iii) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature or
advertising of AVIF, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading if such a statement or omission was
made in reliance upon and in conformity with information furnished to
AVIF, AIM or their affiliates by or on behalf of LIFE COMPANY or its
affiliates for use in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY to perform the
obligations, provide the services and furnish the materials required
of it under
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the terms of this Agreement, or any material breach of any
representation and/or warranty made by LIFE COMPANY in this Agreement
or arise out of or result from any other material breach of this
Agreement by LIFE COMPANY; or
(v) arise as a result of failure by the Policies issued by LIFE COMPANY to
qualify as annuity contracts or life insurance policies under the
Code, otherwise than by reason of any Fund's failure to comply with
Subchapter M or Section 817(h) of the Code.
(b) LIFE COMPANY shall not be liable under this Section 12.1 with respect
to any losses, claims, damages, liabilities or actions to which an Indemnified
Party would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence in the performance by that Indemnified Party of its duties or
by reason of that Indemnified Party's reckless disregard of obligations or
duties (i) under this Agreement, or (ii) to AVIF or AIM.
(c) LIFE COMPANY shall not be liable under this Section 12.1 with respect
to any action against an Indemnified Party unless AVIF or AIM shall have
notified LIFE COMPANY in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the action shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify LIFE COMPANY of any such action shall not relieve LIFE COMPANY from
any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this Section 12. 1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, LIFE COMPANY shall be entitled to participate, at its own
expense, in the defense of such action and also shall be entitled to assume the
defense thereof, with counsel approved by the Indemnified Party named in the
action, which approval shall not be unreasonably withheld. After notice from
LIFE COMPANY to such Indemnified Party of LIFE COMPANY's election to assume the
defense thereof, the Indemnified Party will cooperate fully with LIFE COMPANY
and shall bear the fees and expenses of any additional counsel retained by it,
and LIFE COMPANY will not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
12.2 OF LIFE COMPANY BY AVIF AND AIM.
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, AVIF and AIM agree to indemnify and hold harmless LIFE COMPANY, its
affiliates, and each person, if any, who controls LIFE COMPANY or its affiliates
within the meaning of Section 15 of the 1933 Act and each of their respective
directors and officers, (collectively, the "Indemnified Parties" for purposes of
this Section 12.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of AVIF and/or
AIM) or actions in respect thereof (including, to the extent reasonable, legal
and other expenses), to which the Indemnified Parties may become subject under
any statute, regulation, at common law, or otherwise; PROVIDED, the Account owns
shares of the Fund and insofar as such losses, claims, damages, liabilities or
actions:
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(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in AVIF's 1933
Act registration statement, AVIF Prospectus or sales literature
or advertising of AVIF (or any amendment or supplement to any of
the foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading; PROVIDED, that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission
or such alleged statement or omission was made in reliance upon
and in conformity with information furnished to AVIF or its
affiliates by or on behalf of LIFE COMPANY or its affiliates for
use in AVIF's 1933 Act registration statement, AVIF Prospectus,
or in sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any amendment
or supplement to any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising for the
Contracts, or any amendment or supplement to any of the
foregoing, not supplied for use therein by or on behalf of AVIF,
AIM or their affiliates and on which such persons have reasonably
relied) or the negligent, illegal or fraudulent conduct of AVIF,
AIM or their affiliates or persons under its control (including,
without limitation, their employees and "persons associated with
a member" as that term is defined in Section (q) of Article I of
the NASD By-Laws), in connection with the sale or distribution of
AVIF Shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Account's
1933 Act registration statement, any Account Prospectus, sales
literature or advertising covering the Contracts, or any
amendment or supplement to any of the foregoing, or the omission
or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance
upon and in conformity with information furnished to LIFE COMPANY
or its affiliates by or on behalf of AVIF or AIM for use in any
Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Contracts, or any amendment or supplement to any of the
foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services and furnish the materials
required of it under the terms of this Agreement, or any material
breach of any representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other material
breach of this Agreement by AVIF.
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(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e)
hereof, AVIF and AIM agree to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF
and/or AIM) or actions in respect thereof (including, to the extent reasonable,
legal and other expenses) to which the Indemnified Parties may become subject
directly or indirectly under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions directly or indirectly
result from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY pursuant to the Contracts, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for each
Account that LIFE COMPANY reasonably deems necessary or appropriate as a result
of the noncompliance.
(c) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of such Indemnified Party's reckless disregard of its
obligations and duties (i) under this Agreement, or (ii) to LIFE COMPANY, each
Account or Participants.
(d) Neither AVIF nor AIM shall be liable under this Section 12.2 with
respect to any action against an Indemnified Party unless the Indemnified Party
shall have notified AVIF and/or AIM in w riting within a reasonable time after
the summons or other first legal process giving information of the nature of the
action shall have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such service on any designated
agent), but failure to notify AVIF or AIM of any such action shall not relieve
AVIF or AIM from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this Section
12.2. Except as otherwise provided herein, in case any such action is brought
against an Indemnified Party, AVIF and/or AIM will be entitled to participate,
at its own expense, in the defense of such action and also shall be entitled to
assume the defense thereof (which shall include, without limitation, the conduct
of any ruling request and closing agreement or other settlement proceeding with
the IRS), with counsel approved by the Indemnified Party named in the action,
which approval shall not be unreasonably withheld. After notice from AVIF and/or
AIM to such Indemnified Party of AVIF's or AIM's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and AIM shall bear
the fees and expenses of any additional counsel retained by it, and AVIF and AIM
will not be liable to such Indemnified Party under this Agreement for any legal
or other expenses subsequently incurred by such Indemnified Party independently
in connection with the defense thereof, other than reasonable costs of
investigation.
(e) In no event shall AVIF or AIM be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY or any other Participating Insurance Company or
any Participant, with respect to any losses, claims, damages, liabilities or
expenses that arise out of or result from (i) a breach of any
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representation, warranty, and/or covenant made by LIFE COMPANY hereunder or by
any Participating Insurance Company under an agreement containing substantially
similar representations, warranties and covenants; (ii) the failure by LIFE
COMPANY or any Participating Insurance Company to maintain its segregated asset
account (which invests in any Fund) as a legally and validly established
segregated asset account under applicable state law and as a duly registered
unit investment trust under the provisions of the 1940 Act (unless exempt
therefrom); or (iii) the failure by LIFE COMPANY or any Participating Insurance
Company to maintain its variable annuity contracts or life insurance policies
(with respect to which any Fund serves as an underlying funding vehicle) as
annuity contracts or life insurance policies under applicable provisions of the
Code.
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party referred
to in Sections 12. 1 (c) or 12.2(d) above of participation in or control of any
action by the indemnifying Party will in no event be deemed to be an admission
by the indemnifying Party of liability, culpability or responsibility, and the
indemnifying Party will remain free to contest liability with respect to the
claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more counterparts,
each of which taken together will constitute one and the same instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
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SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for purposes
of reference only and shall not limit or define the meaning of the provisions of
this Agreement.
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY or
any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LEE COMPANY's performance of its duties under this Agreement are the
valuable property of the LEE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY frm information supplied to it by the AVIF Protected
Parties' customers who also maintain accounts directly with LIFE COMPANY, LIFE
COMPANY will hold such information or property in confidence and refrain from
using, disclosing or distributing any of such information or other property
except: (a) with AVIF's prior written consent; or (b) as required by law or
judicial process. Each party acknowledges that any breach of the agreements in
this Section 18 would result in- immediate and irreparable harm to the other
parties for which there would be no adequate remedy at law and agree that in the
event of such a breach, the other parties will be entitled to equitable relief
by way of temporary and permanent injunctions, as well as such other relief as
any court of competent jurisdiction deems appropriate.
24
<PAGE>
SECTION 19. TRADEMARKS AND FUND NAMES
(a) A I M Management Group Inc. ("AIM" or "licensor"), an affiliate of
AVIF, owns all right, title and interest in and to the name, trademark and
service mark "AIM" and such other trade names, trademarks and service marks as
may be set forth on Schedule B, as amended from time to time by written notice
from AIM to LIFE COMPANY (the "AIM licensed marks" or the "licensor's licensed
marks") and is authorized to use and to license other persons to use such marks.
LIFE COMPANY and its affiliates are hereby granted a non-exclusive license to
use the AIM licensed marks in connection with LIFE COMPANY's performance of the
services contemplated under this Agreement, subject to the terms and conditions
set forth in this Section 19.
(b) The grant of license to LIFE COMPANY and its affiliates (the
"licensee") shall terminate automatically upon termination of this Agreement.
Upon automatic termination, the licensee shall cease to use the licensor's
licensed marks, except that LIFE COMPANY shall have the right to continue to
service any outstanding Contracts bearing any of the AIM licensed marks. Upon
AIM's elective termination of this license, LIFE COMPANY and its affiliates
shall immediately cease to issue any new annuity or life insurance Policies
bearing any of the AIM licensed marks and shall likewise cease any activity
which suggests that it has any right under any of the AIM licensed marks or that
it has any association with AIM, except that LIFE COMPANY shall have the right
to continue to service outstanding Contracts bearing any of the AIM licensed
marks.
(c) The licensee shall obtain the prior written approval of the licensor
for the public release by such licensee of any materials bearing the licensor's
licensed marks. The licensor's approvals shall not be unreasonably withheld.
(d) During the term of this grant of license, a licensor may request that a
licensee submit samples of any materials bearing any of the licensor's licensed
marks which were previously approved by the licensor but, due to changed
circumstances, the licensor may wish to reconsider. If, on reconsideration, or
on initial review, respectively, any such samples fail to meet with the written
approval of the licensor, then the licensee shall immediately cease distributing
such disapproved materials. The licensor's approval shall not be unreasonably
withheld, and the licensor, when requesting reconsideration of a prior approval,
shall assume the reasonable expenses of withdrawing and replacing such
disapproved materials. The licensee shall obtain the prior written approval of
the licensor for the use of any new materials developed to replace the
disapproved materials, in the manner set forth above.
(e) The licensee hereunder: (i) acknowledges and stipulates that, to the
best of the knowledge of the licensee, the licensor's licensed marks are valid
and enforceable trademarks and/or service marks and that such licensee does not
own the licensor's licensed marks and claims no rights therein other than as a
licensee under this Agreement; (ii) agrees never to contend otherwise in legal
proceedings or in other circumstances; and (iii) acknowledges and agrees that
the use of the licensor's licensed marks pursuant to this grant of license shall
inure to the benefit of the licensor.
25
<PAGE>
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and all
appropriate governmental authorities (including, without limitation, the SEC,
the NASD, the IRS and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
26
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their names and on their behalf by and through their duly authorized officers
signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
------------------ ------------------
Nancy L. Martin Name: Robert H. Graham
Assistant Secretary Title: President
A I M DISTRIBUTORS, INC.
Attest: By:
------------------ ------------------
Nancy L. Martin Name: Michael J. Cemo
Assistant Secretary Title: President
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, on behalf of itself and its
separate accounts and as principal underwriter for its separate accounts
Attest: By:
------------------ ------------------
Name: Steven Kluever Name: Kelly D. Clevenger
Title: Assistant Vice President Title: Vice President
27
<PAGE>
SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Flexible Premium Variable Life Account R
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
The Lincoln National Life Insurance Company:
Flexible Premium Variable Life Insurance Policy
LN605LL/LN6l5LL/LN6l7LL
and state variations thereof
The Lincoln National Life Insurance Company:
Flexible Premium Variable Life Insurance Policy On the Lives of Two Insureds
LN650LL
and state variations thereof
28
<PAGE>
SCHEDULE B
AIM VARIABLE INSURANCE FUNDS, INC.
AIM Fund
------------------------------
AIM and Design
AIM
29
<PAGE>
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
DESCRIPTION LIFE COMPANY AIM/AVIF
REGISTRATION
<S> <C> <C>
Prepare and file Account registration Fund registration statements
registration statements(1) statements
Payment of fees Account fees Fund fees
PROSPECTUSES
Typesetting Account Prospectuses Fund Prospectuses
Account Prospectuses, and Fund Prospectuses distributed
Printing Fund Prospectuses (but not for to existing Participants(2)
existing PARTICIPANTS)
SAIS
Typesetting Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
SUPPLEMENTS (TO
PROSPECTUSES OR SAIS
Typesetting and Printing Account Supplements, and Fund Supplements to existing
Fund Supplements (but not for Participants(2)
existing Participants)
</TABLE>
(1) Includes all filings and costs necessary to keep registrations current
and effective; including, without limitation, filing Forms N-SAR and Rule 24F-2
Notices as required by law.
(2) With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated as
between AIM/AVIF on the one hand and LIFE COMPANY on the other based on (a) the
ratio of the number of pages of the combined prospectus, report, or other
document, for each Fund listed on Schedule A hereto to the total number of pages
in such combined prospectus, report, or other document; and (b) the ratio of the
number of Participants who invest in all Funds of AVIF to the total number of
Participants.
30
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION LIFE COMPANY AIM/AVIF
<S> <C> <C>
FINANCIAL REPORTS
Typesetting Account Reports Fund Reports to existing
Participants(2)
Printing Account Reports, and Fund
Reports (not to existing
Participants)
MAILING AND DISTRIBUTION
To Contract owners Account and Fund
Prospectuses, SAIs,
Supplements and Reports
To Offerees Account and Fund
Prospectuses, SAIs,
Supplements and Reports
PROXIES
Typesetting, printing and Account and Fund Proxies Fund Proxies where the
mailing of proxy where the matters submitted matters submitted are solely
solicitation materials and are solely Account-related Fund-related
voting instruction
solicitation materials and Account Proxies even where
tabulation of proxies to the matters submitted are
Participants solely Fund-related
OTHER (SALES-RELATED)
Contract owner Account-related items and\
communication Fund-related items
Distribution Policies
Administration Account (Policies)
</TABLE>
(2) With respect to any AVIF material printed in combination with any
non-AVIF materials, total costs of typesetting and printing shall be prorated as
between AIM/AVIF on the one hand and LIFE COMPANY on the other based on (a) the
ratio of the number of pages of the combined prospectus, report, or other
document, for each Fund listed
on Schedule A hereto to the total number of pages in such combined prospectus,
report, or other document; and (b) the ratio of the number of Participants who
invest in all Funds of AVIF to the total number of Participants.
31
<PAGE>
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement'), dated June 16,1998, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware Corporation and The Lincoln National Life
Insurance Company, an Indiana life insurance company, is hereby amended as
follows:
Schedule A of the Agreement is hereby deleted in its entirety and replaced with
the following:
SCHEDULE A
<TABLE>
<CAPTION>
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES/CONTRACTS FUNDED BY THE
THE POLICIES UTILIZING SOME OR SEPARATE ACCOUNTS
ALL OF THE FUNDS
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Lincoln Life Variable Annuity The Lincoln National Life Insurance Company:
AIM V.I. Diversified Income Fund Account N Flexible Premium Variable Annuity Contracts
AIM V.I. Growth Fund AN425LL
AIM V.I. International Equity Fund Lincoln Life Flexible Premium and state variations thereof
AIM V.I. Value Fund Variable Life Account M
The Lincoln National Life Insurance Company:
Lincoln Life Flexible Premium Flexible Premium Variable Life Insurance
Variable Life Account R Policy LN605LULN615LULN617LL
and state variations thereof
The Lincoln National Life Insurance Company:
Flexible Premium Variable Life Insurance
Policy On the Lives of Two Insureds LN650LL
and state variations thereof
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule A to be executed in its name and behalf of its duly authorized officer
on the date specified below. All other terms and provisions of the Agreement not
amended herein shall remain in full force and effect.
Effective Date:
Attest:
Name: Nancy L. Martin
Title: Assistant Secretary
(SEAL)
PAA28AVI.AGR
111098 (2) rr
AIM VARIABLE INSURANCE FUNDS, INC.
'By: -
Name.- Robert H. Graham
Title: President
1 of 2
<PAGE>
A I M DISTRIBUTORS, IN
Attest:
Name: Nancy L. Martin
Title: Assistant Secretary
(SEAL)
Attest:
Name: Steven M. Kluever
Title: Assistant Vice President
(SEAL)
PAA28AVI.AGR 111098 (2) rr
C.
By:
Name: Michael J. Cemo
Title: President
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name: Kelly D. Clevenger
Title: Vice President
2 of 2
<PAGE>
Exhibit A
<TABLE>
<CAPTION>
Funds Available to Name of Separate Accounts
the Separate Accounts Utilizing Some or All of the Funds Policy/Contract Name(s) Policy/Contract Numbers(s)
- --------------------- ---------------------------------- ----------------------- --------------------------
<S> <C> <C> <C>
No Change No Change No Change New Contract Numbers:
Under the 2nd bullet, please
add: LN 660
Under the 3rd bullet, please
add: LN 650
</TABLE>
<PAGE>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT made as of the 11th day of May, 1998, by and between BT
Insurance Funds Trust ("TRUST"), a Massachusetts business trust, Bankers Trust
Company ("ADVISER"), a New York banking corporation, and The Lincoln National
Life Insurance Company ("LIFE COMPANY"), a life insurance company organized
under the laws of the State of Indiana.
WHEREAS, TRUST is registered with the Securities and Exchange Commission
("SEC") under the Investment Company Act of 1940, as amended (the ... 40 Act"),
as an open-end, diversified management investment company; and
WHEREAS, TRUST is comprised of several series funds (each a "Portfolio"),
with those Portfolios currently available being listed on Appendix A hereto; and
WHEREAS, TRUST was organized to act as the funding vehicle for certain
variable life insurance and/or variable annuity contracts ("Variable Contracts")
offered by life insurance companies through separate accounts ("Separate
Accounts") of such life insurance companies ("Participating Insurance
Companies"); and
WHEREAS, TRUST may also offer its shares to certain qualified pension and
retirement plans ("Qualified Plans"); and
WHEREAS, TRUST has received an order from the SEC, granting Participating
Insurance Companies and their separate accounts exemptions from the provisions
of Sections 9(a), 13(a), 15(a) and 15(b) of the '40 Act, and Rules 6e-2(b)(15)
and 6e-3(T)(b)(15) thereunder, to the extent necessary to permit shares of the
Portfolios of the TRUST to be sold to and held by Variable Contract Separate
Accounts of both affiliated and unaffiliated Participating Insurance Companies
and Qualified Plans ("Exemptive Order"); and
WHEREAS, LIFE COMPANY has established or will establish one or more
Separate Accounts to offer Variable Contracts and is desirous of having TRUST as
one of the underlying funding vehicles for such Variable Contracts; and
WHEREAS, ADVISER is a "bank" as defined in the Investment Advisers Act of
1940, as amended (the "Advisers Act") and as such is excluded from the
definition of "Investment Adviser" and is not required to register as an
investment adviser pursuant to the Advisers Act; and
1
<PAGE>
WHEREAS, ADVISER serves as the TRUST's investment adviser; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase shares of TRUST to fund the
aforementioned Variable Contracts and TRUST is authorized to sell such shares to
LIFE COMPANY at such shares' net asset value;
NOW, THEREFORE, in consideration of their mutual promises, LIFE COMPANY,
TRUST, and ADVISER agree as follows:
Article 1. SALE OF TRUST SHARES
1.1 TRUST agrees to make available to the Separate Accounts of LIFE COMPANY
shares of the selected Portfolios as listed on Appendix B for investment of
purchase payments of Variable Contracts allocated to the designated Separate
Accounts as provided in TRUST's Registration Statement.
1.2 TRUST agrees to sell to LIFE COMPANY those shares of the selected
Portfolios of TRUST which LIFE COMPANY orders, executing such orders on a daily
basis at the net asset value next computed after receipt by TRUST or its
designee of the order for the shares of TRUST. For purposes of this Section 1.2,
LIFE COMPANY shall be the designee of TRUST for receipt of such orders from the
designated Separate Account and receipt by such designee shall constitute
receipt by TRUST; provided that LIFE COMPANY receives the order by 4:00 p.m. New
York time and TRUST receives notice from LIFE COMPANY by telephone or facsimile
(or by such other means as TRUST and LIFE COMPANY may agree in writing) of such
order by 9:00 a.m. New York time on the next Business Day. "Business Day" shall
mean any day on which the New York Stock Exchange is open for trading and on
which TRUST calculates its net asset value pursuant to the rules of the SEC.
1.3 TRUST agrees to redeem on LIFE COMPANY's request, any -full or
fractional shares of TRUST held by LIFE COMPANY, executing such requests on a
daily basis at the net asset value next computed after receipt by TRUST or its
designee of the request for redemption, in accordance with the provisions of
this Agreement and TRUST's Registration Statement. (in the event of a conflict
between the provisions of this Agreement and the Trust's Registration Statement,
the provisions of the Registration Statement shall govern.) For purposes of this
Section 1.3, LIFE COMPANY shall be the designee of TRUST for receipt of requests
for redemption from the designated Separate Account and receipt by such designee
shall constitute receipt by TRUST; provided that LIFE COMPANY receives the
request for redemption by 4:00 p.m. New York time and TRUST receives notice from
LIFE COMPANY by telephone or facsimile (or by such other means as TRUST and LIFE
COMPANY may agree in
2
<PAGE>
writing) of such request for redemption by 9:00 a.m. New York time on the next
Business Day.
1.4 TRUST shall furnish, on or before each ex-dividend date, notice to LIFE
COMPANY of any income dividends or capital gain distributions payable on the
shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all such
income dividends and 'capital gain distributions as are payable on a Portfolio's
shares in additional shares of the Portfolio. LIFE COMPANY reserves the right to
change such election. TRUST shall notify LIFE COMPANY or its designee of the
number of shares so issued as payment of such dividends and distributions.
1.5 TRUST shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed on each day for which such incorrect information was
provided to reflect the correct share net asset value. Any material error in the
calculation of net asset value per share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the information
described in Section 1.5 to calculate Separate Account unit values for the day.
Using these unit values, LIFE COMPANY shall process each such Business Day's
Separate Account transactions based on requests and premiums received by it by
the close of trading on the floor of the New York Stock Exchange (currently 4:00
p.m. New York time) to determine the net dollar amount of TRUST shares which
shall be purchased or redeemed at that day's closing net asset value per. share.
The net purchase or redemption orders so determined shall be transmitted to
TRUST by LIFE COMPANY by 9:00 a.m. New York Time on the Business Day next
following LIFE COMPANY's receipt of such requests and premiums in accordance
with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account by 2:00 pm on the day the order is transmitted by
LIFE COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall wire the redemption
proceeds to LIFE COMPANY by 2:00 pm that day, unless doing so would require
TRUST to dispose of Portfolio securities or otherwise incur additional costs. In
any event, proceeds shall be wired to LIFE COMPANY within the time period
permitted by the '40 Act or the rules, orders or regulations thereunder, and
TRUST shall notify the
3
<PAGE>
person designated in writing by LIFE COMPANY as the recipient for such notice of
such delay by 3:00 p.m. New York Time on the same Business Day that LIFE COMPANY
transmits the redemption order to TRUST. If LIFE COMPANY's order requests the
application of redemption proceeds from the redemption of shares to the purchase
of shares of another Fund advised by ADVISER, TRUST shall so-apply such proceeds
on the same Business Day that LIFE COMPANY transmits such order to TRUST.
1.8 TRUST agrees that all shares of the Portfolios of TRUST will be sold
only to Participating Insurance Companies which have agreed to participate in
TRUST to fund their Separate Accounts and/or to Qualified Plans, all in
accordance with the requirements of Section 817(h)(4) of the Internal Revenue
Code of 1986, as amended ("Code") and Treasury Regulation 1.817-5. Shares of the
TRUSTs Portfolios will not be sold directly to the general public.
1.9 TRUST may refuse to sell shares of any Portfolio to any person, or
suspend or terminate the offering of the shares of or liquidate any Portfolio of
TRUST if such action is required by law or by regulatory authorities having
jurisdiction or is, in the sole discretion of the Board of Trustees of the TRUST
(the "Board"), acting in good faith and in light of its duties under federal and
any applicable state laws, deemed necessary, desirable or appropriate and in the
best interests of the shareholders of such Portfolios.
1. 10 Issuance and transfer of Portfolio shares will -be by book entry
only. Stock certificates will not be issued to LIFE COMPANY or the Separate
Accounts. Shares ordered from Portfolio will be recorded in appropriate book
entry titles for the Separate Accounts.
Article II. REPRESENTATIONS AND WARRANTIES
2.1 LIFE COMPANY represents and warrants that it is an insurance company
duly organized and validly existing under the laws of Indiana and that it has
legally and validly established each Separate Account as a segregated asset
account under such laws, and that LIFE COMPANY, the principal underwriter for
the Variable Contracts, is registered as a broker-dealer under. the Securities
Exchange Act of 1934 (the ... 34 Act").
2.2 LIFE COMPANY represents and warrants that it has registered or, prior
to any issuance or sale of the Variable Contracts, will register each Separate
Account as a unit investment trust ("UIT") in accordance with the provisions of
the '40 Act and cause each Separate Account to remain so registered to serve as
a segregated asset account for the Variable Contracts, unless an exemption from
registration is available.
2.3 LIFE COMPANY represents and warrants that the Variable Contracts will
be registered under the Securities Act of 1933 (the "'33 Act") unless an
exemption from registration is available prior to any issuance or sale of the
Variable Contracts, and that
4
<PAGE>
the Variable Contracts will be issued and sold in compliance in all material
respects with all applicable federal and state laws (including all applicable
blue sky laws and further that the sale of the variable contracts shall comply
in all material respects with applicable state insurance law suitability
requirements).
2.4 LIFE COMPANY represents and warrants that the Variable Contracts are
currently and at the time of issuance will be treated as life insurance
policies, endowment or annuity contracts under applicable provisions of the
Code, that it will maintain such treatment and that it will notify TRUST im
mediately Upon having a reasonable basis for believing that the Variable
Contracts have ceased to be so treated or that they might not be so treated in
the future.
2.5 TRUST represents and warrants that the Fund shares offered and sold
pursuant to this Agreement will be registered under the '33 Act and sold in
accordance with all applicable federal laws, and TRUST shall be registered under
the '40 Act prior to and at the time of any issuance or sale of such shares.
TRUST, subject to Section 1.9 above, shall amend its registration statement
under the '33 Act and the '40 Act from time to time as required in order to
effect the continuous offering of its shares. TRUST shall register and qualify
its shares for sale in accorda n with the laws of the various states only if and
to the extent deemed advisable by TRUST.
2.6 TRUST and ADVISER each represents and warrants that each Portfolio will
comply with the diversification requirements set forth in Section 817(h) of the
Code, and the rules and regulations thereunder, including without limitation
Treasury Regulation 1.817-5, and will notify LIFE COMPANY immediately upon
having a reasonable basis for believing any Portfolio has ceased to comply and
will immediately take all reasonable steps to adequately diversify the Portfolio
to achieve compliance.
2.7 TRUST represents and warrants that each Portfolio invested in by the
Separate Account will be treated as a "regulated investment company" under
Subchapter M of the Code, and will notify LIFE COMPANY immediately upon having a
reasonable basis for believing it has ceased to so qualify or might not so
qualify in the future.
2.8 ADVISER represents and warrants that it shall perform its obligations
hereunder in compliance in all material respects with all applicable state and
federal laws.
2.9 TRUST and ADVISER each represents and warrants that all officers,
employees and agents of the TRUST having access to securities or funds of any
Portfolio shall be covered by a blanket fidelity bond in such minimum amount as
the SEC may prescribe under Section 17 (g) of the '40 act.
5
<PAGE>
Article Ill. PROSPECTUS AND PROXY STATEMENTS
3.1 TRUST shall prepare and be responsible for filing with the SEC and any
state regulators requiring such filing all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of TRUST.
TRUST shall bear the costs of registration and qualification of shares of the
Portfolios, preparation and filing of the documents listed in this Section 3.1
and all taxes and filing fees to which an issuer is subject on the issuance and
transfer of its shares.
3.2 TRUST or its designee shall provide LIFE COMPANY, free. of charge, with
as many copies of the current prospectus (or prospectuses), statements of
additional information, annual and semi-annual reports and proxy statements for
the shares of the Portfolios as LIFE COMPANY may reasonably request for
distribution to existing Variable Contract owners whose Variable Contracts are
funded by such shares. TRUST or its designee shall provide LIFE COMPANY, at LIFE
COMPANY's expense, with as many copies of the current prospectus (or
prospectuses) for the shares as LIFE COMPANY may reasonably request for
distribution to prospective purchasers of Variable Contracts. If requested by
LIFE COMPANY, TRUST or its designee shall provide such documentation [including
a "camera ready" copy of the current prospectus (or prospectuses) for the
Portfolios used in THE LIFE COMPANY'S Variable Contracts as set in type or, at
the request of LIFE COMPANY, as a diskette in the form sent to the financial
printer] and other assistance as is reasonably necessary in order for the
parties hereto once a year [or more frequently if the prospectus (or
prospectuses), for such Portfolios for the shares is supplemented or amended] to
have the prospectus for the Variable Contracts and the prospectus (or
prospectuses) for the TRUST shares printed together in one document. The
expenses of such printing will be apportioned between LIFE COMPANY and TRUST in
proportion to the number of pages of the Variable Contract and TRUST prospectus,
taking account of other relevant factors affecting the expense of printing, such
as covers, columns, graphs and charts; TRUST shall bear the cost of printing the
TRUST prospectus portion of such document for distribution only to owners of
existing Variable Contracts funded by the' TRUST shares and LIFE COMPANY shall
bear the expense of printing the portion of such documents relating to the
Separate Account; provided, however, LIFE COMPANY shall bear all printing
expenses of such combined documents where used for distributio to prospective
purchasers or to owners of existing Variable Contracts not funded by the shares.
In the event that LIFE COMPANY requests that TRUST or its designee provide
TRUST's prospectus in a "camera ready" or diskette format, TRUST shall be
responsible for providing the prospectus (or prospectuses) in the format in
which it is accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus (or prospectuses) in such format (e.g. typesetting
expenses), and LIFE COMPANY shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
6
<PAGE>
3.3 TRUST will provide LIFE COMPANY with at least one complete copy of all
prospectuses, statements of additional information, proxy statements, exemptive
applications and all amendments or supplements to any of the above that relate
to the Portfolios and any other material constituting sales literature or
advertising under NASD rules, the 40 Act or the 33 Act within 20 days of the
date of such material and annual and semi-annual reports and any amendments or
supplements thereto within 80 days of the date of such report or amendment or
supplement thereto. LIFE COMPANY will provide TRUST with at least one complete
copy of all prospectuses, statements of additional information, proxy
statements, exemptive applications and all amendments or supplements to any of
the above that relate to a Separate Account and its investment in Trust and any
other material constituting sales literature or advertising under NASD rules,
the 40 Act or the 33 Act within 20 days of the date of such material and annual
and semi-annual reports and any amendments within 80 days of the date of such
report or amendment or supplement thereto.
Article IV. SALES MATERIALS
4.1 LIFE COMPANY will furnish, or will cause to be furnished, to TRUST and
ADVISER, each piece of sales literature or other promotional material in which
TRUST or ADVISER is named, at least ten (10) Business Days prior to its intended
use. No such material will be used if TRUST or ADVISER objects to its use in
writing within seven (7) Business Days after receipt of such material.
4.2 TRUST and ADVISER will furnish, or will cause to be furnished, to LIFE
COMPANY, each piece of sales literature or other promotional material in which
LIFE COMPANY or its Separate Accounts are named, at least ten (10) Business Days
prior to its intended use. No such material will be used if LIFE COMPANY objects
to its use in writing within seven (7) Business Days after receipt of such
material.
4.3 TRUST and its affiliates and agents shall not give any information or
make any representations on behalf of LIFE COMPANY or concerning LIFE COMPANY,
the Separate Accounts, or the Variable Contracts issued by LIFE COMPANY, other
than the information or representations contained in a registration statement or
prospectus for such Variable Contracts, as such registration statement and
prospectus may be amended or supplemented from time to time, or in reports of
the Separate Accounts or reports prepared for distribution to owners of such
Variable Contracts, or in sales literature or other promotional material
approved by LIFE COMPANY or its designee, except with the written permission of
LIFE COMPANY.
4.4 LIFE COMPANY and its affiliates and agents shall not give any
information or make any representations on behalf of TRUST or concerning TRUST
other than the information or representations contained in a registration
statement or prospectus for
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<PAGE>
TRUST, as such registration statement and prospectus may be amended or
supplemented from time to time, or in sales literature or other promotional
material approved by TRUST or its designee, except with the written permission
of TRUST or ADVISER.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional m aterial" or words of similar import in clude, without
limitation, advertisements (such as material published, or designed for use, in
a newspaper, magazine or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures or other
public media), sales literature (such as any written communication distributed
or made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts, or
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, registration
statements, prospectuses, statements of additional information, shareholder
reports and proxy materials, and any other material constituting sales
literature or advertising under National Association of Securities Dealers, Inc.
("NASD") rules, the '40 Act, the '33 Act or rules thereunder.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that TRUST has received an order from the SEC
granting relief from various provisions of the '40 Act and the rules thereunder
to the extent necessary to permit TRUST shares to be sold to and held by
Variable Contract separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and Qualified Plans. The Exemptive Order
requires TRUST and each Participating Insurance Company to comply with
conditions and undertakings substantially as provided in this Section 5. The
TRUST will not enter into a participation agreement with any other Participating
Insurance Company unless it imposes the same conditions and undertakings as are
imposed on LIFE COMPANY hereby.
5.2 The Board will monitor TRUST for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners of all
separate accounts and with participants of Qualified Plans investing in TRUST.
An irreconcilable material conflict may arise for a variety of reasons, which
may include: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling or any similar action by
insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of TRUST are being managed; (e) a difference in voting instructions
given by Variable Contract owners; (f) a decision by a Participating Insurance
Company
8
<PAGE>
to disregard the voting instructions of Variable Contract owners and (g) if
applicable, a decision by a Qualified Plan to disregard the voting instructions
of plan participants.
5.3 LIFE COMPANY will report any potential or existing conflicts of which
it becomes aware to the Board. LIFE COMPANY will be responsible for assisting
the Board in carrying out its duties in this regard by providing the Board with
all information reasonably necessary for the Board to consider any issues
raised. The responsibility includes, but is not limited to, an obligation by the
LIFE COMPANY to inform the Board whenever it has determined to disregard
Variable Contract owner voting instructions. These responsibilities of LIFE
COMPANY will be carried out with a view only to the interests of the Variable
Contract owners.
5.4 If a majority of the Board or majority of its disinterested Trustees,
determines that a material irreconcilable conflict exists affecting LIFE
COMPANY, LIFE COMPANY, at its expense and to the extent reasonably practicable
(as determined by a majority of the Board's disinterested Trustees), will take
any steps necessary to remedy or eliminate the irreconcilable material conflict,
up to and including; (a) withdrawing the assets allocable to some or all of the
Separate Accounts from TRUST or any Portfolio thereof and reinvesting those
assets in a different investment medium, which may include another Portfolio of
TRUST, or another investment company; (b) submitting the question as to whether
such segregation should be implemented to a vote of all affected Variable
Contract owners and as appropriate, segregating the assets of any appropriate
group (i.e variable annuity, or variable life insurance Contract owners of one
or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Variable Contract owners the option of
making such a change; and (c) establishing a new registered management
investment company (or series thereof) or managed separate account. If a
material irreconcilable conflict arises because of LIFE COMPANY's decision to
disregard Variable Contract owner voting instructions, and that decision
represents a minority position or would preclude a majority vote, LIFE COMPANY
may be required, at the election of TRUST, to withdraw the Separate Account's
investment in TRUST, and no charge or penalty will be imposed as a result of
such withdrawal. The responsibility to take such remedial action shall be
carried out with a view only to the interests of the Variable Contract owners.
For the purposes of this Section 5.4, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable material conflict, but in no event will
TRUST or ADVISER (or any other investment adviser of TRUST) be required to
establish a new funding medium for any Variable Contract. Further, LIFE COMPANY
shall not be required by this Section 5.4 to establish a new funding medium for
any Variable Contracts [if any offer to do so has been declined by a vote of a
majority of Variable Contract owners materially and adversely affected by the
irreconcilable material conflict.]
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<PAGE>
5.5 The Board's determination of the existence of an irreconcilable
material conflict and its implications shall be made known promptly and in
writing to LIFE COMPANY.
5.6 LIFE COMPANY shall from time to time submit to the Board such reports,
materials or data as the Board may reasonably request so that the Board may
fully carry out its obligations under this Article V.
Article VI. VOTING
6.1 LIFE COMPANY will provide pass-through voting privileges to all
Variable Contract owners so long as and to the extent the SEC continues to
interpret the '40 Act as requiring pass-through voting privileges for Variable
Contract owners. Accordingly, LIFE COMPANY, where applicable, will vote shares
of the Portfolio held in its 40 Act registered Separate Accounts in a manner
consistent with voting instructions timely received from its Variable Contract
owners. LIFE COMPANY will be responsible for assuring that each of its Separate
Accounts that participates in TRUST calculates voting privileges in a manner
consistent with other Participating Insurance Companies. LIFE COMPANY will vote
shares in a registered Separate Account for which it has not received timely
voting instructions in the same proportion as it votes those shares in that
Separate Account for which it has received voting instructions.
6.2 If and to the extent Rule 6e-2 and Rule 6e-3(T) are amended, or if Rule
6e-3 is adopted, to provide exemptive relief from any provision of the '40 Act
or the rules thereunder with respect to mixed and shared funding on terms and
conditions materially different from any exemptions granted in the Exemptive
Order, then TRUST, and/or the Participating Insurance Companies, as appropriate,
shall take such steps as may be necessary to comply with Rule 6e-2 and Rule
6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such Rules are
applicable.
Article VII. INDEMNIFICATION
7.1 INDEMNIFICATION BY LIFE COMPANY. LIFE COMPANY agrees to indemnify and
hold harmless TRUST, ADVISER and each of their Trustees, directors, principals,
officers, employees and agents and each person, if any, who controls TRUST or
ADVISER within the meaning of Section 15 of the '33 Act (collectively, the
"Indemnified Parties") against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of LIFE COMPANY,
which consent shall not be unreasonably withheld) or litigation or threatened
litigation (including reasonable legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of TRUST's shares or the Variable Contracts and:
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<PAGE>
(a) arise out of or are based upon any untrue statements or alleged untrue
statements of any material fact contained in the Registration Statement or
prospectus or sales literature for the Variable Contracts or contained in
the Variable Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished in writing to
LIFE COMPANY by or on behalf of TRUST for use in the registration statement
or prospectus for the Variable Contracts or in the Variable Contracts or
sales literature (or any amendment or supplement to any of the foregoing)
or otherwise for use in connection with the sale of the Variable Contracts
or TRUST shares; or
(b) arise out of or result from (i) untrue statements or representations (other
than statements or representations contained in the registration statement,
prospectus or sales literature of TRUST not supplied by LIFE COMPANY, or
persons under its control) or (ii) willful misfeasance, bad faith or gross
negligence of LIFE COMPANY or persons under its control, with respect to
the sale or distribution of the Variable Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of a material
fact contained in a registration statement, prospectus, or sales literature
of TRUST or any amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading if such
statement or omission or such alleged statement or omission was made in
reliance upon and in conformity with information furnished in writing to
TRUST by or on behalf of LIFE COMPANY; or
(d) arise as a result of any failure by LIFE COMPANY to provide substantially
the services and furnish the materials under the terms of this Agreement;
or
(e) arise out of or result from any material breach of any representation
and/or warranty made by LIFE COMPANY in this Agreement or arise out of or
result from any other material breach of this Agreement by LIFE COMPANY.
11
<PAGE>
7.2 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against an Indemnified Party to the extent that such losses, claims,
damages, liabilities or litigation are attributable to such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement.
7.3 LIFE COMPANY shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such
Indemnified Party shall have notified LIFE COMPANY in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify LIFE COMPANY of
any such claim shall not relieve LIFE COMPANY from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against an Indemnified Party, LIFE COMPANY shall be entitled to participate at
its own expense in the defense of such action. LIFE COMPANY also shall be
entitled to assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from LIFE COMPANY to such party of LIFE
COMPANY's election to assume the defense thereof, the Indemnified Party shall
bear the fees and expenses of any additional counsel retained by it, and LIFE
COMPANY will not be liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party independently in connection
with the defense thereof other than reasonable costs of investigation.
7.4 INDEMNIFICATION BY TRUST AND ADVISER. TRUST and ADVISER each agree to
indemnify and hold harmless LIFE COMPANY and each of its directors, officers,
employees, and agents and each person, if any, who controls LIFE COMPANY within
the meaning of Section 15 of the '33 Act (collectively, the "Indemnified
Parties") against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of TRUST or ADVISER (which
consent shall not be unreasonably withheld) or litigation or threatened
litigation (including reasonable legal and other expenses) to which the
Indemnified Parties may become subject under any statute, or regulation, at
common law or otherwise, insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof) or settlements are related to the sale
or acquisition of TRUST's shares for the Variable Contracts and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of TRUST (or any amendment or supplement to
any of the foregoing), or arise out of
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<PAGE>
or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to indemnify shall not
apply as to any Indemnified Party if such statement or omission or such alleged
statement or omission was made in reliance upon and in conformity with
information furnished in writing to ADVISER I or TRUST by or on behalf of LIFE
COMPANY for use in the registration statement or prospectus for TRUST or in
sales literature (or any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the Variable Contracts or TRUST
shares; or
(b) arise out of or result from (i) untrue statements or representations
(other than statements or representations contained in the
registration statement, prospectus or sales literature for the
Variable Contracts not supplied by ADVISER or TRUST or
persons under its control) or (ii) gross negligence, bad faith or
willful misfeasance of TRUST or ADVISER or persons under its
control, with respect to the sale or distribution of the Variable
Contracts or TRUST shares; or
(c) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or
sales literature covering the Variable Contracts, or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished in writing to LIFE
COMPANY for inclusion therein by or on behalf of TRUST; or
(d) arise as a result of (i) a failure by TRUST or ADVISER to provide
substantially the services and furnish the materials under the
terms of this Agreement; or (ii) a failure by a Portfolio(s) invested
in by the Separate Account to comply with the diversification
requirements of Section 817(h) of the Code; or (iii) a failure by a
Portfolio(s) invested in by the Separate Account to qualify as a
"regulated investment company" under Subchapter M of the Code; or
13
<PAGE>
(e) arise out of or result from any material breach of any representation
and/or warranty made by TRUST or ADVISER in this Agreement or arise out of
or result from any other material breach of this Agreement by TRUST or
ADVISER.
7.5 TRUST and ADVISER shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party to the extent that such
losses, claims, damages, liabilities or litigation are attributable to such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement.
7.6 TRUST and ADVISER shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified TRUST and ADVISER in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify TRUST and ADVISER
of any such claim shall not relieve TRUST and ADVISER from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, TRUST and ADVISER shall be
entitled to participate at their own expense in the defense thereof. TRUST and
ADVISER also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from TRUST or
ADVISER to such party of TRUST's or ADVISER's election to assume the defense
thereof, the Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and TRUST and/or ADVISER as the case may be
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
Article Vill. TERM; TERMINATION
8.1 This Agreement shall be effective as of the date hereof and shall
continue in force until terminated in accordance with the provisions herein.
8.2 This Agreement shall terminate in accordance with the following provisions:
(a) At the option of LIFE COMPANY or TRUST At any time from the date hereof
upon 180 days' written notice, unless a shorter time is agreed to by the
parties;
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<PAGE>
(b) At the option of LIFE COMPANY, if TRUST shares are not reasonably available
to meet the requirements of the Variable Contracts as determined by LIFE
COMPANY. Prompt notice of election to terminate shall be furnished by LIFE
COMPANY, said termination to be effective ten days after receipt of notice
unless TRUST makes available a sufficient number of shares to reasonably
meet the requirements of the Variable Contracts within said ten-day period;
(c) At the option of LIFE COMPANY, upon the institution of formal proceedings
against TRUST or ADVISER or any sub-adviser by the SEC, the NASD, or any
other regulatory body, the expected or anticipated ruling, judgment or
outcome of which would, in LIFE COMPANY's reasonable judgment, after
affording TRUST and ADVISER reasonable opportunity for consultation with
LIFE COMPANY, materially impair TRUST's ability to meet and perform TRUST's
obligations and duties hereunder, or result in material harm to the
Separate Accounts, LIFE COMPANY, or owners of Variable Contracts. Prompt
notice of election to terminate shall be furnished by LIFE COMPANY with
said termination to be effective upon receipt of notice;
(d) At the option of TRUST or ADVISER, upon the institution of formal
proceedings against LIFE COMPANY by the SEC, the NASD, or any other
regulatory body, the expected or anticipated ruling, judgment or outcome of
which would, in TRUST's or ADVISER's reasonable judgment, after affording
LIFE COMPANY reasonable opportunity for consultation with TRUST and
ADVISER, materially impair LIFE COMPANY's ability to meet and perform its
obligations and duties hereunder. Prompt notice of election to terminate
shall be furnished by TRUST with said termination to be effective upon
receipt of notice;
(e) In the event TRUST's shares are not registered, issued or sold in
accordance with applicable state or federal law, or such law precludes the
use of such shares as the underlying investment medium of Variable
Contracts issued or to be issued by LIFE COMPANY. Termination shall be
effective upon such occurrence without notice;
(f) At the option of TRUST if the Variable Contracts cease to qualify as
annuity contracts or life insurance contracts, as applicable,
15
<PAGE>
under the Code, or if TRUST reasonably believes that the Variable Contracts
may fail to so qualify. Termination shall be effective upon receipt of
notice by LIFE COMPANY;
(g) At the option of LIFE COMPANY, upon TRUST's or ADVISER's breach of any
material provision of this Agreement, which breach has not been cured to
the reasonable satisfaction of LIFE COMPANY within ten days after written
notice of such breach is delivered to TRUST;
(h) At the option of TRUST or ADVISER, upon LIFE COMPANY's breach of any
material provision of this Agreement, which breach has not been cured to
the satisfaction of TRUST within ten days after written notice of such
breach is delivered to LIFE COMPANY;
(i) At the option of TRUST or ADVISER, if the Variable Contracts are not
registered, issued or sold in accordance with applicable federal and/or
state law. Termination shall be effective immediately upon such occurrence
without notice;
At the option of LIFE COMPANY, upon 75 days written notice of a vote of Variable
Contract owners having an interest in a Portfolio and upon written approval of
LIFE COMPANY, to substitute the shares of another investment company for the
corresponding shares of a Portfolio in accordance with the terms of the Variable
Contracts;
(k) In the event this Agreement is assigned without the prior written consent
of LIFE COMPANY, TRUST, and ADVISER,
termination shall be effective immediately upon such occurrence without notice.
8.3 Notwithstanding any termination of this Agreement pursuant to Section
8.2 hereof, TRUST at LIFE COMPANY'S option shall continue to make available
additional TRUST shares, as provided below, for so long as TRUST desires
pursuant to the terms and conditions of this Agreement, for all Variable
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts").
Specifically, without limitation, if TRUST makes additional TRUST shares
available, the owners of the Existing Contracts or LIFE COMPANY, whichever shall
have legal authority to do so, shall be permitted to reallocate investments in
TRUST, redeem investments in TRUST and/or invest in TRUST upon the payment- of
additional premiums under the Existing Contracts. If TRUST shares continue to be
made
16
<PAGE>
available after such termination, the provisions of this Agreement shall remain
in effect and thereafter either TRUST or LIFE COMPANY may terminate the
Agreement, as so continued pursuant to this Section 8.3, upon sixty (60) days
prior written notice to the other party.
8.4 Except as necessary to implement Variable Contract owner initiated
transactions, or as required by state insurance laws or regulations, LIFE
COMPANY shall not redeem the shares attributable to the Variable Contracts (as
opposed to the shares attributable to LIFE COMPANY's assets held in the Separate
Accounts), and LIFE COMPANY shall not prevent Variable Contract owners from
allocating payments to a Portfolio that was otherwise available under the
Variable Contracts until thirty (30) days after the LIFE COMPANY shall have
notified TRUST of its intention to do so.
Article IX. NOTICES
Any notice hereunder shall be given by registered or certified mail return
receipt requested to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to TRUST:
BT Insurance Funds Trust c/o First Data Investor Services Group, Inc. One
Exchange Place 53 State Street, Mail Stop BOS865 Boston, MA 02109
AND
c/o BT Alex Brown
One South Street, Mail Stop 1-18-6
Baltimore, MD 21202
Attn: Brian Wixted
If to ADVISER:
Bankers Trust Company
130 Liberty Street, Mail Stop 2355
New York, NY 10006
Attn.: Vinay Mendiratta
17
<PAGE>
If to LIFE COMPANY:
Lincoln National Life Insurance
Kelly D. Clevenger
1300 S. Clinton Street
Fort Wayne, IN 46802-3506
Notice shall be deemed given on the date of receipt by the addressee as
evidenced by the return receipt.
Article X. MISCELLANEOUS
10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
10.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
10.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
10.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of New York. It
shall also be subject to the provisions of the federal securities laws and the
rules and regulations thereunder and to any orders of the SEC granting exemptive
relief therefrom and the conditions of such orders.
10.5 It is understood and expressly stipulated that neither the
shareholders of shares of any Portfolio nor the Trustees or officers of TRUST or
any Portfolio shall be personally liable hereunder. No Portfolio shall be liable
for the liabilities of any other Portfolio. All persons dealing with TRUST or a
Portfolio must look solely to the property of TRUST or that Portfolio,
respectively, for enforcement of any claims against TRUST or that Portfolio. It
is also understood that each of the Portfolios shall be deemed to be entering
into a separate Agreement with LIFE COMPANY so that it is as if each of the
Portfolios had signed a separate Agreement with LIFE COMPANY and that a single
document is being signed simply to facilitate the execution and administration
of the Agreement.
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10.6 Each party shall cooperate with each other party and all appropriate
governmental authorities (including without limitation the SEC, the NASD and
state insurance regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or inquiry
relating to this Agreement or the transactions contemplated hereby.
10.7 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
10.8 If the Agreement terminates, the parties agree that Article 7 and
Sections 10.5, 10.6 and 10.7 shall remain in effect after termination.
10.9 No provision of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by TRUST,
ADVISER and the LIFE COMPANY.
10.10 No failure or delay by a party in exercising any right or remedy
under this Agreement will operate as a waiver thereof and no single or partial
exercise of rights shall preclude a further or subsequent exercise. The rights
and remedies provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Fund Participation Agreement as of the date and year first above
written.
BT INSURANCE FUNDS TRUST
By:
Name:
Title:
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BANKERS TRUST COMPANY
By:
Name. Irene S. Greenberg
Title: Vice President
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By:
Name: Kelly D. Clevenger
Title: Vice President
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<PAGE>
Appendix A
BT Insurance Funds Trust Portfolios
Equity 500 Index Fund
Small Cap Index Fund
<PAGE>
APPENDIX B
SEPARATE ACCOUNTS
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT M
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT R
<PAGE>
AMENDMENT TO APPENDIX B
AS OF NOVEMBER 1, 1998
Lincoln National Variable Annuity Account C
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Variable Annuity Account N
Lincoln National Variable Annuity Account Q
Lincoln Life Flexible Premium Variable Life Account R
Lincoln National Life Insurance Company Separate Account 27
Lincoln National Life Insurance Company Separate Account 53
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule A to be executed in its name and behalf by its duly authorized officer
on the date specified below.
Date: BT INSURANCE FUNDS TRUST
By: Elizabeth Russell,
Secretary
Date: BANKERS TRUST COMPANY
By: Irene S. Greenberg,
Vice President
Date: THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
on behalf of itself and its separate accounts
and as principal underwriter for its separate
accounts
By: Kelly D. Clevenger,
Vice President
<PAGE>
Exhibit A
Funds Available to Name of Separate Accounts
the Separate Accounts Utilizing Some or All of the Funds
- --------------------- ----------------------------------
Please amend Please add Lincoln Life Flexible
Appendix A of the FPA Premium Variable Life Account
and Exhibit A of the S and Lincoln National Life
Admin Services Letter Insurance Company Separate
to include the EAFE Account 36
Index Fund
<PAGE>
PARTICIPATION AGREEMENT
Among
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
And
LIBERTY ADVISORY SERVICES CORPORATION
And
LIBERTY VARIABLE INVESTMENT TRUST
And
LIBERTY FUNDS DISTRIBUTOR, INC.
THIS AGREEMENT, made and entered into this 20th day of November, 1998 by
and among Liberty Variable Investment Trust, a Massachusetts Business Trust
organized under the laws of Massachusetts (the "Fund") on behalf of the Series
named in Schedule 1 that may be amended from time to time in accordance with the
provisions of Article XI of this Agreement, The Lincoln National Life Insurance
Company, an Indiana insurance corporation (the "Company"), on its own behalf and
on behalf of each separate account of the Company named in Schedule 1 to this
Agreement as in effect at the time this Agreement is executed and such other
separate accounts that may be added to Schedule 1 from time to time in
accordance with the provisions of Article XI of this Agreement (each such
account referred to as the "Account"), Liberty Advisory Services Corporation
(the "Investment Manager"), and Liberty Funds Distributor, Inc., each a
Massachusetts corporation (the "Distributor").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts (collectively referred to as "Variable
Insurance Products," the owners of such products being referred to as "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund filed with the Securities and Exchange Commission (the
"SEC") and the SEC has declared effective a registration statement (referred to
herein as the "Fund Registration Statement" and the prospectus contained
therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as
the "Fund Prospectus") on Form N-1A to register itself as an open-end management
investment company (File No. 811-7556) under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Fund shares (File No. 33-59216) under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC to register
under the 1933 Act (unless exempt therefrom) certain variable annuity contracts
described in Schedule 2 to this Agreement as in effect at the time this
Agreement is executed and such other variable annuity contracts and variable
life insurance policies which may be added to Schedule 2 from time to time in
accordance with Article XI of this Agreement (such policies and contracts shall
be referred to herein collectively as the "Contracts," each such registration
statement for a
<PAGE>
class or classes of contracts listed on Schedule 2 being referred to as the
"Contracts Registration Statement" and the prospectus for each such class or
classes being referred to herein as the "Contracts Prospectus," and the owners
of such contracts, as distinguished from all Product Owners, being referred to
as "Contract Owners"); and
WHEREAS, each Account, a validly existing separate account, duly authorized
by resolution of the Board of Directors of the Company on the date set forth on
Schedule 1, sets aside and invests assets attributable to the Contracts; and
WHEREAS, the Company has registered or will have registered each Account
with the SEC as a unit investment trust under the 1940 Act before any Contracts
are issued by that Account; and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended (the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
(the "NASD"); and
WHEREAS, the Distributor and the Fund have entered into an agreement (the
"Fund Distribution Agreement") pursuant to which the Distributor will distribute
Fund shares; and
WHEREAS, the Investment Manager is registered as an investment adviser
under the 1940 Act and any applicable state securities laws and serves as an
investment manager to the Fund pursuant to an agreement, and may delegate its
responsibilities to selected Sub-Investment Managers; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Fund shares on behalf of each
Account to fund its Contracts and the Distributor is authorized to sell such
Fund shares to unit investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Distributor agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Distributor agrees to sell to the Company those Fund shares which
the Company orders on behalf of each Account, executing such orders on a daily
basis in accordance with Section 1.4 of this Agreement.
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<PAGE>
1.2. The Fund agrees to make shares available for purchase by the Company
on behalf of each Account at the then applicable net asset value per share on
Business Days as defined in Section 1.4 of this Agreement, and the Fund shall
use its best efforts to calculate AND DELIVER such net asset value by 6:00 p.m.,
New York time, on each such Business Day. Notwithstanding any other provision in
this Agreement to the contrary, the Trustees of the Fund may suspend or
terminate the offering of shares, if such action is required by law or by
regulatory authorities having Jurisdiction or if, in the sole discretion of the
Trustees acting in good faith and in light of its fiduciary duties under Federal
and any applicable state laws, suspension or termination is necessary and in the
best interests of the shareholders (it being understood that "shareholders" for
this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full or
fractional shares of the Fund held by each Account or the Company, executing
such requests at the net asset value on a daily basis (Company will expect
redemption wires on the same day as notification of redemption unless unusual
circumstances evolve which cause the Fund to have to redeem securities) in
accordance with Section 1.4 of this Agreement, the applicable provisions of the
1940 Act and the then currently effective Fund Prospectus. Notwithstanding the
foregoing, the Fund may delay redemption of Fund shares of any Fund to the
extent permitted by the 1940 Act, any rules, regulations or orders thereunder,
or the then currently effective Fund Prospectus.
1.4. (a) For purposes of Sections 1. 1, 1.2 and 1.3, the Fund shall
treat receipt on any Business Day by the Company of redemption and
purchase requests from each Account prior to the time prescribed in
the current Fund Prospectus (which as of the date of execution of this
Agreement is the close of the New York Stock Exchange) as receipt by
the Fund on that same Business Day, provided that the Fund receives
notice of such redemption or purchase request by 10: 00 a.m., New York
time on the next following Business Day. For purposes of this
Agreement, "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading.
(b) The Company, which in addition to being a life insurance
company is a broker/dealer and member of the NASD, shall pay for the
shares on the same day that it places an order with the Fund to
purchase those Fund shares for an Account. Payment for Fund shares
will be made by each Account or the Company in Federal Funds
transmitted to the Fund by wire to be received by 2:00 p.m., New York
time on the day the Fund is properly notified of the purchase order
for shares. The Fund will confirm receipt of each trade and these
confirmations will be received by Company via Fax or Email by 2:00
p.m. New York time. If Federal Funds are not received on time, such
funds will be invested, and shares purchased thereby will be issued,
as soon as practicable.
-3-
<PAGE>
(c) Payment for shares redeemed by each Account or the Company
will be made in Federal Funds transmitted to the Company by wire on
the same day the Fund is notified of the redemption order of shares,
except that the Fund reserves the right to delay payment of redemption
proceeds as permitted under Section 22(e) of the 1940 Act. Neither the
Fund nor the Distributor shall bear any responsibility whatsoever for
the proper disbursement or crediting of redemption proceeds if
securities must be redeemed; the Company alone shall be responsible
for such action.
1.5. Issuance and transfer of Fund shares will be by book entry only.
Stock certificates will not be issued to the Company or each Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate ledger
for each Account or the appropriate subaccount of each Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable
to the Company of any income dividends or capital gain distributions payable on
any shares. The Company, on its behalf and on behalf of each Account, hereby
elects to receive all such dividends and distributions as are payable on any
shares in the form of additional shares of that Fund. The Company reserves the
right, on its behalf and on behalf of each Account, to revoke this election and
to receive all such dividends in cash. The Fund shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
1.7. The Fund shall use its best efforts to make the net asset value
per share available to the Company by 6 p.m., New York time each Business Day,
and in any event, as soon as reasonably practicable after the net asset value
per share is calculated, and shall calculate such net asset value in accordance
with the then currently effective Fund Prospectus. Neither the Fund, the
Distributor, nor the Investment Manager nor any of their affiliates shall be
liable for any information provided to the Company pursuant to this Agreement
which information is based on incorrect information supplied by the Company to
the Fund, the Distributor or the Investment Manager.
1.8. (a)The Company may withdraw each Account's investment in the
Fund only: (i) as necessary to facilitate Contract owner
requests; (ii) upon a determination by a majority of the
Trustees, or a majority of disinterested Trustees, that an
irreconcilable material conflict exists among the interests of
(x) any Product Owners or (y) the interests of the Participating
Insurance Companies investing in the Fund; (iii) upon requisite
vote of the Contractowners having an interest in the affected
Fund to substitute the shares of another investment company for
shares in accordance with the terms of the Contracts; (iv) as
required by state and/or federal laws or regulations or Judicial
or other legal precedent of general application; or (v) at the
Company's sole discretion, pursuant to an order of the SEC under
Section 26(b) of the 1940 Act.
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<PAGE>
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the Fund
shares may be sold to other insurance companies (subject to
Section 1.9 hereof) and the cash value of the Contracts may be
invested in other investment companies.
(c) The Company shall not, without prior notice to the
Distributor (unless otherwise required by applicable law), take
any action to operate each Account as a management investment
company under the 1940 Act.
1.9. The Fund and the Distributor agree that Fund shares will be sold only
to Participating Insurance Companies and their separate accounts. The Fund and
the Distributor will not sell Fund shares to any insurance company or separate
account unless an agreement substantially complying with Article VII of this
Agreement is in effect to govern such sales. No Fund shares will be sold to the
general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and warrants that it
is an insurance company duly organized and validly existing under applicable
law and that it has legally and validly authorized each Account as a separate
account under Section 27-1-5-1 of the Indiana Insurance Code, and has
registered or, prior to the issuance of any Contracts, will register each
Account (unless exempt therefrom) as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as a separate account for its
Contracts, and that it will maintain such registrations for so long as any
Contracts issued under them are outstanding.
2.2. The Fund represents and warrants that shares of any Series sold
pursuant to this Agreement shall be registered under the 1933 Act and duly
authorized for issuance in accordance with applicable law and that the Fund is
and shall remain registered under the 1940 Act for so long as the Fund shares
are sold. The Fund further represents and warrants that it is a Massachusetts
Business Trust duly organized and in good standing under the laws of
Massachusetts.
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<PAGE>
2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund further represents and warrants that it
will make every effort to continue to qualify and to maintain such qualification
(under Subchapter M or any successor or similar provision), and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder. In the event of a
breach of this Section 2.4 by the Fund, it will: (a) immediately notify the
Company of such breach; and (b) take the steps necessary to adequately diversify
each portfolio so as to achieve such compliance within the period allowed by
regulation.
2.5. The Company represents and warrants that the Contracts are currently
and at the time of issuance will be treated as annuity contracts or life
insurance policies, whichever is appropriate, under applicable provisions of the
Code. The Company shall make every effort to maintain such treatment and shall
notify the Fund and the Distributor immediately upon having a reasonable basis
for believing that the Contracts have ceased to be so treated or that they might
not be so treated in the future.
2.6. The Fund (except for the Newport Tiger Fund, Variable Series)
represents and warrants that the Fund's investment policies, fees and expenses,
and operations are and shall at all times remain in material compliance with the
laws of the state of California ("CA"), to the extent required to perform this
Agreement; and with any state-mandated investment restrictions set forth on
Schedule 3, as amended from time to time by the Company in accordance with
Section 6.6. The Fund, however, makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund. If CA will not approve use of a Series, then Company reserves the right to
not offer it in the state.
2.7. The Distributor represents and warrants that it is duly registered as
a broker-dealer under the 1934 Act, a member in good standing of the NASD, and
duly registered as a broker-dealer under applicable state securities laws; its
operations are in compliance with applicable law, and it will distribute the
Fund shares according to applicable law.
2.8. The Investment Manager represents and warrants that it is registered
as an investment adviser under the Investment Advisers Act of 1940 and is in
compliance with applicable federal and state securities laws.
2.9. The Fund represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
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<PAGE>
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS,. SALES MATERIAL AND OTHER
INFORMATION
3.1. The Distributor shall provide the Company with as many copies of the
current Prospectus of any Series named in Schedule I as the Company may
reasonably request. If requested by the Company in lieu thereof, the Fund at its
expense shall provide to the Company a camera-ready copy, and electronic
version, of the current Fund Prospectus suitable for printing and other
assistance as is reasonably necessary in order for the Company to have a new
Contracts Prospectus printed together with the Fund Prospectus in one document.
See Article V for a detailed explanation of the responsibility for the cost of
printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Distributor, and the Distributor
shall provide such Statement free of charge to the Company and to any
outstanding or prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports with respect to
the Series named in Schedule I and other communications to
shareholders (except proxy material), in each case in a form suitable
for printing, as determined by the Company. The Fund shall be
responsible for the costs of printing and distributing these materials
to Contract owners, subject to the limitation in Article V.
(b) The Fund at its expense shall be responsible for preparing,
printing and distributing its proxy material. The Company will provide
the appropriate Contractowner names and addresses to a third party
proxy house for this purpose.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investment Manager is named to the
Distributor prior to its use. No such material shall be used, except with the
prior written permission of the Distributor. The Distributor agrees to respond
to any request for approval on a prompt and timely basis. Failure of the
Distributor to respond within 10 days of the request by the Company shall
relieve the Company of the obligation to obtain the prior written permission of
the Distributor.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement or
Fund Prospectus, as such Registration Statement and Prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the
Distributor, except with the prior written permission of the Distributor. The
Distributor agrees to respond to any request for permission on a prompt and
timely basis. If the Distributor does not respond within 10 days of a request by
the Company, then the Company shall be relieved of the obligation to obtain the
prior written permission of the Distributor.
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<PAGE>
3.6. The Fund and the Distributor shall not give any information or make
any representations on behalf of the Company or concerning the Company, each
Account or the Contracts other than the information or representations contained
in the Contracts Registration Statement or Contracts Prospectus, as such
Registration Statement and Prospectus may be amended or supplemented from time
to time, or in published reports of each Account which are in the public domain
or approved in writing by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved in writing by the
Company, except with the prior written permission of the Company. The Company
agrees to respond to any request for permission on a prompt and timely basis. If
the Company falls to respond within 10 days of a request by the Fund or the
Distributor, then the Fund and the Distributor are relieved of the obligation to
obtain the prior written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy of all
Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
applications for exemptions, requests for no-action letters, and all amendments
or supplements to any of the above, that relate to any Series of the Fund named
in Schedule 1, within 20 days after the filing of such document with the SEC or
other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy of all
Contracts Registration Statements, Contract Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts and their investment in the Fund, within 20
days after the filing of such document with the SEC or other regulatory
authorities.
3.9. For purposes of this Article III, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (I.E., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports and proxy materials, and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
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<PAGE>
ARTICLE IV. VOTING
4.1 Subject to applicable law and the order referred to in Article VII, the
Fund shall: solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the order referred to in Article VII, the
Company shall:
(a) vote Fund shares attributable to Contract owners in accordance
with instructions or proxies received in timely fashion from such Contract
owners;
(b) vote Fund shares attributable to Contract owners for which no
instructions have been received in the same proportion as Fund shares for
which instructions have been received in timely fashion; and
(c) vote Fund shares held by the Company on its own behalf or on
behalf of each Account that are not attributable to Contract owners in the
same proportion as Fund shares for which instructions have been received in
timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required of the Fund by any
Federal or state securities law, all taxes on the issuance or transfer of Fund
shares, and any expenses permitted to be paid or assumed by the Fund pursuant to
a plan, if any, under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company may print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contract owners.)
During the calendar year 1999, the Fund will not pay more than $15,000 of
the cost of printing and distributing Fund Prospectuses, Statements of
Additional Information and annual and semi-annual reports to existing Contract
owners.
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<PAGE>
The Company is responsible for the cost of printing and distributing Fund
prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAls.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section 817(h) of
the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements under
the 1933 Act and each Account's Registration Statement under the 1940 Act from
time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the 1933
Act and the 1940 Act from time to time as required in order to effect for so
long as Fund shares are sold the continuous offering of Fund shares as described
in the then currently effective Fund Prospectus. The Fund shall register and
qualify Fund shares for sale to the extent required by applicable securities
laws of the various states.
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have its Trustees, a majority of
whom shall not be interested persons of the Fund, formulate and approve any plan
under Rule 12b-1 to finance distribution expenses.
6.6. (a) The Company shall amend Schedule 3 when appropriate in order
to inform the Fund of any applicable state-mandated investment
restrictions with which the Fund must comply.
(b) Should the Fund or the Distributor become aware of any
restrictions which may be appropriate for inclusion in Schedule 3, the
Company shall be informed immediately of the substance of those
restrictions.
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<PAGE>
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Company has reviewed a copy of the order (the "Mixed and Shared
Funding Order") dated July 1, 1998 of the Securities and Exchange Commission
under Section 6c of the Act and, in particular, has reviewed the conditions to
the relief set forth in the related Notice. As set forth therein, the Company
agrees to report to the Trustees any potential or existing conflicts between the
interests of Product Owners of all separate accounts investing in the Fund, and
to assist the Trustees in carrying out their responsibilities under the
conditions of the Mixed and Shared Funding Order by providing all information
reasonably necessary for the Trustees to consider any issues raised, including
information as to a decision to disregard voting instructions of variable
contract owners.
7.2. If a majority of the Trustees, or a majority of disinterested
Trustees, determines that a material irreconcilable conflict exists, the
Trustees shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the Trustees, after notice to the Company
and a reasonable opportunity for the Company to appear before it and
present its case, determine that the Company is responsible for said
conflict, and if the Company agrees with that determination, the
Company shall, at its sole cost and expense, take whatever steps are
necessary to remedy the irreconcilable material conflict. These steps
could include: (1) withdrawing the assets allocable to some or all of
the affected Accounts from the Fund and reinvesting such assets in a
different investment vehicle, or submitting the question of whether
such segregation should be implemented to a vote of all affected
Contractowners and, as appropriate, segregating the assets of any
particular group (i.e., variable annuity Contractowners, variable life
insurance policyowners, or variable Contractowners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the option of
making such a change; and (ii) establishing a new registered mutual
fund or management separate account, or taking such other action as is
necessary to remedy or eliminate the irreconcilable material conflict.
(b) If the Company disagrees with the Trustees' determination,
the Company shall file a written protest with the Trustees, reserving
its right to dispute the determination as between just the Company and
the Fund. After reserving that right the Company, although disagreeing
with the Trustees that it (the Company) was responsible for the
conflict, shall take the necessary steps, under protest, to remedy the
conflict, substantially in accordance with paragraph (a) just above,
for the protection of Contractowners.
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<PAGE>
(c) As between the Company and the Fund, if within 45 days after
the Trustees' determination the Company elects to press the dispute,
it shall so notify the Trustees in writing. The parties shall then
attempt to resolve the matter amicably through negotiation by
individuals from each party who are authorized to settle the matter.
If the matter has not been amicably resolved within 60 days from
the date of the Company's notice of its intent to press the dispute,
then before either party shall undertake to litigate the dispute it
shall be submitted to non-binding arbitration conducted expeditiously
in accordance with the American Arbitration Association's (AAA) Rules
for Non-Administered Arbitration of Business Disputes, by a sole
arbitrator; PROVIDED, HOWEVER, that if one party has requested the
other party to seek an amicable resolution and the other party has
failed to participate, the requesting party may initiate arbitration
before expiration of the 60-day period set out Just above.
If within 45 days of the commencement of the process to select an
arbitrator the parties cannot agree upon the arbitrator, then he or
she will be selected from the AAA Panels of Neutrals. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. Sec.
1-16. The place of arbitration shall be Fort Wayne, Indiana. The
Arbitrator is not empowered to award damages in excess of compensatory
damages.
(d) If the Trustees shall determine that the Fund or another
insurer was responsible for the conflict, then the Trustees shall
notify the Company immediately of that determination. The Fund shall
assure the Company that it (the Fund) or that other insurer, as
applicable, shall, at its sole cost and expense, take whatever steps
are necessary to eliminate the conflict.
7.3. If a material irreconcilable conflict arises because of the Company's
decision to disregard Contractowner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
shall withdraw (without charge or penalty) each Account's investment in the
Fund, if the Fund so elects.
7.4. Subject to the terms of Section 7.2 above, the Company shall carry out
the responsibility to take remedial action in the event of a Trustees
determination of an irreconcilable material conflict with a view only to the
interests of Contractowners.
7.5. For purposes of this Article, a majority of the disinterested Trustees
shall determine whether or not any proposed action adequately remedies any
irreconcilable conflict, but in no event will the Fund be required to establish
a new funding medium for any variable contract, nor will the Company be required
to establish a new funding medium for any Contract if in either case an offer to
do so has been declined by a vote of a majority of affected Contractowners.
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ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Fund, the Investment Manager, the Distributor and each person
who controls, is controlled by or is affiliated with any of them (other than
another Participating Insurance Company) or the Investment Manager within the
meaning of such terms under the federal securities laws and any officer,
trustee, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid in settlement of, any action, suit or proceeding or any
claim asserted), to which they or any of them may become subject under any
statute or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales
literature or other promotional material for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or such alleged statement or alleged omission
was made in reliance upon and in conformity with information.
furnished in writing to the Company by the Fund or the Investment
Manager (or a person authorized in writing to do so on behalf of the
Fund or the Investment Manager) for use in the Contracts Registration
Statement, Contracts Prospectus or in the Contracts or sales
literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact by or on behalf of the
Company (other than statements or representations contained in the
Fund Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or
persons under its control with respect to the sale or distribution of
the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other promotional
material of the Fund or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not
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<PAGE>
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf of the Company;
or
(d) arise as a result of any failure by the Company to provide
the services and furnish the materials or to make any payments under
the terms of this Agreement; or
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to transmit a
request for redemption or purchase of Fund shares on a timely basis in
accordance with the procedures set forth in Article 1; or
(f) arise as a result of the Company's providing the Fund with
inaccurate information, which causes the Fund to calculate its Net
Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE INVESTMENT MANAGER. The Investment Manager on
behalf of itself, the Fund, and the Distributor agrees to indemnify and hold
harmless the Company and each person who controls, is controlled by or is
affiliated with the Company within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional material
of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing by the, Company to the Fund or the Investment Manager for use
in the Fund Registration Statement, Fund Prospectus (or any amendment
or
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<PAGE>
supplement thereto) or sales literature for the Fund or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact made by the Investment
Manager, the Fund or the Distributor (other than statements or
representations contained in the Fund Registration Statement, Fund
Prospectus or sales literature or other promotional material of the
Fund not supplied by the Investment Manager or the Fund or persons
under their control) or wrongful conduct of the Investment Manager or
persons under its control with respect to the sale or distribution of
the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contracts Registration
Statement, Contracts Prospectus or sales literature or other
promotional material for the Contracts (or any amendment or supplement
thereto), or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in
which they were made, if such statement or omission was made in
reliance upon information furnished in writing by the Investment
Manager or the Fund to the Company (or a person authorized in writing
to do so on behalf of the Fund or the Investment Manager); or
(d) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including, but not by way of limitation, a failure, whether
unintentional or in good faith or otherwise: (i) to comply with the
diversification requirements specified in Article VI of this
Agreement; and (ii) to provide the Company with accurate information
sufficient for it to calculate its accumulation and/or annuity unit
values in timely fashion as required by law and by the Contracts
Prospectuses); or
(e) arise out of any material breach by the Investment Manager
or the Fund of this Agreement.
This indemnification will be in addition to any liability which the Investment
Manager may otherwise have; provided, however, that no party shall be entitled
to indemnification if such loss, claim, damage or liability is due to the
willful misfeasance, bad faith, gross negligence or reckless disregard of duty
by the party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("Indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("Indemnifying party"), such indemnified party
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<PAGE>
will notify the indemnifying party in writing of the commencement thereof as
soon as practicable thereafter, provided that the omission to so notify the
indemnifying party will not relieve it from any liability under this Article
VIII, except to the extent that the omission results in a failure of actual
notice to the indemnifying party and such indemnifying party is damaged solely
as a result of the failure to give such notice. The indemnifying party, upon the
request of the indemnified party, shall retain counsel reasonably satisfactory
to the indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of laws.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant,
and the terms hereof shall be limited, interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months advance written
notice to the other parties; or
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<PAGE>
(b) at the option of the Company if shares of the Fund are not
available to meet the requirements of the Contracts as determined by
the Company. Prompt notice of the election to terminate for such cause
shall be furnished by the Company. Termination shall be effective ten
days after the giving of notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the operation of each Account, the administration of the
Contracts or the purchase of Fund shares, or an expected or
anticipated ruling, judgment or outcome which would, in the Fund's
reasonable judgment, materially impair the Company's ability to
perform the Company's obligations and duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the Distributor, the Investment Manager
or any Sub-Investment Manager, by the NASD, the SEC, or any state
securities or insurance commission or any other regulatory body
regarding the duties of the Fund or the Distributor under this
Agreement, or an expected or anticipated ruling, judgment or outcome
which would, in the Company's reasonable judgment, materially impair
the Fund's or the Distributor's ability to perform Fund's or
Distributor's obligations and duties hereunder; or
(e) at the option of the Company upon institution of formal
proceedings against the Investment Manager or any Sub-Investment
Manager by the NASD, the SEC, or any state securities or insurance
commission or any other regulatory body which would, in the good faith
opinion of the Company, result in material harm to the Accounts, the
Company, or Contract owners.
(f) upon requisite vote of the Contract owners having an
interest in the affected Fund (unless otherwise required by applicable
law) and written approval of the Company, to substitute the shares of
another investment company for the corresponding shares of the Fund in
accordance with the terms of the Contracts; or
(g) at the option of the Fund in the event any of the Contracts
are not registered, issued or sold in accordance with applicable
Federal and/or state law; or
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<PAGE>
(h) at the option of the Company or the Fund upon a
determination by a majority of the Trustees, or a majority of
disinterested Trustees, that an irreconcilable material conflict
exists among the interests of (i) any Product owners or (ii) the
interests of the Participating Insurance Companies investing in the
Fund; or
(i) at the option of the Company if the Fund ceases to qualify
as a Regulated Investment Company under Subchapter M of the Code, or
under any successor or similar provision, or if the Company reasonably
believes, based on an opinion of its counsel, that the Fund may fall
to so qualify; or
(j) at the option of the Company if the Fund falls to meet the
diversification requirements specified in Section 817(h) of the Code
and any regulations thereunder; or
(k) at the option of the Fund if the Contracts cease to qualify
as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fall to so qualify; or
(l) at the option of either the Fund or the Distributor if the
Fund or the Distributor, respectively, shall determine, in their sole
judgment exercised in good faith, that either (1) the Company shall
have suffered a material adverse change in its business or financial
condition; or (2) the Company shall have been the subject of material
adverse publicity which is likely to have a material adverse impact
upon the business and operations of either the Fund or the
Distributor; or
(m) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that either:
(1) the Fund and the Distributor, or either of them, shall have
suffered a material adverse change in their respective businesses or
financial condition; or (2) the Fund or the Distributor, or both of
them, shall have been the subject of material adverse publicity which
is likely to have a material adverse impact upon the business and
operations of the Company; or
(n) upon the assignment of this Agreement (including, without
limitation, any transfer of the Contracts or the Accounts to another
insurance company pursuant to an assumption reinsurance agreement)
unless the non-assigning party consents thereto or unless this
Agreement is assigned to an affiliate of the Distributor.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1,
no termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to all other parties to
this Agreement of its intent to terminate which notice shall set forth the basis
for such termination. Furthermore:
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<PAGE>
(a) In the event that any termination is based upon the provisions of
Article VII or the provisions of Section 10. 1 (a) of this Agreement, such prior
written notice shall be given in advance of the effective date of termination as
required by such provisions; and
(b) In the event that any termination is based upon the provisions of
Section 10. 1 (c) or 10. 1 (d) of this Agreement, such prior written notice
shall be given at least ninety (90) days before the effective date of
termination, or sooner if required by law or regulation.
(c) in the event that any termination is based upon the provisions of
Section 10.1 (e) of this Agreement, such prior written notice shall be given at
least sixty (60) days before the date of any proposed vote to replace the Fund's
shares.
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant to Section
10. 1 of this Agreement, the Fund and the Distributor will, at the option of the
Company, continue to make available additional Fund shares for so long after the
termination of this Agreement as the Company desires, pursuant to the terms and
conditions of this Agreement as provided in paragraph (b) below, for all
Contracts in effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically, without
limitation, if the Company so elects to make additional Fund shares available,
the owners of the Existing Contracts or the Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts.
(b) In the event of a termination of this Agreement pursuant to Section
10. 1 of this Agreement, the Fund and the Distributor shall make Fund -shares
available pursuant to Section 10.3(a) above. However, Fund and Distributor in
the event of negative financial impact to either, may notify Company in writing
of their intent to cease offering Fund Shares to Company. Fund and Distributor
agree to continue to offer such Fund shares for a period of twelve months from
the date of such written notice, or until Company receives a valid SEC
Substitution Order allowing the movement of assets to another fund, and the
Company is able to effectuate such substitution, whichever is sooner.
(c) The parties agree that this Section 10.3 shall not apply to any
termination made pursuant to Article VII or any conditions or undertakings
incorporated by reference in Article VII, and the effect of such Article VII
termination shall be governed by the provisions set forth or incorporated by
reference therein.
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<PAGE>
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance policies
to be issued by the Company through a Separate Account investing in the Fund.
The provisions of this Agreement shall be equally applicable to each such class
of contracts or policies, unless the context otherwise requires.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party(ies) at the address of such party(ies) set forth below
or at such other address as such party(ies) may from time to time specify in
writing to the other party.
If to the Fund:
Liberty Variable Investment Trust
One Financial Center
Boston, MA 02111
Attn: Secretary
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Investment Manager:
Liberty Advisory Services Corp.
125 High Street
Boston, MA 02110
Attn: President
If to the Distributor:
Liberty Funds Distributors, Inc.
One Financial Center
Boston, MA 02111
Attn: President
With a copy to: General Counsel
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<PAGE>
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
Liberty Variable Investment Trust (Fund)
Date: Signature:
Name:
Title:
The Lincoln National Life Insurance Company (Company)
Date: Signature:
Name: Kelly D. Clevenger
------------------
Title: Vice President
--------------
Liberty Funds Distributor, Inc. (Distributor)
Date: Signature:
Name:
Title:
Liberty Advisory Services Corporation (Investment
Manager)
Date: Signature:
Name:
Title:
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<PAGE>
SCHEDULE 1
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Series of the Fund
As of November 20, 1998
COMPANY SEPARATE ACCOUNT(S) ELIGIBLE VARIABLE SERIES OF THE FUND
Lincoln Life Variable Annuity Account N Colonial U.S. Stock Fund, Variable
Series
Newport Tiger Fund, Variable Series
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<PAGE>
SCHEDULE 2
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of November 20, 1998
Delaware- Lincoln ChoicePlus Variable Annuity (individual annuity)
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<PAGE>
SCHEDULE 3
State-mandated Investment Restrictions
Applicable to the Fund
As of November 20, 1998
The California Department of Insurance has established the following Guidelines
for an underlying portfolio of a Separate Account:
BORROWING. Borrowing limits for any variable contract separate account portfolio
are (1) 10% of net asset value when borrowing for any general purpose; and (2)
25% of net asset value when borrowing as a temporary measure to facilitate
redemptions. Net asset value of a portfolio is the market value of all
investments or assets owned less outstanding liabilities of the portfolio at the
time that any new or additional borrowing is undertaken.
FOREIGN INVESTMENTS - DIVERSIFICATION.
1. A portfolio will be invested in a minimum of five different foreign
countries at all times. However, this minimum is reduced to four when foreign
investments comprise less than 80% of the portfolio's net asset value; to three
when less than 60% of that value; to two when less than 40%; and to one when
less than 20%.
2. Except as set forth in items 3 and 4 below, a Portfolio will have no
more than 20% of its net asset value invested in securities of issuers
located in any one country.
3. A Portfolio may have an additional 15% of its net asset value invested
in securities of issuers located in any one of the following countries:
Australia, Canada, France, Japan, the United Kingdom or Germany.
4. A Portfolio's investments in United States issuers are not subject to
the foreign country diversification guidelines.
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<PAGE>
AMENDED AND RESTATED
FUND PARTICIPATION AGREEMENT
(FORMER TITLE: "AGREEMENT TO PURCHASE SHARES")
BETWEEN
THE LINCOLN NATIONAL LIFE INSURANCE CO.
AND
LINCOLN NATIONAL BOND FUND, INC.
THIS AGREEMENT, made and entered into this 1st day of July, 1998, by
and between Lincoln National Bond Fund, Inc. a corporation organized under the
laws of Maryland (the "Fund"), and THE LINCOLN NATIONAL LIFE INSURANCE CO., an
Indiana insurance corporation (the "Company"), on its own behalf and on behalf
of each separate account of the Company named in Schedule 1 to this Agreement as
in effect at the time this Agreement is executed and such other separate
accounts that may be added to Schedule 1 from time to time in accordance with
the provisions of Article XI of this Agreement (each such account referred to as
the "Account"; collectively, the "Accounts").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts (collectively referred to as "Variable
Insurance Products," the owners of such products being referred to as "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund filed with the Securities and Exchange Commission (the
"SEC") and the SEC has declared effective a registration statement (referred to
herein as the "Fund Registration Statement" and the prospectus contained
therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as
the "Fund Prospectus") on Form N-lA to register itself as an open-end management
investment company (File No. 811-3212) under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Fund shares (File No. 2-80743) under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC to
register under the 1933 Act (unless exempt therefrom) certain variable annuity
contracts and/or variable life insurance policies described in Schedule 2 to
this Agreement as in effect at the time this Agreement is executed and such
other variable annuity contracts and variable life insurance policies which may
be added to Schedule 2 from time to time in accordance with Article XI of this
Agreement (such policies and contracts shall be referred to herein collectively
as the "Contracts," each such registration statement for a class or classes of
contracts listed on Schedule 2 being referred to as the "Contracts Registration
Statement" and the prospectus for each such class or classes being referred to
herein as the "Contracts Prospectus," and the owners of the such contracts, as
distinguished from all Product Owners, being referred to as "Contract Owners");
and
<PAGE>
WHEREAS, each Account, a validly existing separate account, duly authorized
by the Company on the date set forth on Schedule 1, sets aside and invests
assets attributable to the Contracts; and
WHEREAS, the Company has registered or will have registered each Account
with the SEC as a unit investment trust under the 1940 Act before any Contracts
are issued by that Account; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares on behalf of each Account to
fund its Contracts and the Fund is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value; and
WHEREAS, pursuant to Articles of Merger approved by the Company in 1988,
the Company succeeded to all the legal rights and responsibilities of Lincoln
National Pension Insurance Company, the signatory to the original Agreement to
Purchase Shares, which this Agreement amends and restates.
NOW, THEREFORE, in consideration of their mutual promises, the Company and
the Fund agree as follows:
ARTICLE I. Sale of Fund Shares
1.1. The Fund agrees to sell to the Company those shares which the Company
orders on behalf of the Account, executing such orders on a daily basis in
accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make shares available for purchase by the Company
on behalf of the Account at the then applicable net asset value per share on
Business Days as defined in Section 1.4 of this Agreement, and the Fund shall
use its best efforts to calculate AND DELIVER such net asset value by 7:00 p.m.,
E.S.T., on each such Business Day. Notwithstanding any other provision in this
Agreement to the contrary, the Board of Directors of the Fund (the "Fund Board")
may suspend or terminate the offering of shares, if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Fund Board acting in good faith and in light of its fiduciary
duties under Federal and any applicable state laws, suspension or termination is
necessary and in the best interests of the shareholders (it being understood
that "shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full or
fractional shares of the Fund held by the Account or the Company, executing such
requests at the net asset value on a daily basis (LL will expect same day
redemption wires unless unusual circumstances evolve which cause the Fund to
have to redeem securities) in accordance with Section 1.4 of this
<PAGE>
Agreement, the applicable provisions of the 1940 Act and the then currently
effective Fund Prospectus. Notwithstanding the foregoing, the Fund may delay
redemption of Fund shares to the extent permitted by the 1940 Act, any rules,
regulations or orders thereunder, or the then currently effective Fund
Prospectus.
1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall
be the agent of the Fund for the limited purpose of receiving
redemption and purchase requests from the Account (but not from the
general account of the Company), and receipt on any Business Day by
the Company as such limited agent of the Fund prior to the time
prescribed in the current Fund Prospectus (which as of the date of
execution of this Agreement is 4 p.m., E.S.T.) shall constitute
receipt by the Fund on that same Business Day, provided that the Fund
receives notice of such redemption or purchase request by 9:00 a.m.,
E.S.T. on the next following Business Day. For purposes of this
Agreement, "Business Day" shall mean any day on which the New York
Stock exchange is open for trading.
(b) The Company shall pay for the shares on the same day that it
places an order with the Fund to purchase those Fund shares for an
Account. Payment for Fund shares will be made by the Account or the
Company in Federal Funds transmitted to the Fund by wire to be
received by 11:00 a.m., E.S.T. on the day the Fund is properly
notified of the purchase order for shares. The Fund will confirm
receipt of each trade and these confirmations will be received by the
Company via Fax or Email by 3:00 p.m. E.S.T. If Federal Funds are not
received on time, such funds will be invested, and shares purchased
thereby will be issued, as soon as practicable.
(c) Payment for shares redeemed by the Account or the Company
will be made in Federal Funds transmitted to the Company by wire on
the same day the Fund is notified of the redemption order of shares,
except that the Fund reserves the right to delay payment of redemption
proceeds, but in no event may such payment be delayed longer than the
period permitted under Section 22(e) of the 1940 Act. The Fund shall
not bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds if securities must be redeemed; the
Company alone shall be responsible for such action.
1.5. Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Account. Purchase and
redemption orders for Fund shares will be recorded in an appropriate ledger for
the Account or the appropriate subaccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any shares in
the form of additional shares of that Fund. The Company reserves
<PAGE>
the right, on its behalf and on behalf of the Account, to revoke this election
and to receive all such dividends in cash. The Fund shall notify the Company of
the number of shares so issued as payment of such dividends and distributions.
1.7. The Fund shall use its best efforts to make the net asset value per
share available to the Company by 7:00 p.m., E.S.T. each Business Day, and in
any event, as soon as reasonably practicable after the net asset value per share
is calculated, and shall calculate such net asset value in accordance with the
then currently effective Fund Prospectus. The Fund shall not be liable for any
information provided to the Company pursuant to this Agreement which information
is based on incorrect information supplied by the Company to the Fund.
1.8. (a) The Company may withdraw the Account's investment in the Fund
only: (i) as necessary to facilitate Contract owner requests; (ii)
upon a determination by a majority of the Fund Board, or a majority of
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of (x) any Product Owners or (y)
the interests of the Participating Insurance Companies investing in
the Fund; (iii) upon requisite vote of the Contractowners having an
interest in the Fund to substitute the shares of another investment
company for shares in accordance with the terms of the Contracts; (iv)
as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application; or (v) at the Company's
sole discretion, pursuant to an order of the SEC under Section 26(b)
of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the Fund
shares may be sold to other insurance companies (subject to Section
1.9 hereof) and the cash value of the Contracts may be invested in
other investment companies.
(c) The Company shall not, without prior notice to the Fund
(unless otherwise required by applicable law), take any action to
operate the Accounts as management investment companies under the 1940
Act.
1.9. The Fund agrees that Fund shares will be sold only to Participating
Insurance Companies and their separate accounts. The Fund will not sell Fund
shares to any insurance company or separate account unless an agreement
complying with Article VII of this Agreement is in effect to govern such sales.
No Fund shares will be sold to the general public.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered
<PAGE>
and sold in compliance in all material respects with all applicable Federal and
state laws. The Company further represents and warrants that it is an insurance
company duly organized and validly existing under applicable law and that it has
legally and validly authorized each Account as a separate account under Section
27-1-5-1 of the Indiana Insurance Code, and has registered or, prior to the
issuance of any Contracts, will register each Account (unless exempt therefrom)
as a unit investment trust in accordance with the provisions of the 1940 Act to
serve as a separate account for its Contracts, and that it will maintain such
registrations for so long as any Contracts issued under them are outstanding.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for so long as the Fund shares are sold. The Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund further represents and warrants that it
will make every effort to continue to qualify and to maintain such qualification
(under Subchapter M or any successor or similar provision), and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees and
expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement; and with any state- mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Fund, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Fund represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will immediately
notify the Company in the event the fidelity bond coverage should lapse at any
time.
<PAGE>
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Fund shall provide the Company with as many copies of the current
Fund Prospectus as the Company may reasonably request. If requested by the
Company in lieu thereof, the Fund at its expense shall provide to the Company a
camera-ready copy, and electronic version, of the current Fund Prospectus
suitable for printing and other assistance as is reasonably necessary in order
for the Company to have a new Contracts Prospectus printed together with the
Fund Prospectus in one document. See Article V for a detailed explanation of the
responsibility for the cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Fund and the Fund shall provide
such Statement free of charge to the Company and to any outstanding or
prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in each case
in a form suitable for printing, as determined by the Company. The
Fund shall be responsible for the costs of printing and distributing
these materials to Contract owners.
(b) The Fund at its expense shall be responsible for preparing,
printing and distributing its proxy material. The Company will provide
the appropriate Contractowner names and addresses to the Fund for this
purpose.
3.4. The Company shall furnish to the Fund, prior to its use, each piece of
sales literature or other promotional material in which the Fund is named. No
such material shall be used, except with the prior written permission of the
Fund. The Fund agrees to respond to any request for approval on a prompt and
timely basis. Failure of the Fund to respond within 10 days of the request by
the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement or
Fund Prospectus, as such Registration Statement and Prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund,
except with the prior written permission of the Fund. The Fund agrees to respond
to any request for permission on a prompt and timely basis. If the Fund does not
respond within 10 days of a request by the Company, then the Company shall be
relieved of the obligation to obtain the prior written permission of the Fund.
<PAGE>
3.6. The Fund shall not give any information or make any representations on
behalf of the Company or concerning the Company, the Account or the Contracts
other than the information or representations contained in the Contracts
Registration Statement or Contracts Prospectus, as such Registration Statement
and Prospectus may be amended or supplemented from time to time, or in published
reports of the Account which are in the public domain or approved in writing by
the Company for distribution to Contract owners, or in sales literature or other
promotional material approved in writing by the Company, except with the prior
written permission of the Company. The Company agrees to respond to any request
for permission on a prompt and timely basis. If the Company fails to respond
within 10 days of a request by the Fund, then the Fund is relieved of the
obligation to obtain the prior written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy of all
Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy of all
Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft versions of
any registration statements, prospectuses, statements of additional information,
reports, proxy statements, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (I.E., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements,
<PAGE>
prospectuses, Statements of Additional Information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the requirements of Article VII, the Fund
shall solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the requirements of Article VII, the
Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with instructions or proxies received in timely fashion
from such Contract owners;
(b) vote Fund shares attributable to Contract owners for which no
instructions have been received in the same proportion as Fund shares
of such Series for which instructions have been received in timely
fashion; and
(c) vote Fund shares held by the Company on its own behalf or on
behalf of the Account that are not attributable to Contract owners in
the same proportion as Fund shares of such Series for which
instructions have been received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Fund shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company decided to print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contractowners.)
<PAGE>
The Company is responsible for the cost of printing and distributing Fund
prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section 817(h) of
the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements under
the 1933 Act and the Account's Registration Statement under the 1940 Act from
time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the 1933
Act and the 1940 Act from time to time as required in order to effect for so
long as Fund shares are sold the continuous offering of Fund shares as described
in the then currently effective Fund Prospectus. The Fund shall register and
qualify Fund shares for sale to the extent required by applicable securities
laws of the various states.
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
6.6. (a) When appropriate in order to inform the Fund of any
applicable state-mandated investment restrictions with which the Fund
must comply, the Company shall arrange with the Fund to amend Schedule
3, pursuant to the requirements of Article XI.
(b) Should the Fund become aware of any restrictions which may be
appropriate for inclusion in Schedule 3, the Company shall be informed
immediately of the substance of those restrictions.
<PAGE>
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of the Fund
(the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist the
Board in carrying out its responsibilities under Section 6e-3(T) of the 1940
Act, by providing all information reasonably necessary for the Board to consider
any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested Board
Members, determines that a material irreconcilable conflict exists, the Board
shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to the Company
and a reasonable opportunity for the Company to appear before it and
present its case, determines that the Company is responsible for said
conflict, and if the Company agrees with that determination, the
Company shall, at its sole cost and expense, take whatever steps are
necessary to remedy the material irreconcilable conflict. These steps
could include: (i) withdrawing the assets allocable to some or all of
the affected Accounts from the Fund and reinvesting such assets in a
different investment vehicle, or submitting the question of whether
such segregation should be implemented to a vote of all affected
Contractowners and, as appropriate, segregating the assets of any
particular group (i.e., variable annuity Contractowners, variable life
insurance policyowners, or variable Contractowners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the option of
making such a change; and (ii) establishing a new registered mutual
fund or management separate account; or (iii) taking such other action
as is necessary to remedy or eliminate the material irreconcilable
conflict.
(b) If the Company disagrees with the Board's determination, the
Company shall file a written protest with the Board, reserving its
right to dispute the determination as between just the Company and the
Fund and to seek reimbursement from the Fund for the reasonable costs
and expenses of resolving the conflict . After reserving that right
the Company, although disagreeing with the Board that it (the Company)
was responsible for the conflict, shall take the necessary steps,
under protest, to remedy the conflict, substantially in accordance
with paragraph (a) just above, for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45 days after
the Board's determination the Company elects to press the dispute, it
shall so notify the Board in writing. The parties shall then attempt
to resolve the matter amicably through negotiation by individuals from
each party who are authorized to settle the matter. If the matter has
not been amicably resolved within 60 days from the date
<PAGE>
of the Company's notice of its intent to press the dispute, then
before either party shall undertake to litigate the dispute it shall
be submitted to non-binding arbitration conducted expeditiously in
accordance with the CPR Rules for Non-Administered Arbitration of
Business Disputes, by a sole arbitrator; PROVIDED, HOWEVER, that if
one party has requested the other party to seek an amicable resolution
and the other party has failed to participate, the requesting party
may initiate arbitration before expiration of the 60-day period set
out just above.
If within 45 days of the commencement of the process to select an
arbitrator the parties cannot agree upon the arbitrator, then he or
she will be selected from the CPR Panels of Neutrals. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. Sec.
1-16. The place of arbitration shall be Fort Wayne, Indiana. The
Arbitrator is not empowered to award damages in excess of compensatory
damages.
(d) If the Board shall determine that the Fund or another was
responsible for the conflict, then the Board shall notify the Company
immediately of that determination. The Fund shall assure the Company
that it (the Fund) or that other Participating Insurance Company as
applicable, shall, at its sole cost and expense, take whatever steps
are necessary to eliminate the conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall constitute a
waiver of any right of action which the Company may have against other
Participating Insurance Companies for reimbursement of all or part of
the costs and expenses of resolving the conflict.
7.3. If a material irreconcilable conflict arises because of the Company's
decision to disregard Contractowner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
shall withdraw (without charge or penalty) the Account's investment in the Fund,
if the Fund so elects.
7.4. For purposes of this Article, a majority of the disinterested members
of the Board shall determine whether or not any proposed action adequately
remedies any irreconcilable conflict. However, in no event will the Fund be
required to establish a new funding medium for any variable contract, nor will
the Company be required to establish a new funding medium for any Contract, if
in either case an offer to do so has been declined by a vote of a majority of
affected Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Fund and each person who controls or is associated with the
Fund (other than another Participating Insurance Company) within the meaning of
such terms under the federal securities
<PAGE>
laws and any officer, trustee, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid with the prior written consent of the
Company in settlement of, any action, suit or proceeding or any claim asserted),
to which they or any of them may become subject under any statute or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales
literature or other promotional material for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or such alleged statement or alleged omission
was made in reliance upon and in conformity with information furnished
in writing to the Company by the Fund (or a person authorized in
writing to do so on behalf of the Fund) for use in the Contracts
Registration Statement, Contracts Prospectus or in the Contracts or
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact by or on behalf of the
Company (other than statements or representations contained in the
Fund Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or
persons under its control with respect to the sale or distribution of
the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the Fund Registration Statement, Fund
Prospectus or sales literature or other promotional material of the
Fund or any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf of the Company;
or
(d) arise as a result of any failure by the Company to provide
the services and furnish the materials or to make any payments under
the terms of this Agreement; or
<PAGE>
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to transmit a
request for redemption or purchase of Fund shares on a timely basis in
accordance with the procedures set forth in Article I; or
(f) arise as a result of the Company's providing the Fund with
inaccurate information, which causes the Fund to calculate its Net
Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify and hold
harmless the Company and each person who controls or is associated with the
Company within the meaning of such terms under the federal securities laws and
any officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Fund in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional material
of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Fund for use in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or
sales literature for the Fund or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact made by the Fund (other
than statements or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other promotional
material of the Fund not supplied by the Distributor or the Fund or
persons under their control) or wrongful conduct of the Fund or
persons under its control with respect to the sale or distribution of
the Contracts or Fund shares; or
<PAGE>
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the Contract's Registration Statement,
Contracts Prospectus or sales literature or other promotional material
for the Contracts (or any amendment or supplement thereto), or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon information
furnished in writing by the Fund to the Company (or a person
authorized in writing to do so on behalf of the Fund); or
(d) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including, but not by way of limitation, a failure, whether
unintentional or in good faith or otherwise: (i) to comply with the
diversification requirements specified in Sections 2.4 and 6.1 in
Article VI of this Agreement; and (ii) to provide the Company with
accurate information sufficient for it to calculate its accumulation
and/or annuity unit values in timely fashion as required by law and by
the Contracts Prospectuses); or
(e) arise out of any material breach by the Fund of this
Agreement.
This indemnification will be in addition to any liability which the Fund may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
<PAGE>
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of law.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant,
and the terms hereof shall be limited, interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance written
notice to the other parties; or
(b) at the option of the Company if shares of the Fund are not
available to meet the requirements of the Contracts as determined by
the Company. Prompt notice of the election to terminate for such cause
shall be furnished by the Company. Termination shall be effective ten
days after the giving of notice by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the operation of the Account, the administration of the
Contracts or the purchase of Fund shares;
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the investment advisor or any
subinvestment advisor, by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body; or
<PAGE>
(e) upon requisite vote of the Contract owners having an interest
in the Fund (unless otherwise required by applicable law) and written
approval of the Company, to substitute the shares of another
investment company for the corresponding shares of the Fund in
accordance with the terms of the Contracts; or
(f) at the option of the Fund in the event any of the Contracts
are not registered, issued or sold in accordance with applicable
Federal and/or state law; or
(g) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of disinterested Fund
Board members, that an irreconcilable material conflict exists among
the interests of (i) any Product owners or (ii) the interests of the
Participating Insurance Companies investing in the Fund; or
(h) at the option of the Company if the Fund ceases to qualify as
a Regulated Investment Company under Subchapter M of the Code, or
under any successor or similar provision, or if the Company reasonably
believes, based on an opinion of its counsel, that the Fund may fail
to so qualify; or
(i) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Section 817(h) of the Code
and any regulations thereunder; or
(j) at the option of the Fund if the Contracts cease to qualify
as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify; or
(k) at the option of the Fund if the Fund shall determine, in its
sole judgment exercised in good faith, that either (1) the Company
shall have suffered a material adverse change in its business or
financial condition; or (2) the Company shall have been the subject of
material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund; or
(l) at the option of the Company, if the Company shall determine,
in its sole judgment exercised in good faith, that: (1) the Fund shall
have suffered a material adverse change in its business or financial
condition; or (2) the Fund shall have been the subject of material
adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company; or
(m) automatically upon the assignment of this Agreement
(including, without limitation, any transfer of the Contracts or the
Accounts to another insurance company pursuant to an assumption
reinsurance agreement) unless the non-assigning party consents thereto
or unless this Agreement is assigned to an
<PAGE>
affiliate of the Company or the Fund, as the case may be.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1, no
termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to the other party of its
intent to terminate, which notice shall set forth the basis for such
termination. Furthermore:
(a) In the event that any termination is based upon the
provisions of Article VII or the provisions of Section 10.1(a) of this
Agreement, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such prior
written notice shall be given at least ninety (90) days before the
effective date of termination, or sooner if required by law or
regulation.
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund will, at the option of the
Company, continue to make available additional Fund shares for so long
after the termination of this Agreement as the Company desires,
pursuant to the terms and conditions of this Agreement as provided in
paragraph (b) below, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if the Company so
elects to make additional Fund shares available, the owners of the
Existing Contracts or the Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in
the Fund, redeem investments in the Fund and/or invest in the Fund
upon the making of additional purchase payments under the Existing
Contracts.
(b) If Fund shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect
except for Section 10.1(a) and thereafter either the Fund or the
Company may terminate the Agreement, as so continued pursuant to this
Section 10.3, upon prior written notice to the other party, such
notice to be for a period that is reasonable under the circumstances
but, if given by the Fund, need not be for more than six months.
(c) The parties agree that this Section 10.3 shall not apply to
any termination made pursuant to Article VII, and the effect of such
Article VII termination shall be governed by the provisions set forth
or incorporated by reference therein.
<PAGE>
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance policies
to be issued by the Company through new or existing Separate Accounts investing
in the Fund. The provisions of this Agreement shall be equally applicable to
each such separate account and each such class of contracts or policies, unless
the context otherwise requires. Any such amendment must be signed by the parties
and must bear an effective date for that amendment.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party(ies) at the address of such party(ies) set forth below
or at such other address as such party(ies) may from time to time specify in
writing to the other party.
If to the Fund:
Lincoln National Bond Fund, Inc.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Steven M. Kluever
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
<PAGE>
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Amended and Restated Fund Participation Agreement, as of its
effective date, hereby supersedes any and all prior agreements to purchase
shares between Lincoln Life and the Fund.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
LINCOLN NATIONAL BOND FUND, INC.
Signature:
------------------------------------------------------------
Name: Kelly D. Clevenger
-----------------------------------------------------------------
Title: President
----------------------------------------------------------------
LINCOLN NATIONAL LIFE INSURANCE CO. (Company)
Signature:
------------------------------------------------------------
Name: Stephen H. Lewis
-----------------------------------------------------------------
Title: Senior Vice President, Lincoln National Life Insurance Company
----------------------------------------------------------------
<PAGE>
SCHEDULE 1
Lincoln National Bond Fund, Inc.
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of July 1, 1998
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT D
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53
SCHEDULE 2
Lincoln National Bond Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of July 1, 1998
MULTI FUND VARIABLE ANNUITY
eANNUITY
EMANCIPATOR LIFE
MULTI FUND VARIABLE LIFE
<PAGE>
ACCRU CHOICEPLUS
GROUP MULTI FUND
MULTI FUND - NON-REGISTERED
<PAGE>
SCHEDULE 3
Lincoln National Bond Fund, Inc.
State-mandated Investment Restrictions
Applicable to the Fund
As of July 1, 1998
The California Department of Insurance has established the following Guidelines
for an underlying portfolio of a Separate Account:
BORROWING. The borrowing limit for any FUND is 33 1/3 percent of total assets.
Entering into a reverse repurchase agreement shall be considered "borrowing" as
that term is used herein.
FOREIGN INVESTMENTS - DIVERSIFICATION
The diversification guidelines to be followed by international and global FUNDS
are as follows:
a. An international FUND or a global FUND is sufficiently diversified if it is
invested in a minimum of three different countries at all times, and has
invested no more than 50 percent of total assets in any one second-tier
country and no more than 25 percent of total assets in any one third-tier
country. First-tier countries are: Germany, the United Kingdom, Japan, the
United States, France, Canada, and Australia. Second-tier countries are all
countries not in the first or third tier. Third-tier countries are
countries identified as "emerging" or "developing" by the International
Bank for Reconstruction and Development ("World Bank") or International
Finance Corporation.
b. A regional FUND is sufficiently diversified if it is invested in a minimum
of three countries. The name of the fund must accurately describe the FUND.
c. The name of the single country FUND must accurately describe the FUND.
d. An index FUND must substantially mirror the index.
<PAGE>
Amendment to
SCHEDULE 1
Lincoln National Money Market Fund, Inc.
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of May 1, 1999
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT D
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53
<PAGE>
Amendment to
SCHEDULE 2
Lincoln National Money Market Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of May 1, 1999
MULTI FUND INDIVIDUAL VARIABLE ANNUITY
EANNUITY
EMANCIPATOR LIFE
MULTI FUND VARIABLE LIFE
VUL I
LINCOLN VUL
DELAWARE-LINCOLN CHOICE PLUS
GROUP MULTI FUND
SVUL I
LINCOLN SVUL
LINCOLN CVUL
MULTI FUND - NON-REGISTERED
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1 and 2 to be executed in its name and behalf by its duly authorized
officer on the date specified below.
LINCOLN NATIONAL MONEY MARKET FUND, INC.
Date: 3/26/99 By: /s/ Kelly D. Clevenger
------------------------ ---------------------------------
Kelly D. Clevenger
President and Chairman
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: 3/26/99 By: /s/ Stephen H. Lewis
------------------------ ---------------------------------
Stephen H. Lewis
Senior Vice President
<PAGE>
AMENDED AND RESTATED
FUND PARTICIPATION AGREEMENT
(FORMER TITLE: "AGREEMENT TO PURCHASE SHARES")
BETWEEN
THE LINCOLN NATIONAL LIFE INSURANCE CO.
AND
LINCOLN NATIONAL MONEY MARKET FUND, INC.
THIS AGREEMENT, made and entered into this 7th day of June, 1998, by
and between Lincoln National Money Market Fund, Inc. a corporation organized
under the laws of Maryland (the "Fund"), and THE LINCOLN NATIONAL LIFE INSURANCE
CO., an Indiana insurance corporation (the "Company"), on its own behalf and on
behalf of each separate account of the Company named in Schedule 1 to this
Agreement as in effect at the time this Agreement is executed and such other
separate accounts that may be added to Schedule 1 from time to time in
accordance with the provisions of Article XI of this Agreement (each such
account referred to as the "Account"; collectively, the "Accounts").
WHEREAS, the Fund is engaged in business as an open-end management
investment company and was established for the purpose of serving as the
investment vehicle for separate accounts established for variable life insurance
policies and variable annuity contracts (collectively referred to as "Variable
Insurance Products," the owners of such products being referred to as "Product
owners") to be offered by insurance companies which have entered into
participation agreements with the Fund ("Participating Insurance Companies");
and
WHEREAS, the Fund filed with the Securities and Exchange Commission (the
"SEC") and the SEC has declared effective a registration statement (referred to
herein as the "Fund Registration Statement" and the prospectus contained
therein, or filed pursuant to Rule 497 under the 1933 Act, referred to herein as
the "Fund Prospectus") on Form N-lA to register itself as an open-end management
investment company (File No. 811-3212) under the Investment Company Act of 1940,
as amended (the "1940 Act"), and the Fund shares (File No. 2-80743) under the
Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC to
register under the 1933 Act (unless exempt therefrom) certain variable annuity
contracts and/or variable life insurance policies described in Schedule 2 to
this Agreement as in effect at the time this Agreement is executed and such
other variable annuity contracts and variable life insurance policies which may
be added to Schedule 2 from time to time in accordance with Article XI of this
Agreement (such policies and contracts shall be referred to herein collectively
as the "Contracts," each such registration statement for a class or classes of
contracts listed on Schedule 2 being referred to as the "Contracts Registration
Statement" and the prospectus for each such class or classes being referred to
herein as the "Contracts Prospectus," and the owners of the such contracts, as
distinguished from all Product Owners, being referred to as "Contract Owners");
and
<PAGE>
WHEREAS, each Account, a validly existing separate account, duly authorized
by the Company on the date set forth on Schedule 1, sets aside and invests
assets attributable to the Contracts; and
WHEREAS, the Company has registered or will have registered each Account
with the SEC as a unit investment trust under the 1940 Act before any Contracts
are issued by that Account; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares on behalf of each Account to
fund its Contracts and the Fund is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Company and
the Fund agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Fund agrees to sell to the Company those shares which the Company
orders on behalf of the Account, executing such orders on a daily basis in
accordance with Section 1.4 of this Agreement.
1.2. The Fund agrees to make shares available for purchase by the Company
on behalf of the Account at the then applicable net asset value per share on
Business Days as defined in Section 1.4 of this Agreement, and the Fund shall
use its best efforts to calculate AND DELIVER such net asset value by 7:00 p.m.,
E.S.T., on each such Business Day. Notwithstanding any other provision in this
Agreement to the contrary, the Board of Directors of the Fund (the "Fund Board")
may suspend or terminate the offering of shares, if such action is required by
law or by regulatory authorities having jurisdiction or if, in the sole
discretion of the Fund Board acting in good faith and in light of its fiduciary
duties under Federal and any applicable state laws, suspension or termination is
necessary and in the best interests of the shareholders (it being understood
that "shareholders" for this purpose shall mean Product owners).
1.3. The Fund agrees to redeem, at the Company's request, any full or
fractional shares of the Fund held by the Account or the Company, executing such
requests at the net asset value on a daily basis (LL will expect same day
redemption wires unless unusual circumstances evolve which cause the Fund to
have to redeem securities) in accordance with Section 1.4 of this Agreement, the
applicable provisions of the 1940 Act and the then currently effective Fund
Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund
shares to the extent permitted by the 1940 Act, any rules, regulations or orders
thereunder, or the then currently effective Fund Prospectus.
<PAGE>
1.4 (a) For purposes of Sections 1.1, 1.2 and 1.3, the Company shall
be the agent of the Fund for the limited purpose of receiving
redemption and purchase requests from the Account (but not from the
general account of the Company), and receipt on any Business Day by
the Company as such limited agent of the Fund prior to the time
prescribed in the current Fund Prospectus (which as of the date of
execution of this Agreement is 4 p.m., E.S.T.) shall constitute
receipt by the Fund on that same Business Day, provided that the Fund
receives notice of such redemption or purchase request by 9:00 a.m.,
E.S.T. on the next following Business Day. For purposes of this
Agreement, "Business Day" shall mean any day on which the New York
Stock exchange is open for trading.
(b) The Company shall pay for the shares on the same day that it
places an order with the Fund to purchase those Fund shares for an
Account. Payment for Fund shares will be made by the Account or the
Company in Federal Funds transmitted to the Fund by wire to be
received by 11:00 a.m., E.S.T. on the day the Fund is properly
notified of the purchase order for shares. The Fund will confirm
receipt of each trade and these confirmations will be received by the
Company via Fax or Email by 3:00 p.m. E.S.T. If Federal Funds are not
received on time, such funds will be invested, and shares purchased
thereby will be issued, as soon as practicable.
(c) Payment for shares redeemed by the Account or the Company
will be made in Federal Funds transmitted to the Company by wire on
the same day the Fund is notified of the redemption order of shares,
except that the Fund reserves the right to delay payment of redemption
proceeds, but in no event may such payment be delayed longer than the
period permitted under Section 22(e) of the 1940 Act. The Fund shall
not bear any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds if securities must be redeemed; the
Company alone shall be responsible for such action.
1.5. Issuance and transfer of Fund shares will be by book entry only. Stock
certificates will not be issued to the Company or the Account. Purchase and
redemption orders for Fund shares will be recorded in an appropriate ledger for
the Account or the appropriate subaccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any shares in
the form of additional shares of that Fund. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
<PAGE>
1.7. The Fund shall use its best efforts to make the net asset value per
share available to the Company by 7:00 p.m., E.S.T. each Business Day, and in
any event, as soon as reasonably practicable after the net asset value per share
is calculated, and shall calculate such net asset value in accordance with the
then currently effective Fund Prospectus. The Fund shall not be liable for any
information provided to the Company pursuant to this Agreement which information
is based on incorrect information supplied by the Company to the Fund.
1.8. (a) The Company may withdraw the Account's investment in the Fund
only: (I) as necessary to facilitate Contract owner requests; (ii)
upon a determination by a majority of the Fund Board, or a majority of
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of (x) any Product Owners or (y)
the interests of the Participating Insurance Companies investing in
the Fund; (iii) upon requisite vote of the Contract owners having an
interest in the Fund to substitute the shares of another investment
company for shares in accordance with the terms of the Contracts; (iv)
as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application; or (v) at the Company's
sole discretion, pursuant to an order of the SEC under Section 26(b)
of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the Fund
shares may be sold to other insurance companies (subject to Section
1.9 hereof) and the cash value of the Contracts may be invested in
other investment companies.
(c) The Company shall not, without prior notice to the Fund
(unless otherwise required by applicable law), take any action to
operate the Accounts as management investment companies under the 1940
Act.
1.9. The Fund agrees that Fund shares will be sold only to Participating
Insurance Companies and their separate accounts. The Fund will not sell Fund
shares to any insurance company or separate account unless an agreement
complying with Article VII of this Agreement is in effect to govern such sales.
No Fund shares will be sold to the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and warrants that it is
an insurance company duly organized and validly existing under applicable law
and that it has legally and validly authorized each Account as
<PAGE>
a separate account under Section 27-1-5-1 of the Indiana Insurance Code, and has
registered or, prior to the issuance of any Contracts, will register each
Account (unless exempt therefrom) as a unit investment trust in accordance with
the provisions of the 1940 Act to serve as a separate account for its Contracts,
and that it will maintain such registrations for so long as any Contracts issued
under them are outstanding.
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for so long as the Fund shares are sold. The Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund further represents and warrants that it
will make every effort to continue to qualify and to maintain such qualification
(under Subchapter M or any successor or similar provision), and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees and
expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement; and with any state- mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Fund, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Fund represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will immediately
notify the Company in the event the fidelity bond coverage should lapse at any
time.
<PAGE>
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Fund shall provide the Company with as many copies of the current
Fund Prospectus as the Company may reasonably request. If requested by the
Company in lieu thereof, the Fund at its expense shall provide to the Company a
camera-ready copy, and electronic version, of the current Fund Prospectus
suitable for printing and other assistance as is reasonably necessary in order
for the Company to have a new Contracts Prospectus printed together with the
Fund Prospectus in one document. See Article V for a detailed explanation of the
responsibility for the cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Fund and the Fund shall provide
such Statement free of charge to the Company and to any outstanding or
prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in each case
in a form suitable for printing, as determined by the Company. The
Fund shall be responsible for the costs of printing and distributing
these materials to Contract owners.
(b) The Fund at its expense shall be responsible for preparing,
printing and distributing its proxy material. The Company will provide
the appropriate Contractowner names and addresses to the Fund for this
purpose.
3.4. The Company shall furnish to the Fund, prior to its use, each piece of
sales literature or other promotional material in which the Fund is named. No
such material shall be used, except with the prior written permission of the
Fund. The Fund agrees to respond to any request for approval on a prompt and
timely basis. Failure of the Fund to respond within 10 days of the request by
the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement or
Fund Prospectus, as such Registration Statement and Prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund,
except with the prior written permission of the Fund. The Fund agrees to respond
to any request for permission on a prompt and timely basis. If the Fund does not
respond within 10 days of a request by the Company, then the Company shall be
relieved of the obligation to obtain the prior written permission of the Fund.
<PAGE>
3.6. The Fund shall not give any information or make any representations on
behalf of the Company or concerning the Company, the Account or the Contracts
other than the information or representations contained in the Contracts
Registration Statement or Contracts Prospectus, as such Registration Statement
and Prospectus may be amended or supplemented from time to time, or in published
reports of the Account which are in the public domain or approved in writing by
the Company for distribution to Contract owners, or in sales literature or other
promotional material approved in writing by the Company, except with the prior
written permission of the Company. The Company agrees to respond to any request
for permission on a prompt and timely basis. If the Company fails to respond
within 10 days of a request by the Fund, then the Fund is relieved of the
obligation to obtain the prior written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy of all
Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy of all
Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft versions of
any registration statements, prospectuses, statements of additional information,
reports, proxy statements, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications
<PAGE>
distributed or made generally available to some or all agents or employees,
registration statements, prospectuses, Statements of Additional Information,
shareholder reports and proxy materials, and any other material constituting
sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE IV. VOTING
4.1 Subject to applicable law and the requirements of Article VII, the Fund
shall solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the requirements of Article VII, the
Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with instructions or proxies received in timely fashion
from such Contract owners;
(b) vote Fund shares attributable to Contract owners for which no
instructions have been received in the same proportion as Fund shares
of such Series for which instructions have been received in timely
fashion; and
(c) vote Fund shares held by the Company on its own behalf or on
behalf of the Account that are not attributable to Contract owners in
the same proportion as Fund shares of such Series for which
instructions have been received in timely fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Fund shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company decided to print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contractowners.)
<PAGE>
The Company is responsible for the cost of printing and distributing Fund
prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section 817(h) of
the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements under
the 1933 Act and the Account's Registration Statement under the 1940 Act from
time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the 1933
Act and the 1940 Act from time to time as required in order to effect for so
long as Fund shares are sold the continuous offering of Fund shares as described
in the then currently effective Fund Prospectus. The Fund shall register and
qualify Fund shares for sale to the extent required by applicable securities
laws of the various states.
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
6.6. (a) When appropriate in order to inform the Fund of any
applicable state-mandated investment restrictions with which the Fund
must comply, the Company shall arrange with the Fund to amend Schedule
3, pursuant to the requirements of Article XI.
(b) Should the Fund become aware of any restrictions which may be
appropriate for inclusion in Schedule 3, the Company shall be informed
immediately of the substance of those restrictions.
<PAGE>
ARTICLE VLI. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of the Fund
(the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist the
Board in carrying out its responsibilities under Section 6e-3(T) of the 1940
Act, by providing all information reasonably necessary for the Board to consider
any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested Board
Members, determines that a material irreconcilable conflict exists, the Board
shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to the Company
and a reasonable opportunity for the Company to appear before it and
present its case, determines that the Company is responsible for said
conflict, and if the Company agrees with that determination, the
Company shall, at its sole cost and expense, take whatever steps are
necessary to remedy the material irreconcilable conflict. These steps
could include: (i) withdrawing the assets allocable to some or all of
the affected Accounts from the Fund and reinvesting such assets in a
different investment vehicle, or submitting the question of whether
such segregation should be implemented to a vote of all affected
Contractowners and, as appropriate, segregating the assets of any
particular group (i.e., variable annuity Contractowners, variable life
insurance policyowners, or variable Contractowners of one or more
Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the option of
making such a change; and (ii) establishing a new registered mutual
fund or management separate account; or (iii) taking such other action
as is necessary to remedy or eliminate the material irreconcilable
conflict.
(b) If the Company disagrees with the Board's determination, the
Company shall file a written protest with the Board, reserving its
right to dispute the determination as between just the Company and the
Fund and to seek reimbursement from the Fund for the reasonable costs
and expenses of resolving the conflict . After reserving that right
the Company, although disagreeing with the Board that it (the Company)
was responsible for the conflict, shall take the necessary steps,
under protest, to remedy the conflict, substantially in accordance
with paragraph (a) just above, for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45 days after
the Board's determination the Company elects to press the dispute, it
shall so notify the Board in writing. The parties shall then attempt
to resolve the matter amicably through negotiation by individuals from
each party who are authorized to settle the
<PAGE>
matter. If the matter has not been amicably resolved within 60 days
from the date of the Company's notice of its intent to press the
dispute, then before either party shall undertake to litigate the
dispute it shall be submitted to non-binding arbitration conducted
expeditiously in accordance with the CPR Rules for Non-Administered
Arbitration of Business Disputes, by a sole arbitrator; PROVIDED,
HOWEVER, that if one party has requested the other party to seek an
amicable resolution and the other party has failed to participate, the
requesting party may initiate arbitration before expiration of the
60-day period set out just above.
If within 45 days of the commencement of the process to select an
arbitrator the parties cannot agree upon the arbitrator, then he or
she will be selected from the CPR Panels of Neutrals. The arbitration
shall be governed by the United States Arbitration Act, 9 U.S.C. Sec.
1-16. The place of arbitration shall be Fort Wayne, Indiana. The
Arbitrator is not empowered to award damages in excess of compensatory
damages.
(d) If the Board shall determine that the Fund or another was
responsible for the conflict, then the Board shall notify the Company
immediately of that determination. The Fund shall assure the Company
that it (the Fund) or that other Participating Insurance Company as
applicable, shall, at its sole cost and expense, take whatever steps
are necessary to eliminate the conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall constitute a
waiver of any right of action which the Company may have against other
Participating Insurance Companies for reimbursement of all or part of
the costs and expenses of resolving the conflict.
7.3. If a material irreconcilable conflict arises because of the Company's
decision to disregard Contractowner voting instructions and that decision
represents a minority position or would preclude a majority vote, the Company
shall withdraw (without charge or penalty) the Account's investment in the Fund,
if the Fund so elects.
7.4. For purposes of this Article, a majority of the disinterested members
of the Board shall determine whether or not any proposed action adequately
remedies any irreconcilable conflict. However, in no event will the Fund be
required to establish a new funding medium for any variable contract, nor will
the Company be required to establish a new funding medium for any Contract, if
in either case an offer to do so has been declined by a vote of a majority of
affected Contractowners.
<PAGE>
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Fund and each person who controls or is associated with the
Fund (other than another Participating Insurance Company) within the meaning of
such terms under the federal securities laws and any officer, trustee, director,
employee or agent of the foregoing, against any and all losses, claims, damages
or liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid with the
prior written consent of the Company in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales
literature or other promotional material for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or such alleged statement or alleged omission
was made in reliance upon and in conformity with information furnished
in writing to the Company by the Fund (or a person authorized in
writing to do so on behalf of the Fund) for use in the Contracts
Registration Statement, Contracts Prospectus or in the Contracts or
sales literature (or any amendment or supplement) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact by or on behalf of the
Company (other than statements or representations contained in the
Fund Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or
persons under its control with respect to the sale or distribution of
the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the Fund Registration Statement, Fund
Prospectus or sales literature or other promotional material of the
Fund or any amendment thereof or supplement thereto, or the omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon and in conformity
with information furnished to the Fund by or on behalf of the Company;
or
<PAGE>
(d) arise as a result of any failure by the Company to provide
the services and furnish the materials or to make any payments under
the terms of this Agreement; or
(e) arise out of any material breach by the Company of this
Agreement, including but not limited to any failure to transmit a
request for redemption or purchase of Fund shares on a timely basis in
accordance with the procedures set forth in Article I; or
(f) arise as a result of the Company's providing the Fund with
inaccurate information, which causes the Fund to calculate its Net
Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify and hold
harmless the Company and each person who controls or is associated with the
Company within the meaning of such terms under the federal securities laws and
any officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Fund in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional material
of the Fund, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Fund for use in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or
sales literature for the Fund or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
<PAGE>
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact made by the Fund (other
than statements or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other promotional
material of the Fund not supplied by the Distributor or the Fund or
persons under their control) or wrongful conduct of the Fund or
persons under its control with respect to the sale or distribution of
the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the Contract's Registration Statement,
Contracts Prospectus or sales literature or other promotional material
for the Contracts (or any amendment or supplement thereto), or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if
such statement or omission was made in reliance upon information
furnished in writing by the Fund to the Company (or a person
authorized in writing to do so on behalf of the Fund); or
(d) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including, but not by way of limitation, a failure, whether
unintentional or in good faith or otherwise: (i) to comply with the
diversification requirements specified in Sections 2.4 and 6.1 in
Article VI of this Agreement; and (ii) to provide the Company with
accurate information sufficient for it to calculate its accumulation
and/or annuity unit values in timely fashion as required by law and by
the Contracts Prospectuses); or
(e) arise out of any material breach by the Fund of this
Agreement.
This indemnification will be in addition to any liability which the Fund may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and
<PAGE>
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. The indemnifying party shall not be liable for
any settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying party agrees to indemnify the indemnified party from and against
any loss or liability by reason of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of law.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant,
and the terms hereof shall be limited, interpreted and construed in accordance
therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance written
notice to the other parties; or
(b) at the option of the Company if shares of the Fund are not
available to meet the requirements of the Contracts as determined by
the Company. Prompt notice of the election to terminate for such cause
shall be furnished by the Company. Termination shall be effective ten
days after the giving of notice by the Company; or
<PAGE>
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the insurance
commission of any state or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the
Contracts, the operation of the Account, the administration of the
Contracts or the purchase of Fund shares;
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the investment advisor or any
subinvestment advisor, by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body; or
(e) upon requisite vote of the Contract owners having an interest
in the Fund (unless otherwise required by applicable law) and written
approval of the Company, to substitute the shares of another
investment company for the corresponding shares of the Fund in
accordance with the terms of the Contracts; or
(f) at the option of the Fund in the event any of the Contracts
are not registered, issued or sold in accordance with applicable
Federal and/or state law; or
(g) at the option of the Company or the Fund upon a determination
by a majority of the Fund Board, or a majority of disinterested Fund
Board members, that an irreconcilable material conflict exists among
the interests of (i) any Product owners or (ii) the interests of the
Participating Insurance Companies investing in the Fund; or
(h) at the option of the Company if the Fund ceases to qualify as
a Regulated Investment Company under Subchapter M of the Code, or
under any successor or similar provision, or if the Company reasonably
believes, based on an opinion of its counsel, that the Fund may fail
to so qualify; or
(i) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Section 817(h) of the Code
and any regulations thereunder; or
(j) at the option of the Fund if the Contracts cease to qualify
as annuity contracts or life insurance policies, as applicable, under
the Code, or if the Fund reasonably believes that the Contracts may
fail to so qualify; or
(k) at the option of the Fund if the Fund shall determine, in its
sole judgment exercised in good faith, that either (1) the Company
shall have suffered a material adverse change in its business or
financial condition; or (2) the Company shall have been the subject of
material adverse publicity which is likely to have a material adverse
impact upon the business and operations of the Fund; or
<PAGE>
(l) at the option of the Company, if the Company shall determine,
in its sole judgment exercised in good faith, that: (1) the Fund shall
have suffered a material adverse change in its business or financial
condition; or (2) the Fund shall have been the subject of material
adverse publicity which is likely to have a material adverse impact
upon the business and operations of the Company; or
(m) automatically upon the assignment of this Agreement
(including, without limitation, any transfer of the Contracts or the
Accounts to another insurance company pursuant to an assumption
reinsurance agreement) unless the non-assigning party consents thereto
or unless this Agreement is assigned to an affiliate of the Company or
the Fund, as the case may be.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1, no
termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to the other party of its
intent to terminate, which notice shall set forth the basis for such
termination. Furthermore:
(a) In the event that any termination is based upon the
provisions of Article VII or the provisions of Section 10.1(a) of this
Agreement, such prior written notice shall be given in advance of the
effective date of termination as required by such provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such prior
written notice shall be given at least ninety (90) days before the
effective date of termination, or sooner if required by law or
regulation.
10.3. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant to
Section 10.1 of this Agreement, the Fund will, at the option of the
Company, continue to make available additional Fund shares for so long
after the termination of this Agreement as the Company desires,
pursuant to the terms and conditions of this Agreement as provided in
paragraph (b) below, for all Contracts in effect on the effective date
of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, if the Company so
elects to make additional Fund shares available, the owners of the
Existing Contracts or the Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments in
the Fund, redeem investments in the Fund and/or invest in the Fund
upon the making of additional purchase payments under the Existing
Contracts.
<PAGE>
(b) If Fund shares continue to be made available after such
termination, the provisions of this Agreement shall remain in effect
except for Section 10.1(a) and thereafter either the Fund or the
Company may terminate the Agreement, as so continued pursuant to this
Section 10.3, upon prior written notice to the other party, such
notice to be for a period that is reasonable under the circumstances
but, if given by the Fund, need not be for more than six months.
(c) The parties agree that this Section 10.3 shall not apply to
any termination made pursuant to Article VII, and the effect of such
Article VII termination shall be governed by the provisions set forth
or incorporated by reference therein.
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance policies
to be issued by the Company through new or existing Separate Accounts investing
in the Fund. The provisions of this Agreement shall be equally applicable to
each such separate account and each such class of contracts or policies, unless
the context otherwise requires. Any such amendment must be signed by the parties
and must bear an effective date for that amendment.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party(ies) at the address of such party(ies) set forth below
or at such other address as such party(ies) may from time to time specify in
writing to the other party.
If to the Fund:
Lincoln National Money Market Fund, Inc.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Steven M. Kluever
<PAGE>
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Amended and Restated Fund Participation Agreement, as of its effective
date, hereby supersedes any and all prior agreements to purchase shares between
Lincoln Life and the Fund.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized officer on the date
specified below.
LINCOLN NATIONAL MONEY MARKET FUND, INC.
Signature:
------------------------------------------------------------
Name: Kelly D. Clevenger
-----------------------------------------------------------------
Title: President
----------------------------------------------------------------
LINCOLN NATIONAL LIFE INSURANCE CO. (Company)
Signature:
------------------------------------------------------------
Name: Stephen H. Lewis
-----------------------------------------------------------------
Title: Senior Vice President, Lincoln National Life Insurance Company
----------------------------------------------------------------
<PAGE>
SCHEDULE 1
Lincoln National Money Market Fund
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of June 7, 1998
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT D
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q
LINCOLN LIFE FLEXIBLE VARIABLE LIFE ACCOUNT R
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53
<PAGE>
SCHEDULE 2
Lincoln National Money Market Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of June 7, 1998
MULTI FUND VARIABLE ANNUITY
EANNUITY
EMANCIPATOR LIFE
VUL I
ACCRU CHOICEPLUS
GROUP MULTI FUND
SVUL I
MULTI FUND - NON-REGISTERED
<PAGE>
SCHEDULE 3
Lincoln National Money Market Fund
State-mandated Investment Restrictions
Applicable to the Fund
As of June 7, 1998
The California Department of Insurance has established the following Guidelines
for an underlying portfolio of a Separate Account:
BORROWING. The borrowing limit for any FUND is 33 1/3 percent of total assets.
Entering into a reverse repurchase agreement shall be considered "borrowing" as
that term is used herein.
FOREIGN INVESTMENTS - DIVERSIFICATION
The diversification guidelines to be followed by international and global FUNDS
are as follows:
a. An international FUND or global FUND is sufficiently diversified if it is
invested in a minimum of three different countries at all times, and has
invested no more than 50 percent of total assets in any one second-tier
country and not more than 25 percent of total assets in any one third-tier
country. First-tier countries are: Germany, the United Kingdom, Japan, the
United States, France, Canada, and Australia. Second-tier countries are all
countries not in the first or third tier. Third-tier countries are
countries identified as "emerging" or "developing" by the International
Bank for Reconstruction and Development ("World Bank") or International
Finance Corporation.
b. A regional FUND is sufficiently diversified if it is invested in a
minimum of three countries. The name of the fund must accurately
describe the FUND.
c. The name of the single country FUND must accurately describe the FUND.
d. An index FUND must substantially mirror the index.
<PAGE>
Amendment to
SCHEDULE 1
Lincoln National Bond Fund, Inc.
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of May 1, 1999
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT D
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT K
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT M
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT Q
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT R
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 53
<PAGE>
Amendment to
SCHEDULE 2
Lincoln National Bond Fund, Inc.
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of May 1, 1999
MULTI FUND INDIVIDUAL VARIABLE ANNUITY
EANNUITY
EMANCIPATOR LIFE
MULTI FUND VARIABLE LIFE
LINCOLN VUL
DELAWARE-LINCOLN CHOICEPLUS
GROUP MULTI FUND
LINCOLN SVUL
LINCOLN CVUL
MULTI FUND - NON-REGISTERED
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1 and 2 to be executed in its name and behalf by its duly authorized
officer on the date specified below.
LINCOLN NATIONAL BOND FUND, INC.
Date: 3/26/99 By: /s/ Kelly D. Clevenger
----------------------- ----------------------------------
Kelly D. Clevenger
President and Chairman
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: 3/26/99 By: /s/ Stephen H. Lewis
----------------------- ----------------------------------
Stephen H. Lewis
Senior Vice President
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND 111,
FIDELITY DISTRIBUTORS CORPORATION
and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the ____ day of
October, 1998 by and among THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Indiana corporation, on its own behalf and
on behalf of each segregated asset account of the Company set forth on
Schedule A hereto as may be amended from time to time (each such account
hereinafter referred to as the "Account"), and the VARIABLE INSURANCE
PRODUCTS FUND III, an unincorporated business trust organized under the
laws of the Commonwealth of Massachusetts (hereinafter the "Fund") and
FIDELITY DISTRIBUTORS CORPORATION (hereinafter the "Underwriter"), a
Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and
variable annuity contracts (collectively, the "Variable Insurance
Products") to be offered by insurance companies which have entered into
participation agreements with the Fund and the Underwriter (hereinafter
"Participating Insurance Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular
managed portfolio of securities and other assets, any one or more of which
may be made available under this Agreement, as may be amended from time to
time by mutual agreement of the parties hereto (each such series
hereinafter referred to as a "Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections
9(a), 13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as
amended, (hereinafter the " 1940 Act") and Rules 6e-2(b) (15) and 6e-3(T)
(b) (15) thereunder, to the extent necessary to permit
1
LG973490.022 6+ 10/23/98 9:26 AM
<PAGE>
shares of the Fund to be sold to and held by variable annuity and variable
life insurance separate accounts of both affiliated and unaffiliated life
insurance companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under
the Securities Act of 1933, as amended (hereinafter the "1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser")
is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act;
and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of
Directors of the Company, on the date shown for such Account on Schedule A
hereto, to set aside and invest assets attributable to the aforesaid
variable annuity contracts; and
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission ("SEC") under the Securities
Exchange Act of 1934, as amended, (hereinafter the "1934 Act"), and is a
member in good standing of the National Association of Securities Dealers,
Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid variable life
insurance and variable annuity contracts and the Underwriter is authorized
to sell such shares to unit investment trusts such as each Account at net
asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Fund. For purposes of this
Section 1.1, the Company shall be the designee of the Fund for receipt of
such orders from each Account and receipt by such designee shall
2
LG973490.022 6+ 10/23/98 9:26 AM
<PAGE>
constitute receipt by the Fund; provided that the Fund receives notice of
such order by 9:00 a.m. Boston time on the next following Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is
open for trading and on which the Fund calculates its net asset value
pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by the Company and
its Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund
shall use reasonable efforts to calculate such net asset value on each day
which the New York Stock Exchange is open for trading. Notwithstanding the
foregoing, the Board of Trustees of the Fund (hereinafter the "Board") may
refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such action is
required by law or by regulatory authorities having jurisdiction or is, in
the sole discretion of the Board acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to
any insurance company or separate account unless an agreement containing
provisions substantially the same as Articles I, III, V, VII and Section
2.5 of Article 11 of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value next
computed after receipt by the Fund or its designee of the request for
redemption. For purposes of this Section 1.5, the Company shall be the
designee of the Fund for receipt of requests for redemption from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the Fund receives notice of such request for redemption on
the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall
be made in accordance with the provisions of such prospectus. The Company
agrees that all net amounts available under the variable life insurance or
variable annuity contracts with the form number(s) which are listed on
Schedule A attached hereto and incorporated herein by this reference, as
such Schedule A may be amended from time to time hereafter by mutual
written agreement of all the parties hereto, (the "Contracts") shall be
invested in the Fund, in such other Funds advised by the Adviser as may be
mutually agreed to in writing by the parties hereto, or in the Company's
general account, provided that such amounts may also be invested in one or
more investment companies other than the Fund.
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1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds
transmitted by wire. For purpose of Section 2. 10 and 2.11, upon receipt by
the Fund of the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the
Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any
Account. Shares ordered from the Fund will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares
of that Portfolio. The Company reserves the night to revoke this election
and to receive all such income dividends and capital gain distributions in
cash. The Fund shall notify the Company of the number of shares so issued
as payment of such dividends and distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company or its designee on a daily basis as soon
as reasonably practical after the net asset value per share is calculated
(normally by 6:30 p.m. Boston time) and shall use its best efforts to make
such net asset value per share available by 7 p.m. Boston time.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act unless an exemption from
registration is available and an opinion of counsel to that effect shall
have been furnished to the Fund; that the Contracts will be issued and sold
in compliance in all material respects with all applicable Federal and
State laws. The Company further represents and warrants that it is an
insurance company duly organized and validly existing under applicable law
and that it has legally and validly established each Account prior to any
issuance or sale thereof as a segregated asset account under Section
27-1-5-1 of the Indiana Insurance Code and has registered or, prior to any
issuance or sale of the Contracts, will register each Account as a unit
investment trust in accordance with the provisions of the 1940 Act to serve
as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and
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<PAGE>
sold in compliance with the laws of the State of Indiana and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend the Registration
Statement for its shares under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of its shares.
The Fund shall register and qualify the shares for sale in accordance with
the laws of the various states only if and to the extent deemed advisable
by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue
Code of 1986, as amended, (the "Code") and that it will make every effort
to maintain such qualification (under Subchapter M or any successor or
similar provision) and that it will notify the Company immediately upon
having a reasonable basis for believing that it has ceased to so qualify or
that it might not so qualify in the future.
2.4. The Company represents that the Contracts are currently
treated as life insurance policies or annuity insurance contracts under
applicable provisions of the Code; that it will make every effort to
maintain such treatment; and that it will notify the Fund and the
Underwriter immediately upon having a reasonable basis for believing that
the Contracts have ceased to be so treated or that they might not be so
treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses
pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it may
make such payments in the future. The Fund has adopted a "no fee" or
"defensive" Rule l2b-1 Plan under which it makes no payments for
distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the
Fund, formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
(b) With respect to Service Class shares, the Fund has
adopted a Rule 12b-1 Plan under which it makes payments to finance
distribution expenses. The Fund represents and warrants that it has a board
of trustees, a majority of whom are not interested persons of the Fund,
which has formulated and approved the Fund's Rule 12b-1 Plan to finance
distribution expenses of the Fund and that any changes to the Fund's Rule
12b-1 Plan will be approved by a similarly constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states except that the Fund represents that the Fund's investment
policies, fees and expenses are and shall at all times remain in compliance
with the laws of the State of Indiana and the Fund and the Underwriter
represent that their respective operations are and shall at all times
remain in material compliance with the laws of the State of Indiana to the
extent required to perform this Agreement.
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<PAGE>
2.7. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer with the
SEC. The Underwriter further represents that it will sell and distribute
the Fund shares in accordance with the laws of the State of Indiana and all
applicable state and federal securities laws, including without limitation
the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and
validly existing under the laws of the Commonwealth of Massachusetts and
that it does and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under the
Investment Advisers Act of 1940 and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the
laws of the State of Indiana and any applicable state and federal
securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund
are and shall continue to be at all times covered by a blanket fidelity
bond or similar coverage for the benefit of the Fund in an amount not less
than the minimal coverage as required currently by Rule 17g-(1) of the 1940
Act or related provisions as may be promulgated from time to time. The
aforesaid Bond shall include coverage for larceny and embezzlement and
shall be issued by a reputable bonding company. The Fund and the
Underwriter agree to make all reasonable efforts to see that this bond or
another bond containing these provisions is always in effect, and agree to
notify the Company immediately in the event that such coverage no longer
applies.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund
are covered by a blanket fidelity bond or similar coverage for the benefit
of the Fund, and that said bond is issued by a reputable bonding company,
includes coverage for larceny and embezzlement, and is in an amount not
less than $5 million. The Company agrees to make all reasonable efforts to
see that this bond or another bond containing these provisions is always in
effect, and agrees to notify the Fund and the Underwriter in the event that
such coverage no longer applies.
ARTICLE 111. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the
Company in lieu thereof, the Fund
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<PAGE>
shall provide camera-ready film containing the Fund's prospectus (which
shall mean, for purposes of this Article III if the Company so requests, a
separate prospectus for each Fund portfolio used in a particular Account),
and Statement of Additional Information, and such other assistance as is
reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for
the Fund is amended during the year) to have the prospectus for the
Contracts and the Fund's prospectus printed together in one document, and
to have the Statement of Additional Information for the Fund and the
Statement of Additional Information for the Contracts printed together in
one document. Alternatively, the Company may print the Fund's prospectus
and/or its Statement of Additional Information in combination with other
fund companies' prospectuses and statements of additional information.
Except as provided in the following three sentences, all expenses of
printing and distributing Fund prospectuses and Statements of Additional
Information shall be the expense of the Company. For prospectuses and
Statements of Additional Information provided by the Company to its
existing owners of Contracts in order to update disclosure annually as
required by the 1933 Act and/or the 1940 Act, the cost of printing shall be
borne by the Fund. If the Company chooses to receive camera-ready film in
lieu of receiving printed copies of the Fund's prospectus, the Fund will
reimburse the Company in an amount equal to the product of A and B where A
is the number of such prospectuses distributed to owners of the Contracts,
and B is the Fund's per unit cost of typesetting and printing the Fund's
prospectus. The same procedures shall be followed with respect to the
Fund's Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed
to existing owners of the Contracts.
3.2. The Fund's *prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or
the Company (or in the Fund's discretion, the Prospectus shall state that
such Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3.1) to shareholders in such
quantity as the Company shall reasonably require for distributing to
Contract owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund
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<PAGE>
shares of such portfolio for which instructions have
been received in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting
privileges for variable contract owners. The Company reserves the right to
vote Fund shares held in any segregated asset account in its own right, to
the extent permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner consistent with the
standards set forth on Schedule B attached hereto and incorporated herein
by this reference, which standards will also be provided to the other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of
that Act) as well as with Sections 16(a) and, if and when applicable,
16(b). Further, the Fund will act in accordance with the Securities and
Exchange Commission's interpretation of the requirements of Section 16(a)
with respect to periodic elections of trustees and with whatever rules the
Commission may promulgate with respect thereto.
ARTICLE IV. Sales MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or other
promotional material in which the Fund or its investment adviser or the
Underwriter is named, at least ten Business Days prior to its use. No such
material shall be used if the Fund or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund
in connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for
the Fund shares, as such registration statement and prospectus may be
amended or supplemented from time to time, or in reports or proxy
statements for the Fund, or in sales literature or other promotional
material approved by the Fund or its designee or by the Underwriter, except
with the permission of the Fund or the Underwriter or the designee of
either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional material in which the Company and/or
its separate account(s), is named at least ten Business Days prior to its
use. No such material shall be used if the Company or
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<PAGE>
its designee reasonably objects to such use within ten Business Days after
receipt of such material.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the
Company, each Account, or the Contracts other than the information or
representations contained in a registration statement or prospectus for the
Contracts, as such registration statement and prospectus may be amended or
supplemented from time to time, or in an offering statement for
unregistered contracts, or in published reports for each Account which are
in the public domain or approved by the Company for distribution to
Contract owners, or in sales literature or other promotional material
approved by the Company or its designee, except with the permission of the
Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund or
its shares, within 30 days of the filing of such document with the
Securities and Exchange Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales
literature and other promotional materials, applications for exemptions,
requests for no action letters, and all amendments to any of the above,
that relate to the Contracts or each Account, and to their investments in
the Fund within 30 days of the filing of such document with the SEC or
other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to,
any of the following that refer to the Fund or any affiliate of the Fund:
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (I.E., any written communication
distributed or made generally available to customers or the public,
including brochures, circulars, research reports, market letters, form
letters, seminar texts, reprints or excerpts of any other advertisement,
sales literature, or published article), educational or training materials
or other communications distributed or made generally available to some or
all agents or employees, and registration statements, prospectuses,
Statements of Additional Information, shareholder reports, and proxy
materials, and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
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<PAGE>
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund
or any Portfolio adopts and implements a plan pursuant to Rule 12b-1 to
finance distribution expenses, then the Underwriter may make payments to
the Company or to the underwriter for the Contracts if and in amounts
agreed to by the Underwriter in writing and such payments will be made out
of existing fees otherwise payable to the Underwriter, past profits of the
Underwriter or other resources available to the Underwriter. No such
payments shall be made directly by the Fund.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with
applicable federal law and, if and to the extent deemed advisable by the
Fund, in accordance with -applicable state laws prior to their sale. The
Fund shall bear the expenses for the cost of registration and qualification
of the Fund's shares, preparation and filing of the Fund's prospectus and
registration statement, proxy materials and reports, setting the prospectus
in type, setting in type and printing the proxy materials and reports to
shareholders (including the costs of printing a prospectus that constitutes
an annual report), the preparation of all statements and notices required
by any federal or state law, and all taxes on the issuance or transfer of
the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts
issued by the Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts
in such a manner as to ensure that the Contracts will be treated as
variable contracts under the Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will at all times
comply with Section 817(h) of the Code and Treasury Regulation 1.817-5,
relating to the diversification requirements for variable annuity,
endowment, or life insurance contracts and any amendments or other
modifications to such Section or Regulations. In the event of a breach of
this Article VI by the Fund, it will take all reasonable steps (a) to
notify Company of such breach and (b) to adequately diversify the Fund so
as to achieve compliance within the grace period afforded by Regulation
1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract
owners of all separate accounts investing in the Fund. An irreconcilable
material conflict may arise for a variety
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<PAGE>
of reasons, including: (a) an action by any state insurance regulatory
authority; (b) a change in applicable federal or state insurance, tax, or
securities laws or regulations, or a public ruling, private letter ruling,
no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists
and the implications thereof.
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemptive Order,
by providing the Board with all information reasonably necessary for the
Board to consider any issues raised. This includes, but is not limited to,
an obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested trustees, that a material irreconcilable
conflict exists, the Company and other Participating Insurance Companies
shall, at their expense and to the extent reasonably practicable (as
determined by a majority of the disinterested trustees), take whatever
steps are necessary to remedy or eliminate the irreconcilable material
conflict, up to and including: (1), withdrawing the assets allocable to
some or all of the separate accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium, including (but
not limited to) another Portfolio of the Fund, or submitting the question
whether such segregation should be implemented to a vote of all affected
Contract owners and, as appropriate, segregating the assets of any
appropriate group (IE., variable contract owners of one or more
Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected contract owners the option of making such a
change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority
vote, the Company may be required, at the Fund's election, to withdraw the
affected Account's investment in the Fund and terminate this Agreement with
respect to such Account; provided, however that such withdrawal and
termination shall be limited to the extent required by the foregoing
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Any such withdrawal and termination
must take place within six (6) months after the Fund gives written notice
that this provision is being implemented, and until the end of that six
month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
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<PAGE>
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company
will withdraw the affected Account's investment in the Fund and terminate
this Agreement with respect to such Account within six months after the
Board informs the Company in writing that it has determined that such
decision has created an irreconcilable material conflict; provided,
however, that such withdrawal and termination shall be limited to the
extent required by the foregoing material irreconcilable conflict as
determined by a majority of the disinterested members of the Board. Until
the end of the foregoing six month period, the Underwriter and Fund shall
continue to accept and implement orders by the Company for the purchase
(and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement,
a majority of the disinterested members of the Board shall determine
whether any proposed action adequately remedies any irreconcilable material
conflict, but in no event will the Fund be required to establish a new
funding medium for the Contracts. The Company shall not be required by
Section 7.3 to establish a new funding medium for the Contracts if an offer
to do so has been declined by vote of a majority of Contract owners
materially adversely affected by the irreconcilable material conflict. In
the event that the Board determines that any proposed action does not
adequately remedy any irreconcilable material conflict, then the Company
will withdraw the Account's investment in the Fund and terminate this
Agreement within six (6) months after the Board informs the Company in
writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any
such material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to
mixed or shared funding (as defined in the Shared Funding Exemptive Order)
on terms and conditions materially different from those contained in the
Shared Funding Exemptive Order, then (a) the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3,
as adopted, to the extent such rules are applicable; and (b) Sections 3.4,
3.5, 7.1, 7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect
only to the extent that terms and conditions substantially identical to
such Sections are contained in such Rule(s) as so amended or adopted.
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ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1 (a). The Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any,
who controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses
(or actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or alleged
untrue statements of any material fact contained in the Registration
Statement or prospectus for the Contracts or contained in the Contracts or
sales literature for the Contracts (or any amendment or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use in the
Registration Statement or prospectus for the Contracts or in the Contracts
or sales literature (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of untrue statements or
representations (other than statements or representations contained in the
Registration Statement, prospectus or sales literature of the Fund not
supplied by the Company, or persons under its control) or willful
misfeasance, bad faith or gross negligence of the Company or persons under
its control, with respect to the sale or distribution of the Contracts or
Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue statement of
a material fact contained in a Registration Statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or
the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading if such a statement or omission was made in reliance upon
information furnished to the Fund by or on behalf of the Company; or
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<PAGE>
(iv) arise as a result of any failure by the Company to provide the
services and furnish the materials under the terms of this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this Agreement or
arise out of or result from any other material breach of this Agreement by
the Company, as limited by and in accordance with the provisions of
Sections 8.1 (b) and 8.1 (c) hereof.
8.1 (b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations or
duties under this Agreement or to the Fund, whichever is applicable.
8.1 (c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Company in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company from any liability
which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In
case any such action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own expense, in the
defense of such action. The Company also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Company to such party of the Company's
election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the
Company will not be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.1 (d). The Indemnified Parties will promptly notify the Company of
the commencement of any litigation or proceedings against them in
connection with the issuance or sale of the Fund Shares or the Contracts or
the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
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<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement or
prospectus or sales literature of the Fund (or any amendment or supplement
to any of the foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity with information
furnished to the Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement to any of the foregoing) or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(ii) arise out of or as a result of untrue statements or representations (other
than statements or representations contained in the Registration
Statement, prospectus or sales literature for the Contracts not supplied
by the Underwriter or persons under its control) or willful misfeasance,
bad faith, or gross negligence of the Fund, Adviser or Underwriter or
persons under their control, with respect to the sale or distribution of
the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment thereof or supplement
thereto, or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statement or
statements therein not misleading, if such statement or omission was made
in reliance upon information furnished to the Company by or on behalf of
the Fund; or
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<PAGE>
(iv) arise as a result of any failure by the Fund to provide the services and
furnish the materials under the terms of this Agreement (including a
failure, whether unintentional or in good faith or otherwise, to comply
with the diversification requirements specified in Article VI of this
Agreement); or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Underwriter in this Agreement or arise out of
or result from any other material breach of this Agreement by the
Underwriter; as limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to each Company or the
Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified the
Underwriter in writing within a reasonable time after the summons or other
first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified
Party shall have received notice of such service on any designated agent),
but failure to notify the Underwriter of any such claim shall not relieve
the Underwriter from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on account of this
indemnification provision. In case any such action is brought against the
Indemnified Parties, the Underwriter will be entitled to participate, at
its own expense, in the defense thereof. The Underwriter also shall be
entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Underwriter will not be liable to such
party under this Agreement for any legal or other expenses subsequently
incurred by such party independently in connection with the defense thereof
other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the
Contracts or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
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<PAGE>
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any,
who controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund) or litigation
(including legal and other expenses) to which the Indemnified Parties may
become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross negligence, bad faith
or willful misconduct of the Board or any member thereof, are related to
the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services and
furnish the materials under the terms of this Agreement (including a
failure to comply with the diversification requirements specified in
Article VI of this Agreement);or
(ii) arise out Of Or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may
arise from such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or
by reason of such Indemnified Party's reckless disregard of obligations and
duties under this Agreement or to the Company, the Fund, the Underwriter or
each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party
unless such Indemnified Party shall have notified the Fund in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon
such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify the
Fund of any such claim shall not relieve the Fund from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any
such action is brought against the Indemnified Parties, the Fund will be
entitled to participate, at its own expense, in the defense thereof. The
Fund also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Fund
to such party of the Fund's election to assume the defense thereof, the
Indemnified Party shall bear the fees and
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<PAGE>
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceedings against it or
any of its respective officers or directors in connection with this
Agreement, the issuance or sale of the Contracts, with respect to the
operation of either Account, or the sale or acquisition of shares of the
Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 Acts, and the rules and regulations and rulings
thereunder, including such exemptions from those statutes, rules and
regulations as the SEC may grant (including, but not limited to, the Shared
Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. Termination
10.1. This Agreement shall continue in full force and effect until the
first to occur of:
(a) termination by any party for any reason by ninety (90) days advance written
notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio based upon the Company's
determination that shares of such Portfolio are not reasonably available to
meet the requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event any of the
Portfolio's shares are not registered, issued or sold in accordance with
applicable state and/or federal law or such law precludes the use of such
shares as the underlying investment media of the Contracts issued or to be
issued by the Company; or
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<PAGE>
(d) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such Portfolio
ceases to qualify as a Regulated Investment Company under Subchapter M of
the Code or under any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify; or
(e) termination by the Company by written notice to the Fund and the
Underwriter with respect to any Portfolio in the event that such Portfolio
fails to meet the diversification requirements specified in Article VI
hereof; or
(f) termination by either the Fund or the Underwriter by written notice to the
Company, if either one or both of the Fund or the Underwriter respectively,
shall determine, in their sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a material adverse
change in its business, operations, financial condition or prospects since
the date of this Agreement or is the subject of material adverse publicity;
or
(g) termination by the Company by written notice to the Fund and the
Underwriter, if the Company shall determine, in its sole judgment exercised
in good faith, that either the Fund or the Underwriter has suffered a
material adverse change in its business, operations, financial condition or
prospects since the date of this Agreement or is the subject of material
adverse publicity; or
(h) termination by the Company by written notice to the Fund and the
Underwriter upon the requisite vote of the Contract owners having an
interest in a Portfolio (unless otherwise required by applicable law) and
written approval of the Company, to substitute shares of another investment
company for the corresponding shares of a Portfolio in accordance with the
terms of the Contracts; or
(i) termination by written notice to the Company at the option of the Fund,
upon institution of formal proceedings against the Company and by the NASD,
the SEC, the insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to the sale
of the Contracts, the operation of the Account, the administration of the
Contracts or the purchase of Fund shares, or an expected or anticipated
ruling, judgment or outcome which would, in the Fund's reasonable judgment,
materially impair the Company's ability to perform the Company's
obligations and duties hereunder; or
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<PAGE>
(j) termination by written notice to the Fund and the Underwriter, at the
option of the Company, upon institution of formal proceedings against the
Fund, the Underwriter, the Fund's investment adviser or any subadviser, by
the NASD, the SEC, or any state securities or insurance commission or any
other regulatory body regarding the duties of the Fund or the Underwriter
under this Agreement, or an expected or anticipated ruling, judgment or
outcome which would, in the Company's reasonable judgment, materially
impair the Fund's or the Underwriter's ability to perform the Fund's or
Underwriter's obligations and duties hereunder; or
(k) termination by written notice to the Fund and the Underwriter, at the
option of the Company, upon institution of formal proceedings against the
Fund's investment adviser of any sub-adviser by the NASD, the SEC, or any
state securities or insurance commission or any regulatory body which
would, in the good faith opinion of the Company, result in material harm to
the Accounts, the Company or Contract Owners.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall, at the option of the
Company, continue to make available additional shares of the Fund pursuant
to the terms and conditions of this Agreement, for all Contracts in effect
on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate
investments in the Fund, redeem investments in the Fund and/or invest in
the Fund upon the making of additional purchase payments under the Existing
Contracts. The parties agree that this Section 10.2 shall not apply to any
terminations under Article VII and the effect of such Article VII
terminations shall be governed by Article VII of this Agreement.
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or
federal laws or regulations or judicial or other legal precedent of general
application (hereinafter referred to as a "Legally Required Redemption") or
(iii) as permitted by an order of the SEC pursuant to Section 26(b) of the
1940 Act. Upon request, the Company will promptly furnish to the Fund and
the Underwriter the opinion of counsel for the Company (which counsel shall
be reasonably satisfactory to the Fund and the Underwriter) to the effect
that any redemption pursuant to clause (ii) above is a Legally Required
Redemption. Furthermore, except in cases where permitted under the terms of
the Contracts, the Company shall not prevent Contract Owners from
allocating payments to a Portfolio that was otherwise available under the
Contracts without first giving the Fund or the Underwriter 90 days notice
of its intention to do so.
10.4 Notwithstanding any other provision of this Agreement, one
party's obligation under Article VIII to indemnify the other party shall
survive termination of this Agreement, to the
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<PAGE>
extent that the events giving rise to the obligation to indemnify the other
party occurred prior to the date of termination.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify
in writing to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
The Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, IN 46802
Attention: Kelly D. Clevenger
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
12.1 All person's dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and
addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except
as permitted by this Agreement, shall not disclose, disseminate or utilize
such names and addresses and other confidential information until such time
as it may come into the public domain without the express written consent
of the affected party.
12.3 The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions
hereof or otherwise affect their construction or effect.
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<PAGE>
12.4 This Agreement may be executed, simultaneously in two or
more counterparts, each of which taken together shall constitute one and
the same instrument.
12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of
the Agreement shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the
SEC, the NASD and state insurance regulators) and shall permit such
authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the foregoing, each
party hereto further agrees to furnish any insurance commissioner with any
information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain whether
the insurance operations of the Company are being conducted in a manner
consistent with the insurance regulations and any other applicable law or
regulations of that state.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights,
remedies and obligations, at law or in equity, which the parties hereto are
entitled to under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written
consent of all parties hereto; provided, however, that the Underwriter may
assign this Agreement or any rights or obligations hereunder to any
affiliate of or company under common control with the Underwriter, if such
assignee is duly licensed and registered to perform the obligations of the
Underwriter under this Agreement. The Company shall promptly notify the
Fund and the Underwriter of any change in control of the Company.
12.9. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee copies of the following reports:
(a) the Company's annual statement (prepared under
statutoryaccounting principles) and annual report
(prepared under generally accepted accounting
principles ("GAAP"), if any), as soon as practical and
in any event within 90 days after the end of each
fiscal year;
(b) the Company's quarterly statements (statutory) (and
GAAP, if any), as soon as practical and in any event
within 45 days after the end of each quarterly period:
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<PAGE>
(c) any financial statement, proxy statement, notice or
report of the Company sent to stockholders and/or
policyholders, as soon as practical after the delivery
thereof to stockholders;
(d) any registration statement (without exhibits) and
financial reports of the Company filed with the SEC or
any state insurance regulator, as soon as practical
after the filing thereof;
(e) any other report submitted to the Company by
independent accountants in connection with any annual,
interim or special audit made by them of the books of
the Company, as soon as practical after the receipt
thereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of
the date specified below.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Kelly D. Clevenger
Vice President
VARIABLE INSURANCE PRODUCTS FUND III
By:
Robert C. Pozen
Senior Vice President
FIDELITY DISTRIBUTORS CORPORATION
By:
Kevin J. Kelly
Vice President
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<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND-ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded by Separate Account Fidelity Fund (Class)
-------------------------------------- -------------------------- ---------------------
<S> <C> <C>
Lincoln Life Variable Annuity AN425LL Growth Opportunities -
Annuity Account N Initial Class
(November 3, 1997)
</TABLE>
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<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities
for the handling of proxies relating to the Fund by the Underwriter,
the Fund and the Company. The defined terms herein shall have the
meanings assigned in the Participation Agreement except that the term
"Company" shall also include the department or third party assigned by
the Insurance Company to perform the steps delineated below.
1. The number of proxy proposals is given to the Company by the
Underwriter as early as possible before the date set by the Fund for the
shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of the
Record, Mailing and Meeting dates. This will be done in writing
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run",
or other activity, which will generate the names, addresses and number
of units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for
account adjustments made after this date that could affect the status
of the Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer
by the Company either before or together with the Customers' receipt
of a proxy statement. Under-writer will provide the last Annual Report
to the Company pursuant to the terms of Section 3.3 of the Agreement
to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
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<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent to
Company for insertion into envelopes (envelopes and return envelopes
are provided and paid for by the Insurance Company). Contents of
envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by Fidelity Legal.
6. The above contents should be received by the Company at least 7
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to Fidelity
Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended. Solicitation time is
calculated as calendar days from (but NOT including) the meeting,
counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not
been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
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<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are considered to be not received for purposes
of vote tabulation. Any Cards that have "kicked out" (e.g. mutilated,
illegible) of the procedure are "hand verified," i.e., examined as to
why they did not complete the system. Any questions on those Cards are
usually remedied individually.
11. There are various control procedures used to ensure proper tabulation
of votes and accuracy of that tabulation. The most prevalent is to
sort the Cards as they first arrive into categories depending upon
their vote; an estimate of how the vote is progressing may then be
calculated. If the initial estimates and the actual vote do not
coincide, then an internal audit of that vote should occur. This may
entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives the
tabulations stated in terms of a percentage and the number of SHARES.)
Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00 a.m.
Boston time. Fidelity Legal may reasonably request an earlier deadline
if required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final
vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.
16. All approvals and "signing-off' maybe done orally, but must always be
followed up in writing.
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<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Separate Account: Lincoln National Variable Annuity Separate Account N
Product(s) Name: Delaware-Lincoln ChoicePlus Variable Annuity
Investment Companies
Available: Fidelity, Delaware, MFS, AIM, Lincoln Investments, Kemper,
Colonial,
Bankers Trust, Dreyfus. Vantage Global
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<PAGE>
PARTICIPATION AGREEMENT
AMONG
MFS VARIABLE INSURANCE TRUST,
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
AND
MASSACHUSETTS FINANCIAL SERVICES COMPANY
THIS AGREEMENT, made and entered into this _____ day of May 1998, by and among
MFS VARIABLE INSURANCE TRUST, a Massachusetts business trust (the "Trust"), THE
LINCOLN NATIONAL LIFE INSURANCE COMPANY, an Indiana corporation (the "Company")
on its own behalf and on behalf of each of the segregated asset accounts of the
Company set forth in Schedule A hereto, as may be amended from time to time (the
"Accounts"), and MASSACHUSETTS FINANCIAL SERVICES COMPANY, a Delaware
corporation ("MFS").
WHEREAS, the Trust is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act"),
and its shares are registered or will be registered under the Securities Act of
1933, as amended (the " 1933 Act");
WHEREAS, shares of beneficial interest of the Trust are divided into
several series of shares, each representing the interests in a particular
managed pool of securities and other assets;
WHEREAS, the series of shares of the Trust offered by the Trust to the
Company and the Accounts are set forth on Schedule A attached hereto (each, a
"Portfolio," and, collectively, the "Portfolios");
WHEREAS, MFS is duly registered as an investment adviser under the
Investment Advisers Act of 1940, as amended and is the Trust's investment
adviser;
WHEREAS, the Company will issue certain variable annuity and/or variable
life insurance contracts (individually, the "Policy" or, collectively, the
"Policies") which, if required by applicable law, will be registered under the
1933 Act;
WHEREAS, the Accounts are duly organized, validly existing segregated asset
accounts, established by resolution of the Board of Directors of the Company, to
set aside and invest assets attributable to the aforesaid variable annuity
and/or variable life insurance contracts that are allocated to the Accounts (the
Policies and the Accounts covered by this Agreement, and each corresponding
Portfolio covered by this Agreement in which the Accounts invest, is specified
in Schedule A attached hereto as may be modified from time to time);
WHEREAS, the Company has registered or will register the Accounts as unit
investment trusts under the 1940 Act (unless exempt therefrom);
WHEREAS, MFS Fund Distributors, Inc. (the "Underwriter") is registered as a
broker-dealer with the Securities and Exchange Commission (the "SEC") under the
Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"), and is
a member in good standing of the National Association of Securities Dealers,
Inc. (the "NASD");
WHEREAS, the Company, the underwriter for the Policies, is registered as a
broker-dealer with the SEC under the 1934 Act and is a member in good standing
of the NASD; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in one or more of the
Portfolios specified in Schedule A attached hereto (the "Shares") on behalf of
the Accounts to fund the Policies, and the Trust intends to sell such Shares to
the Accounts at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the Trust, MFS,
and the Company agree as follows:
<PAGE>
ARTICLE 1. SALE AND REDEMPTION OF TRUST SHARES
1. 1. The Trust agrees to sell to the Company those Shares which the Accounts
order (based on orders placed by Policy holders on that Business Day, as defined
below) and which are available for purchase by such Accounts, executing such
orders on a daily basis at the net asset value next computed after receipt by
the Trust or its designee of the order for the Shares. For purposes of this
Section 1.1, the Company shall be the designee of the Trust for receipt of such
orders from Policy owners and receipt by such designee shall constitute receipt
by the Trust; PROVIDED that the Trust receives notice of such orders by 9:30
a.m. New York time on the next following Business Day. "Business Day" shall mean
any day on which the New York Stock Exchange, Inc. (the "NYSE") is open for
trading and on which the Trust calculates its net asset value pursuant to the
rules of the SEC.
1.2. The Trust agrees to make the Shares available indefinitely for purchase at
the applicable net asset value per share by the Company and the Accounts on
those days on which the Trust calculates its net asset value pursuant to rules
of the SEC and the Trust shall calculate such net asset value on each day which
the NYSE is open for trading. Notwithstanding the foregoing, the Board of
Trustees of the Trust (the "Board") may refuse to sell any Shares to the Company
and the Accounts, or suspend or terminate the offering of the Shares if such
action is required by law or by regulatory authorities having jurisdiction or
is, in the sole discretion of the Board acting in good faith and in light of its
fiduciary duties under federal and any applicable state laws, necessary in the
best interest of the Shareholders of such Portfolio.
1.3. The Trust and MFS agree that the Shares will be sold only to insurance
companies which have entered into participation agreements with the Trust and
MFS (the "Participating Insurance Companies") and their separate accounts,
qualified pension and retirement plans and MFS or its affiliates. The Trust and
MFS will not sell Trust shares to any insurance company or separate account
unless an agreement containing provisions substantially the same as Articles III
and VII of this Agreement is in effect to govern such sales. The Company will
not resell the Shares except to the Trust or its agents.
1.4. The Trust agrees to redeem for cash, on the Company's request, any full or
fractional Shares held by the Accounts (based on orders placed by Policy owners
on that Business Day), executing such requests on a daily basis at the net asset
value next computed after receipt by the Trust or its designee of the request
for redemption. For purposes of this Section 1.4, the Company SHALL be the
designee of the Trust for receipt of requests for redemption from Policy owners
and receipt by such designee shall constitute receipt by the Trust; provided
that the Trust receives notice of such request for redemption by 9:30 a.m. New
York time on the next following Business Day.
1.5. Each purchase, redemption and exchange order placed by the Company shall be
placed separately for each Portfolio and shall not be netted with respect to any
Portfolio. However, with respect to payment of the purchase price by the Company
and of redemption proceeds by the Trust, the Company and the Trust shall net
purchase and redemption orders with respect to each Portfolio and shall transmit
one net payment for all of the Portfolios in accordance with Section 1.6 hereof.
1.6. In the event of net purchases, the Company shall pay for the Shares by 2:00
p.m. New York time on the next Business Day after an order to purchase the
Shares is made in accordance with the provisions of Section 1. 1. hereof. In the
event of net redemptions, the Trust shall pay the redemption proceeds by 2:00
p.m. New York time on the next Business Day after an order to redeem the shares
is made in accordance with the provisions of Section 1.4. hereof. All such
payments shall be in federal funds transmitted by wire.
1.7. Issuance and transfer of the Shares will be by book entry only. Stock
certificates will not be issued to the Company or the Accounts. The Shares
ordered from the Trust will be
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recorded in an appropriate title for the Accounts or the appropriate subaccounts
of the Accounts.
1.8. The Trust shall furnish same day notice (by wire or telephone followed by
written confirmation) to the Company of any dividends or capital gain
distributions payable on the Shares' The Company hereby elects to receive all
such dividends and distributions as are payable on a Portfolio's Shares in
additional Shares of that Portfolio, but may revoke that election at any time by
notifying the Trust in writing. The Trust shall notify the Company of the number
of Shares so issued as payment of such dividends and distributions.
1.9. The Trust or its custodian shall make the net asset value per share for
each Portfolio available to the Company on each Business Day as soon as
reasonably practical after the net asset value per share is calculated and shall
use its best efforts to make such net asset value per share available by 6:30
p.m. New York time. In the event that the Trust is unable to meet the 6:30 p.m.
time stated herein, it shall provide additional time for the Company to place
orders for the purchase and redemption of Shares. Such additional time shall be
equal to the additional time which the Trust takes to make the net asset value
available to the Company. If the Trust provides materially incorrect share net
asset value information, the Trust shall make an adjustment to the number of
shares purchased or redeemed for the Accounts to reflect the correct net asset
value per share. Any material error in the calculation or reporting of net asset
value per share, dividend or capital gains information shall be reported
promptly upon discovery to the Company.
ARTICLE 11. CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS
2.1. The Company represents and warrants that the Policies are or will be
registered under the 1933 Act or are exempt from or not subject to registration
thereunder, and that the Policies will be issued, sold, and distributed in
compliance in all material respects with all applicable state and federal laws;
including without limitation the 1933 Act, the Securities Exchange Act of 1934,
as amended (the " 1934 Act"), and the 1940 Act. The Company further represents
and warrants that it is an insurance company duly organized and validly existing
under applicable law and that it has legally and validly established the Account
as a segregated asset account under applicable law and has registered or, prior
to any issuance or sale of the Policies, will register the Accounts as unit
investment trusts in accordance with the provisions of the 1940 Act (unless
exempt therefrom) to serve as segregated investment accounts for the Policies,
and that it will maintain such registration for so long as any Policies are
outstanding. The Company shall amend the registration statements under the 1933
Act for the Policies and the registration statements under the 1940 Act for the
Accounts from time to time as required in order to effect the continuous
offering of the Policies or as may otherwise be required by applicable law. The
Company shall register and qualify the Policies for sales in accordance with the
securities laws of the various states only if and to the extent deemed necessary
by the Company.
2.2. The Company represents and warrants that the Policies are currently and at
the time of issuance will be treated as life insurance policies, endowment or
annuity contracts under applicable provisions of the Internal Revenue Code of
1986, as amended (the "Code"), that it will maintain such treatment and that it
will notify the Trust or MFS immediately upon having a reasonable basis for
believing that the Policies have ceased to be so treated or that they might not
be so treated in the future.
2.3. The Company represents and warrants that it, as the underwriter for the
Policies, is a member in good standing of the NASD and is a registered
broker-dealer with the SEC. The Company represents and warrants that, to the
extent it sells the Policies directly, it will sell and distribute such policies
in accordance in all material respects with all applicable state and federal
securities laws, including without limitation the 1933 Act, the 1934 Act, and
the 1940 Act.
2.4. The Trust and MFS represent and warrant that the Shares sold pursuant to
this Agreement shall be registered under the 1933 Act, duly authorized for
issuance and sold in compliance with the laws of The Commonwealth of
Massachusetts and all applicable federal and state securities laws and that the
Trust is
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and shall remain registered under the 1940 Act. The Trust shall amend the
registration statement for its Shares under the 1933 Act and the 1940 Act from
time to time as required in order to effect the continuous offering of its
Shares. The Trust shall register and qualify the Shares for sale in accordance
with the laws of the various states only if and to the extent deemed necessary
by the Trust.
2.5. MFS represents and warrants that the Underwriter is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC. The
Trust and MFS represent that the Trust and the Underwriter will sell and
distribute the Shares in accordance in all material respects with all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.6. The Trust represents that it is lawfully organized and validly existing
under the laws of The Commonwealth of Massachusetts and that it does and will
comply in all material respects with the 1940 Act and any applicable regulations
thereunder.
2.7. MFS represents and warrants that it is and shall remain duly registered
under all applicable federal securities laws and that it shall perform its
obligations for the Trust in compliance in all material respects with any
applicable federal securities laws and with the securities laws of The
Commonwealth of Massachusetts. MFS represents and warrants that it is not
subject to state securities laws other than the securities laws of The
Commonwealth of Massachusetts and that it is exempt from registration as an
investment adviser under the securities laws of The Commonwealth of
Massachusetts.
2.8. The Company shall submit to the Board such reports, material or data as the
Board may reasonably request from time to time so that it may carry out fully
the obligations imposed upon it by the conditions contained in the exemptive
application pursuant to which the SEC has granted exemptive relief to permit
mixed and shared funding (the "Mixed and Shared Funding Exemptive Order").
ARTICLE III. PROSPECTUS AND PROXY STATEMENTS; VOTING
3.1. At least annually, the Trust or its designee shall provide the Company,
free of charge, with as many copies of the current prospectus (describing
only the Portfolios listed in Schedule A hereto) for the Shares as the
Company may reasonably request for distribution to existing Policy owners
whose Policies are funded by such Shares. The Trust or its designee shall
provide the Company, at the Company's expense, with as many copies of the
current prospectus for the Shares as the Company may reasonably request for
distribution to prospective purchasers of Policies. If requested by the
Company in lieu thereof, the Trust or its designee shall provide such
documentation (including a "camera ready" copy of the new prospectus as set
in type or, at the request of the Company, as a diskette in the form sent to
the financial printer) and other assistance as is reasonably necessary in
order for the parties hereto once each year (or more frequently if the
prospectus for the Shares is supplemented or amended) to have the prospectus
for the Policies and the prospectus for the Shares printed together in one
document; the expenses of such printing to be apportioned between (a) the
Company and (b) the Trust or its designee in proportion to the number of
pages of the Policy and Shares' prospectuses, taking account of other
relevant factors affecting the expense of printing, such as covers, columns,
graphs and charts; the Trust or its designee to bear the cost of printing the
Shares' prospectus portion of such document for distribution to owners of
existing Policies funded by the Shares and the Company to bear the expenses
of printing the portion of such document relating to the Accounts; PROVIDED,
however, that the Company shall bear all printing expenses of such combined
documents where used for distribution to prospective purchasers or to owners
of existing Policies not funded by the Shares. In the event that the Company
requests that the Trust or its designee provides the Trust! s prospectus in a
"camera ready" or diskette format, the Trust shall be responsible for
providing the prospectus in the format in which it or MFS is accustomed to
formatting prospectuses and shall bear the expense of providing the prospectus
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<PAGE>
in such format (E.G., typesetting expenses), and the Company shall bear the
expense of adjusting or changing the format to conform with any of its
prospectuses.
3.2. The prospectus for the Shares shall state that the statement of
additional information for the Shares is available from the Trust or its
designee. The Trust or its designee, at its expense, shall print and provide
such statement of additional information to the Company (or a master of such
statement suitable for duplication by the Company) for distribution to any
owner of a Policy funded by the Shares. The Trust or its designee, at the
Company's expense, shall print and provide such statement to the Company (or
a master of such statement suitable for duplication by the Company) for
distribution to a prospective purchaser who requests such statement or to an
owner of a Policy not funded by the Shares.
3.3. The Trust or its designee shall provide the Company free of charge copies,
if and to the extent applicable to the Shares, of the Trust's proxy materials,
reports to Shareholders and other communications to Shareholders in such
quantity as the Company shall reasonably require for distribution to Policy
owners.
3.4. Notwithstanding the provisions of Sections 3.1, 3.2, and 3.3 above, or of
Article V below, the Company shall pay the expense of printing or providing
documents to the extent such cost is considered a distribution expense.
Distribution expenses would include by way of illustration, but are not limited
to, the printing of the Shares' prospectus or prospectuses for distribution to
prospective purchasers or to owners of existing Policies not funded by such
Shares.
3.5. The Trust hereby notifies the Company that it may be appropriate to include
in the prospectus pursuant to which a Policy is offered disclosure regarding the
potential risks of mixed and shared funding.
3.6. If and to the extent required by law, the Company shall:
(a) solicit voting instructions from Policy owners;
(b) vote the Shares in accordance with instructions received from Policy
owners; and
(c) vote the Shares in each separate Account for which no instructions have
been received in the same proportion as the Shares of such Portfolio in
such Account for which instructions have been received from Policy owners;
so long as and to the extent that the SEC continues to interpret the 1940 Act to
require pass through voting privileges for variable contract owners. The Company
will in no way recommend action in connection with or oppose or interfere with
the solicitation of proxies for the Shares held for such Policy owners. The
Company reserves the right to vote shares held in any segregated asset account
in its own right, to the extent permitted by law. Participating Insurance
Companies shall be responsible for assuring that each of their separate accounts
holding Shares calculates voting privileges in the manner required by the Mixed
and Shared Funding Exemptive Order. The Trust and MFS will notify the Company of
any changes of interpretations or amendments to the Mixed and Shared Funding
Exemptive Order.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the Trust or
its designee, each piece of sales literature or other promotional material in
which the Trust, MFS, any other investment adviser to the Trust, or any
affiliate of MFS are named, at least ten (10) Business Days prior to its use. No
such material shall be used if the Trust, MFS, or their respective designees
reasonably objects to such use within five (5) Business Days after receipt of
such material.
4.2. The Company shall not give any information or make any representations or
statement on behalf of the Trust, MFS, any other investment adviser to the
Trust, or any affiliate of MFS or
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<PAGE>
concerning the Trust or any other such entity in connection with the sale of the
Policies other than the information or representations contained in the
registration statement, prospectus or statement of additional information for
the Shares, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or in
reports or proxy statements for the Trust, or in sales literature or other
promotional material approved by the Trust, MFS or their respective designees,
except with the permission of the Trust, MFS or their respective designees. The
Trust, MFS or their respective designees each agrees to respond to any request
for approval on a prompt and timely basis. The Company shall adopt and implement
procedures reasonably designed to ensure that information concerning the Trust,
MFS or any of their affiliates which is intended for use only by brokers or
agents selling the Policies(IE., information that is not intended for
distribution to Policy owners or prospective Policy owners) is so used, and
neither the Trust, MFS nor any of their affiliates shall be liable for any
losses, damages or expenses relating to the improper use of such broker only
materials.
4.3. The Trust or its designee shall furnish, or shall cause to be furnished, to
the Company or its designee, each piece of sales literature or other promotional
material in which the Company and/or the Accounts is named, at least ten (10)
Business Days prior to its use. No such material shall be used if the Company or
its designee reasonably objects to such use within five (5) Business Days after
receipt of such material.
4.4. The Trust and MFS shall not give, and agree that the Underwriter shall not
give, any information or make any representations on behalf of the Company or
concerning the Company, the Accounts, or the Policies in connection with the
sale of the Policies other than the information: or representations contained in
a registration statement, prospectus, or statement of additional information for
the Policies, as such registration statement, prospectus and statement of
additional information may be amended or supplemented from time to time, or in
reports for the Accounts, or in sales literature or other promotional material
approved by the Company or its designee, except with the permission of the
Company. The Company or its designee agrees to respond to any request for
approval on a prompt and timely basis. The parties hereto agree that this
Section 4.4. is neither intended to designate nor otherwise imply that MFS is an
underwriter or distributor of the Policies.
4.5. The Company and the Trust (or its designee in lieu of the Company or the
Trust, as appropriate) will each provide to the other at least one complete copy
of all registration statements, prospectuses, statements of additional
information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate (in the case of the Trust) to the
Policies, or (in the case of the Company) to the Trust or its Shares, within
twenty (20) days after the filing of such document with the SEC or other
regulatory authorities. The Company and the Trust shall also each promptly
inform the other of the results of any examination by the SEC (or other
regulatory authorities) that relates to the Policies, the Trust or its Shares,
and the party that was the subject of the examination shall provide the other
party with a copy of relevant portions of any "deficiency letter" or other
correspondence or written report regarding any such examination.
4.6. The Trust and MFS will provide the Company with as much notice as is
reasonably practicable of any proxy solicitation for any Portfolio, and of any
material change in the Trusts registration statement, particularly any change
requiring change to the registration statement or prospectus or statement of
additional information for any Account. The Trust and MFS will cooperate with
the Company so as to enable the Company to solicit proxies from Policy owners or
to make changes to its prospectus, statement of additional information or
registration statement, in an orderly manner. The Trust and MFS will make
reasonable efforts to attempt to have changes affecting Policy prospectuses
become effective simultaneously with the annual
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<PAGE>
updates for such prospectuses.
4.7. For purpose of this Article IV and Article VIII, the phrase "sales
literature or other promotional material" includes but is not limited to
advertisements (such as material published, or designed for use in, a newspaper,
magazine, or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures, or other public media),
and sales literature (such as brochures, circulars, reprints or excerpts or any
other advertisement, sales literature, or published articles), distributed or
made generally available to customers or the public, educational or training
materials or communications distributed or made generally available to some or
all agents or employees.
ARTICLE V. FEES AND EXPENSES
5.1. The Trust shall pay no fee or other compensation to the Company under this
Agreement, and the Company shall pay no fee or other compensation to the Trust,
except that if the Trust or any Portfolio adopts and implements a plan pursuant
to Rule 12b- I under the 1940 Act to finance distribution and Shareholder
servicing expenses, then, subject to obtaining any required exemptive orders or
regulatory approvals, the Trust may make payments to the Company or to the
underwriter for the Policies if and in amounts agreed to by the Trust in
writing. Each party, however, shall, inaccordance with the allocation of
expenses specified in Articles III and V hereof, reimburse other parties for
expenses initially paid by one party but allocated to another party. In
addition, nothing herein shall prevent the parties hereto from otherwise
agreeing to perform, and arranging for appropriate compensation for, other
services relating to the Trust and/or to the Accounts.
5.2. The Trust or its designee shall bear the expenses for the cost of
registration and qualification of the Shares under all applicable federal and
state laws, including preparation and filing of the Trust's registration
statement, and payment of filing fees and registration fees; preparation and
filing of the Trusts proxy materials and reports to Shareholders; setting in
type and printing its prospectus and statement of additional information (to the
extent provided by and as determined in accordance with Article III above);
setting in type and printing the proxy materials and reports to Shareholders (to
the extent provided by and as determined in accordance with Article III above);
the preparation of all statements and notices required of the Trust by any
federal or state law with respect to its Shares; all taxes on the issuance or
transfer of the Shares; and the costs of distributing the Trusts prospectuses
and proxy materials to owners of Policies funded by the Shares and any expenses
permitted to be paid or assumed by the Trust pursuant to a plan, if any, under
Rule 12b- I under the 1940 Act. The Trust shall not bear any expenses of
marketing the Policies.
5.3. The Company shall bear the expenses of distributing the Shares' prospectus
or prospectuses in connection with new sales of the Policies and of distributing
the Trust's Shareholder reports to Policy owners. The Company shall bear all
expenses associated with the registration, qualification, and filing of the
Policies under applicable federal securities and state insurance laws; the cost
of preparing, printing and distributing the Policy prospectus and statement of
additional information to other than existing Policy owners; and the cost of
preparing, printing AND distributing annual individual account statements for
Policy owners as required by state insurance laws.
ARTICLE VI. DIVERSIFICATION AND RELATED LIMITATIONS
6.1. The Trust and MFS represent and warrant that each Portfolio of the Trust
will meet the diversification requirements of Section 817 (h) (1) of the Code
and Treas. Reg. 1.817-5, relating to the diversification requirements for
variable annuity, endowment, or life insurance contracts,
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as they may be amended from time to time (and any revenue rulings, revenue
procedures, notices, and other published announcements of the Internal Revenue
Service interpreting these sections), as if those requirements applied directly
to each such Portfolio.
6.2. The Trust and MFS represent that each Portfolio will elect to be qualified
as a Regulated Investment Company under Subchapter M of the Code and that they
will maintain such qualification (under Subchapter M or any successor or similar
provision), and will notify the Company if it appears that any Portfolio will
not so qualify.
ARTICLE VII. POTENTIAL MATERIAL CONFLICTS
7.1. The Trust agrees that the Board, constituted with a majority of
disinterested trustees, will monitor each Portfolio of the Trust for the
existence of any material irreconcilable conflict between the interests of the
variable annuity contract owners and the variable life insurance policy owners
of the Company and/or affiliated companies ("contract owners") investing in the
Trust. The Board shall have the sole authority to determine if a material
irreconcilable conflict exists, and such determination shall be binding on the
Company only if approved in the form of a resolution by a majority of the Board,
or a majority of the disinterested trustees of the Board. The Board will give
prompt notice of any such determination to the Company.
7.2. The Company agrees that it will be responsible for assisting the Board in
carrying out its responsibilities under the conditions set forth in the Trust's
exemptive application pursuant to which the SEC has granted the Mixed and Shared
Funding Exemptive Order by providing the Board, as it may reasonably request,
with all information necessary for the Board to consider any issues raised and
agrees that it will be responsible for promptly reporting any potential or
existing conflicts of which it is aware to the Board including, but not limited
to, an obligation by the Company to inform the Board whenever contract owner
voting instructions are disregarded. The Company also agrees that if it is
determined by a majority of the Trustees, or a majority of the disinterested
Trustees, that a material irreconcilable conflict exists, the Company shall, at
its own expense and to the extent reasonably practicable (as determined by a
majority of the disinterested Trustees) take whatever steps are necessary to
remedy or eliminate the material irreconcilable conflict, which steps include:
(a) withdrawing the assets allocable to some or all of the Accounts from the
Trust or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Trust, or
submitting to a vote of all affected contract owners whether to withdraw assets
from the Trust or any Portfolio and reinvesting such assets in a different
investment medium and, as appropriate, segregating the assets attributable to
any appropriate group of contract owners that votes in favor of such
segregation, or offering to any of the affected contract owners the option of
segregating the assets attributable to their contracts or policies, and (b)
establishing a new registered management investment company and segregating
the-assets underlying the Policies, unless a majority of Policy owners
materially adversely affected by the conflict have voted to decline the offer to
establish a new registered management investment company.
7.3. A majority of the disinterested trustees of the Board shall determine
whether any proposed action by the Company adequately remedies any material
irreconcilable conflict. In the event that the Board determines that any
proposed action does not adequately remedy any material irreconcilable conflict,
the Company will withdraw from investment in the Trust each of the Accounts
designated by the disinterested trustees and terminate this Agreement within six
(6) months after the Board informs the Company in writing of the foregoing
determination; PROVIDED HOWEVER, that such withdrawal and termination shall be
limited to the extent required to remedy any such material irreconcilable
conflict as determined by a majority of the disinterested trustees
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of the Board.
7.4. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are amended, or Rule
6e-3 is adopted, to provide exemptive relief from any provision of the 1940 Act
or the rules promulgated thereunder with respect to mixed or shared funding (as
defined in the Mixed and Shared Funding Exemptive Order) on terms and conditions
materially different from those contained in the Mixed and Shared Funding
Exemptive Order, then (a) the Trust and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rule 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent
such rules are applicable; and (b) Sections 3.5, 3.6, 7.1, 7.2, 7.3 and 7.4 of
this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
The Company agrees to indemnify and hold harmless the Trust, MFS, any
affiliates of MFS, and each of their respective directors/trustees, officers and
each person, if any, who controls the Trust or MFS within the meaning of Section
15 of the 1933 Act, and any agents or employees of the foregoing (each an
"Indemnified Party," or collectively, the "Indemnified Parties" for purposes of
this Section 8.1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the Company)
or expenses (including reasonable counsel fees) to which any Indemnified Party
may become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Policies or
contained in the Policies or sales literature or other promotional material
for the Policies (or any amendment or supplement to any of the foregoing),
or arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading PROVIDED that this agreement to
indemnify shall not apply as to any Indemnified Party if such statement or
omission or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the Company
or its designee by or on behalf of the Trust or MFS for-use in the
registration statement, prospectus or statement of additional information
for the Policies or in the Policies or sales literature or other
promotional material (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the Policies
or Shares; or
(b) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus, statement of additional information or sales literature or
other promotional material of the Trust not supplied by the Company or its
designee, or persons under its control and on which the Company has
reasonably relied) or wrongful conduct of the Company or persons under its
control, with respect to the sale or distribution of the Policies or
Shares; or
(c) arise out of any untrue statement or alleged untrue statement of a material
fact contained in the registration statement, prospectus, statement of
additional
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information, or sales literature or other promotional literature of the
Trust, or any amendment thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement or statements therein not
misleading, if such statement or omission was made in reliance upon
information furnished to the Trust by or on behalf of the Company; or
(d) arise out of or result from any material breach of any representation
and/or warranty made by the Company in this Agreement or arise out of or
result from any other material breach of this Agreement by the Company; or
(e) arise as a result of any failure by the Company to provide the services and
furnish the materials under the terms of this Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.2. INDEMNIFICATION BY THE TRUST
The Trust agrees to indemnify and hold harmless the Company and each of its
directors and officers and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act, and any agents or employees of the
foregoing (each an "Indemnified Party," or collectively, the "Indemnified
Parties" for purposes of this Section 8.2) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust) or expenses (including reasonable counsel fees) to which
any Indemnified Party may become subject under any statute, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Shares or the Policies and:
(a) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus, statement of additional information or sales literature or
other promotional material of the Trust (or any amendment or supplement to
any of the foregoing), or arise oat of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein not misleading, PROVIDED
that this agreement to indemnify shall not apply as to any Indemnified
Party if such statement or omission or such alleged statement or omission
was made in reasonable reliance upon and in conformity with information
furnished to the Trust, MFS, the Underwriter or their respective designees
by or on behalf of the Company for use in the registration statement,
prospectus or statement of additional information for the Trust or in sales
literature or other promotional material for the Trust (or any amendment or
supplement to any of the foregoing) or otherwise for use in connection with
the sale of the Policies or Shares; or
(b) arise out of or as a result of statements or representations (other than
statements or representations contained in the registration statement,
prospectus, statement of additional information or sales literature or
other promotional material for the Policies not supplied by the Trust, MFS,
the Underwriter or any of their respective designees or persons under their
respective control and on which any such entity has reasonably relied) or
wrongful conduct of the Trust or persons under its control, with respect to
the sale or distribution of the Policies or Shares; or
(c) arise out of any untrue statement or alleged untrue statement of a material
fact
-10-
<PAGE>
contained in the registration statement, prospectus, statement of
additional information, or sales literature or other promotional literature
of the Accounts or relating to the Policies, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by
or on behalf of the Trust, MFS or the Underwriter; or
(d) arise out of or result from any material breach of any representation
and/or warranty made by the Trust in this Agreement (including a failure,
whether unintentional or in good faith or other-wise, to comply with the
diversification requirements specified in Article VI of this Agreement) or
arise out of or result from any other material breach of this Agreement by
the Trust; or
(e) arise out of or result from the materially incorrect or untimely
calculation or reporting of the daily net asset value per share or dividend
or capital gain distribution rate; or
(f) arise as a result of any failure by the Trust to provide the services and
furnish the materials under the terms of the Agreement;
as limited by and in accordance with the provisions of this Article VIII.
8.3. In no event shall the Trust be liable under the indemnification provisions
contained in this Agreement to any individual or entity, including without
limitation, the Company, or any Participating Insurance Company or any Policy
holder, with respect to any losses, claims, damages, liabilities or expenses
that arise out of or result from (i) a breach of any representation, warranty,
and/or covenant made by the Company hereunder or by any Participating Insurance
Company under an agreement containing substantially similar representations,
warranties and covenants; (ii) the failure by the Company or any Participating
Insurance Company to maintain its segregated asset account (which invests in any
Portfolio) as a legally and validly established segregated asset account under
applicable state law and as a duly registered unit investment trust under the
provisions of the 1940 Act (unless exempt therefrom); or (iii) the failure by
the Company or any Participating Insurance Company to maintain its variable
annuity and/or variable life insurance contracts (with respect to which any
Portfolio serves as an underlying funding vehicle) as life insurance, endowment
or annuity contracts under applicable provisions of the Code.
8.4. Neither the Company nor the Trust shall be liable under the indemnification
provisions contained in this Agreement with respect to any losses, claims,
damages, liabilities or expenses to which an Indemnified Party would otherwise
be subject by reason of such Indemnified Party's willful misfeasance, willful
misconduct, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement.
8.5. Promptly after receipt by an Indemnified Party under this Section 8.5. of
notice of commencement of any action, such Indemnified Party will, if a claim in
respect thereof is to be made against the indemnifying party under this section,
notify the indemnifying party of the commencement thereof; but the omission so
to notify the indemnifying party will not relieve it from any liability which it
may have to any Indemnified Party otherwise than under this section. In case
any such action is brought against any Indemnified Party, and it notified the
indemnifying party of the commencement thereof, the indemnifying party will be
entitled to participate therein and, to the extent that it may wish, assume the
defense thereof, with counsel satisfactory to such Indemnified Party. After
notice from the indemnifying party of its intention to assume the
-11-
<PAGE>
defense of an action, the Indemnified Party shall bear the expenses of any
additional counsel obtained by it, and the indemnifying party shall not be
liable to such Indemnified Party under this section for any legal or other
expenses subsequently incurred by such Indemnified Party in connection with the
defense thereof other than reasonable costs of investigation.
8.6. Each of the parties agrees promptly to notify the other parties of the
commencement of any litigation or proceeding against it or any of its respective
officers, directors, trustees, employees or 1933 Act control persons in
connection with the Agreement, the issuance. or sale of the Policies, the
operation of the Accounts, or the sale or acquisition of Shares.
8.7. A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article Vill. The
indemnification provisions contained in this Article Vill shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of The Commonwealth of Massachusetts.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the RULES and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant and
the terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE X. NOTICE OF FORMAL PROCEEDINGS
The Trust, MFS, and the Company agree that each such party shall promptly
notify the other parties to tills Agreement, in writing, of the institution of
any formal proceedings brought against such party or its designees by the NASD,
the SEC, or any insurance department or any other regulatory body regarding such
party's duties under this Agreement or related to the sale of the Policies, the
operation of the Accounts, or the purchase of the Shares.
ARTICLE XI. TERMINATION
11.1. This Agreement shall terminate with respect to the Accounts, or one, some,
or all Portfolios:
(a) at the option of any party upon six (6) months' advance written notice to
the other parties; or
(b) at the option of the Company to the extent that the Shares of Portfolios
are not reasonably available to meet the requirements of the Policies or
are not "appropriate funding vehicles" for the Policies, as reasonably
determined by the Company. Without limiting the generality of the
foregoing, the Shares of a Portfolio would not be "appropriate funding
vehicles" if, for example, such Shares did not meet the diversification or
other requirements referred to in Article VI hereof, or if the Company
would be permitted to disregard Policy owner voting instructions pursuant
to Rule 6e-2 or 6e-3(T) under the 1940 Act. Prompt notice of the election
to terminate for such cause and an explanation of such cause shall be
furnished to the Trust by the Company; or
(c) at the option of the Trust or MFS upon institution of formal proceedings
against the Company by the NASD, the SEC, or any insurance department or
any other
-12-
<PAGE>
regulatory body regarding the Company's duties under this Agreement or
related to the sale of the Policies, the operation of the Accounts, -or the
purchase of the Shares; or
(d) at the option of the Company upon institution of formal proceedings against
the Trust or MFS by the NASD, the SEC, or any state securities or insurance
department or any other regulatory body regarding the Trust's or MFS'
duties under this Agreement or related to the sale of the Shares; or
(e) at the option of the Company, the Trust or MFS upon receipt of any
necessary regulatory approvals and/or the vote of the Policy owners having
an interest in the Accounts (or any subaccounts) to substitute the shares
of another investment company for the corresponding Portfolio Shares in
accordance with the terms of the Policies for which those Portfolio Shares
had been selected to serve as the underlying investment media. The Company
will give thirty (30) days' prior written notice to the Trust of the Date
of any proposed vote or other action taken to replace the Shares; or
(f) termination by either the Trust or MFS by written notice to the Company, if
either one or both of the Trust or MFS respectively, shall determine, in
their sole judgment exercised in good faith, that the Company has suffered
a material adverse change in its business, operations, financial condition,
or prospects since the date of this Agreement; or
(g) termination by the Company by written notice to the Trust and MFS, if the
Company shall determine, in its sole judgment exercised in good faith, that
the Trust or MFS has suffered a material adverse change in this business,
operations, financial condition or prospects since the date of this
Agreement; or
(h) at the option of any party to this Agreement, upon another party's material
breach of any provision of this Agreement; or
(i) upon assignment of this Agreement, unless made with the written consent of
the parties hereto.
11.2. The notice shall specify the Portfolio or Portfolios, Policies and, if
applicable, the Accounts as to which the Agreement is to be terminated.
11.3. It is understood and agreed that the right of any party hereto to
terminate this Agreement pursuant to Section 11. 1 (a) may be exercised for
cause or for no cause. Termination by any party pursuant to any of Section I
1.1(b) through Section 11. l(i) shall not take effect until the terminating
party shall have provided written notice to the other party.
11.4. Except as necessary to implement Policy owner initiated transactions, or
as required by state insurance laws or regulations, the Company shall not redeem
the Shares attributable to the Policies (as opposed to the Shares attributable
to the Company's assets held in the Accounts), and the Company shall not prevent
Policy owners from allocating payments to a Portfolio that was otherwise
available under the Policies, until thirty (30) days after the Company shall
have notified the Trust of its intention to do so.
11.5. Notwithstanding any termination of this Agreement, the Trust and MFS
shall, at the option of the Company, continue to make available additional
shares of the Portfolios pursuant to the terms and conditions of this Agreement,
for all Policies in effect on the effective date of termination of this
Agreement (the "Existing Policies"), except as otherwise provided under Article
VII of this Agreement. Specifically, without limitation, the owners of the
Existing Policies shall be permitted to transfer or reallocate investment under
the Policies, redeem investments in any Portfolio and/or invest in the Trust
upon the making of additional purchase payments under
-13-
<PAGE>
the Existing Policies.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or certified
mail, overnight courier or facsimile to the other party at the address of such
party set forth below or at such other address as such party may FROM time to
time specify in writing to the other party.
If to the Trust:
MFS Variable Insurance Trust
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, Secretary
If to the Company:
The Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, Indiana 46802-3506
Facsimile No.: (219) 455-1773
Attn: Kelly D. Clevenger
If to MFS:
Massachusetts Financial Services Company
500 Boylston Street
Boston, Massachusetts 02116
Facsimile No.: (617) 954-6624
Attn: Stephen E. Cavan, General Counsel
ARTICLE XIII. MISCELLANEOUS
13.1. Subject to the requirement of legal process and regulatory authority, each
party hereto shall treat as confidential the names and addresses of the owners
of the Policies and all information reasonably identified as confidential in
writing by any other party hereto and, except as permitted by this Agreement or
as otherwise required by applicable law or regulation, shall not disclose,
disseminate or utilize such names and addresses and other confidential
information without the express written consent of the affected party until such
time as it may come into the public domain.
13.2. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
13.3. This Agreement may be executed simultaneously in one or more counterparts,
each of which taken together shall constitute one and the same instrument.
13.4. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
13.5. The Schedule attached hereto, as modified from time to time, is
incorporated herein by reference and is part of this Agreement.
13.6. Each party hereto shall cooperate with each other party in connection with
inquiries by appropriate governmental authorities (including without limitation
the SEC, the NASD, and state
-14-
<PAGE>
insurance regulators) relating to this Agreement or the transactions
contemplated hereby.
13.7. The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties hereto are entitled to under state and
federal laws.
13.8. A copy of the Trust's Declaration of Trust is on file with the Secretary
of State of The Commonwealth of Massachusetts. The Company acknowledges that the
obligations of or arising out of this instrument are not binding upon any of the
Trust's trustees, officers, employees, agents or shareholders individually, but
are binding solely upon the assets and property of the Trust in accordance with
its proportionate interest hereunder. The Company further acknowledges that the
assets and liabilities of each Portfolio are separate and distinct and that the
obligations of or arising out of this instrument are binding solely upon the
assets or property of the Portfolio on whose behalf the Trust has executed this
instrument. The Company also agrees that the obligations of each Portfolio
hereunder shall be several and not joint, in accordance with its proportionate
interest hereunder, and the Company agrees not to proceed against any Portfolio
for the obligations of another Portfolio.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and on its behalf by its duly authorized representative
and its seal to be hereunder affixed hereto as of the date specified above.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By its authorized officer,
By:
Title:
MFS VARIABLE INSURANCE TRUST, on behalf of the
Portfolios
By its authorized officer and not individually,
James R. Bordewick, Jr. Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY.
By its authorized officer,
By:
Jeffrey L. Shames
Chairman and Chief Executive Officer
As of May 1998
-15-
<PAGE>
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
NAME OF SEPARATE POLICIES FUNDED PORTFOLIOS
ACCOUNT AND DATE BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
ESTABLISHED BY BOARD OF DIRECTORS
<S> <C> <C>
Lincoln Life Flexible Flexible Premium Variable Life MFS Emerging Growth Series
Premium Variable Life MFS Total Return Series
Separate Account M MFS Utilities Series
Lincoln Life Flexible
Premium Variable Life
Separate Account R
</TABLE>
-16-
<PAGE>
AMENDMENT TO SCHEDULE A AS OF NOVEMBER 1, 1998
NAME OF SEPARATE ACCOUNT AND DATE ESTABLISHED BY BOARD OF DIRECTORS
Lincoln Life Flexible Premium Variable Life Separate Account M
Lincoln Life Variable Annuity Account N
Lincoln Life Flexible Premium Variable Life Separate Account R
POLICIES/CONTRACTS FUNDED BY SEPARATE ACCOUNT
Flexible Premium Variable Life
Variable Annuity Contracts
PORTFOLIOS APPLICABLE TO SOME OR ALL OF THE POLICIES
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
MFS Research Series
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule A to be executed in its name and behalf by its duly authorized officer
on the date specified below.
Date: The Lincoln National Life Insurance Company
By its authorized officer,
By:
Kelly D. Clevenger,
Vice President
Date: MFS Variable Insurance Trust, on behalf of the Portfolios
By its authorized officer and not individually
By:
James R. Bordewick, Jr.,
Assistant Secretary
Date: Massachusetts Financial Services Company,
By its authorized officer,
By:
Jeffrey L. Shames,
Chairman and Chief Executive Officer
-17-
<PAGE>
PARTICIPATION AGREEMENT
By and Among
OCC ACCUMULATION TRUST
And
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
And
OCC DISTRIBUTORS
THIS AGREEMENT, made and entered into this 15 day of May 1998 by and among
The Lincoln National Life Insurance Company, an Indiana Corporation
(hereinafter the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule I to this Agreement, as may be
amended from time to time (each account referred to as the "Account"), OCC
ACCUMULATION TRUST, an open-end diversified management investment company
organized under the laws of the State of Massachusetts (hereinafter the
"Fund") and OCC DISTRIBUTORS, a Delaware general partnership (hereinafter the
"Underwriter")
WHEREAS, the Fund engages in business as an open-end diversified,
management investment company and was established for the purpose of serving
as the investment vehicle for separate accounts established for variable life
insurance contracts and variable annuity contracts to be offered by insurance
companies which have entered into participation agreements substantially
<PAGE>
identical to this Agreement (hereinafter "Participating Insurance
Companies"); and
WHEREAS, beneficial interests in the Fund are divided into several
series of shares, each representing the interest in a particular managed
portfolio of securities and other assets (the "Portfolios"); and
WHEREAS, the Fund has obtained an order from the Securities and Exchange
Commission (alternatively referred to as the "SEC" or the "Commission"),
dated February 22, 1995 (File No. 812-9290), granting Participating Insurance
Companies and variable annuity separate accounts and variable life insurance
separate accounts relief from the provisions of Sections 9(a), 13(a), 15(a),
and 15(b) of the Investment Company Act of 1940, as amended, (hereinafter the
" 1940 Act") and Rules 6e-2(b)(1 5) and 6e-3 (T)(b)(1 5) thereunder, to the
extent necessary to permit shares of the Fund to be sold to and held by
variable annuity separate accounts and variable life insurance separate
accounts of both affiliated and unaffiliated Participating Insurance
Companies and qualified pension and 'retirement plans (hereinafter the "Mixed
and Shared Funding Exemptive Order");and
WHEREAS, the Fund is registered as an open-end management investment company
under the 1940 Act and its shares are registered under the Securities Act of
1933, as amended (hereinafter the " 193 3 Act"); and
WHEREAS, the Company has registered or will register certain variable annuity
contracts and variable life insurance policies (the "Contracts") under the
1933 Act; and
WHEREAS, the Account is a duly organized, validly existing segregated asset
account, established by resolution of the Board of Directors of the Company
under the
<PAGE>
insurance laws of the State of Indiana, to set aside and invest assets
attributable to the Contracts; and
WHEREAS, the Company has registered or will register each Account as a unit
investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker-dealer with the SEC under
the Securities Exchange Act of 1934, as amended (hereinafter the "1934 Act"),
and is a member in good standing of the National Association of Securities
Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios named
in Schedule 2 on behalf of the Accounts named in Schedule 2 to fund the
Contracts and the Underwriter is authorized to sell such shares to unit
investment trusts such as the Accounts at net asset value,
NOW, THEREFORE, in consideration of their mutual promises, the Company, the
Fund and the Underwriter agree as follows:
ARTICLE 1. SALE AND REDEMPTION OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares of the Fund
which the Company orders on behalf of each Account, executing such orders on
a daily basis at the net asset value next computed after receipt and
acceptance by the Fund or its agent of the order for the shares of the Fund.
For purposes of this Section 1.1, the Company shall be the designee of the
Fund for receipt of such orders from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund
receives notice of such order by
<PAGE>
10:00 a.m. Eastern Time on the next following Business Day. "Business Day"
shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the SEC.
1.2. The Company shall pay for Fund shares on the next Business Day after it
places an order to purchase Fund shares in accordance with Section 1. 1
hereof Payment shall be in federal -funds transmitted by wire.
1.3. The Fund agrees to make its shares available indefinitely for purchase
at the applicable net asset value per share by Participating Insurance
Companies and their separate accounts on those days on which the Fund
calculates its net asset value pursuant to rules of the SEC; provided,
however) that the Board of Trustees of the Fund (hereinafter the "Directors")
may refuse to sell shares of any Portfolio to any person, or suspend or
terminate the offering of shares of any Portfolio if such action is required
by law or by regulatory authorities having jurisdiction or is, in the sole
discretion of the Directors, acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, necessary in
the best interests of the shareholders of any Portfolio.
1.4. THE FUND AND THE UNDERWRITER AGREE THAT shares OF THE FUND WILL BE sold
only to Participating Insurance Companies and their separate accounts,
qualified pension and retirement plans or such other persons as are permitted
under applicable provisions of the Internal Revenue Code of 1986, as amended,
(the "Internal Revenue Code"), and regulations promulgated
<PAGE>
thereunder, the sale to which will not impair the tax treatment currently
afforded the contracts. No shares of any Portfolio will be sold to the
general public.
1. 5. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing
provisions substantially the same as Articles 1, 111, V, and VII of this
Agreement are in effect to govern such sales. The Fund shall make available
upon written request from the Company (i) a list of all other Participating
Insurance Companies and (ii) a copy of the Participation Agreement executed
by any other Participating Insurance Company.
1.6. The Fund agrees to redeem for cash, upon the Company's request, any
full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt
and acceptance by the Fund or its agent of the request for redemption. For
purposes of this Section 1.6, the Company shall be the designee of the Fund
for receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided the Fund receives
notice of request for redemption by 10:00 a.m. Eastern Time on the next
following Business Day. Payment shall be in federal funds transmitted by wire
to the Company's account as designated by the Company in writing from time to
time, on the same Business Day the Fund receives notice of the redemption
order from the Company, except that the Fund reserves the right to delay
payment of redemption proceeds in the
<PAGE>
event that portfolio holdings other than cash equivalents must be liquidated
to pay the redemption proceeds, but in no event may such payment be delayed
longer than the period permitted under Section 22(e) of the 1940 Act. Neither
the Fund nor the Underwriter shall bear any responsibility whatsoever for the
proper disbursement or crediting of redemption proceeds; the Company alone
shall be responsible for such action. If notification of redemption is
received after 10:00 a.m. Eastern Time, payment for redeemed shares will be
made on the next following Business Day.
1.7. The Company agrees to purchase and redeem the shares of the Portfolios
named in Schedule 2 offered by the then current prospectus of the Fund in
accordance with the provisions of such prospectus.
1.8. Issuance and transfer of the Fund's shares will be by book entry only.
Stock certificates will not be issued to the Company or any Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate
title for each Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish notice as soon as reasonably practicable to the
Company of any income, dividends or capital gain distributions payable on the
Fund's shares. The Company hereby elects to receive all such dividends and
distributions as are payable on the Portfolio shares in the form of
additional shares of that Portfolio. The Company reserves the right to revoke
this election and to receive all such dividends and distributions in cash.
The Fund shall
<PAGE>
notify the Company of the number of shares so issued as payment of such
dividends and distributions.
1.10. The Fund shall make the net asset value per share for each Portfolio
available to the Company on a daily basis as soon as reasonably practical
after the net asset value per share is calculated and shall use its best
efforts to make' such net asset value per share available by 5:30 p.m.,
Eastern Time, each business day. Any material error in the calculation of net
asset value per share, dividend or capital gain information shall be
reported. promptly to the Company upon discovery by the Fund and the Company
shall be entitled to an adjustment to the number of shares purchased or
redeemed to reflect the correct net asset value.
ARTICLE H. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are or will be
registered under the 1933 Act and that the Contracts will be issued and sold
in compliance with all applicable federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and
validly existing under applicable law and that it has legally and validly
established each Account as a segregated asset account under applicable state
law and has registered each Account as a unit investment trust in accordance
with the provisions of the 1940 Act to serve as segregated investment
accounts for the Contracts, and that it will maintain such registration for
so long as the 1940 Act requires. The Company shall amend the registration
statement under the 1933 Act for the Contracts and the registration statement
under the
<PAGE>
1940 Act for the Account from time to time as required in order to effect the
continuous offering of the Contracts or as may otherwise be required by
applicable law. The Company shall register and qualify the Contracts for sale
in accordance with the securities laws of the various states only if and to
the extent deemed necessary by the Company.
2.2. The Company represents that it believes that the Contracts are
currently and at the time of issuance will be treated as annuity contracts or
life insurance policies under applicable provisions of the Internal Revenue
Code and that it will make every effort to maintain such treatment and that
it will notify the Fund and the Underwriter immediately upon having a
reasonable basis for believing that the Contracts have ceased to be so
treated or that they might not be so treated in the future.
2.3. The Fund represents and warrants that Fund shares sold pursuant to this
Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall
remain registered under the 1940 Act for as long as the Fund shares are sold.
The Fund shall amend the registration statement for its shares under the 1933
Act and the 1940 Act from time to time as required in order to effect the
continuous offering of its shares. The Fund shall register and qualify the
shares for sale in accordance with the laws of the various states only if
and to the extent deemed advisable by the Fund or the Underwriter.
<PAGE>
2.4. The Fund represents that it is currently qualified as a Regulated
Investment Company under Subchapter M of the Internal Revenue Code, and that
it will make every effort to maintain such qualification (under Subchapter M
or any successor or similar provision) and that it will notify the Company
immediately upon having a reasonable basis for believing that it has ceased
to so qualify or that it might not so qualify in the future.
2.5. The Fund represents that its investment objectives, policies and
restrictions comply with applicable state investment laws as they may apply
to the Fund. The Fund makes no representation as to whether any aspect of its
operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws and regulations of any state. The
Company alone shall be responsible for informing the Fund of any investment
restrictions imposed by state insurance laws which are applicable to the
Fund. To the extent feasible and consistent with market conditions, the Fund
will adjust its investments to comply with the aforementioned state insurance
laws UPON WRITTEN notice FROM THE COMPANY OF such requirements and proposed
adjustments, it being agreed and understood that in any such case the Fund
shall be allowed a reasonable period of time under the circumstances after
receipt of such notice to make any such adjustment.
2.6. The Fund currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it may
<PAGE>
make such payments in the future. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have its
Board of Trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
2.7. The Underwriter represents and warrants that it is a member in good
standing of the National Association of Securities Dealers, Inc., ("NASD")
and is registered as a broker-dealer with the SEC. The Underwriter further
represents that it will sell and distribute the Fund shares in accordance
with all applicable federal and state securities laws, including without
limitation the 1933 Act, the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly existing
under the laws of Massachusetts and that it does and will comply with
applicable provisions of the 1940 Act.
2.9. The Underwriter represents and warrants that the Fund's Adviser, OpCap
Advisors, is and shall remain duly registered under federal securities laws
and that the Adviser will perform its obligations to the Fund in accordance
with the laws of Massachusetts and any applicable state and federal
securities laws.
2.10. The FUND AND UNDERWRITER REPRESENT AND WARRANT that all of their
directors, officers, employees, investment advisers, and other
individuals/entities having access to the funds and/or securities of the Fund
are and continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal
<PAGE>
coverage as required currently by Rule 17g-(1) adopted pursuant to the 1940
Act or related provisions as may be promulgated from time to time. The
aforesaid Bond includes coverage for larceny and embezzlement and is issued
by a reputable bonding company.
2.11. The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals/entities
dealing with the money and/or securities of the Fund are covered by a blanket
fidelity bond or similar coverage for the benefit of the Fund,- in an amount
not less than $5 million. The aforesaid includes coverage for larceny and
<PAGE>
embezzlement and is issued by a reputable bonding company. The Company agrees
to make all reasonable efforts to see that this bond or another bond
containing these provisions is always in effect, and agrees to notify the
Fund and the Underwriter in the event that such coverage no longer applies.
ARTICLE M. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company, at the Company's expense,
with as many copies of the Fund's current prospectus or, if requested by the
Company, a version of the Fund's prospectus that includes only the Portfolios
of the Fund that are used to fund the Company's contracts, as the Company may
reasonably request for use with prospective contractowners and applicants.
The Underwriter shall print and distribute, at the Fund's or Underwriter's
expense, as many copies of said prospectus as necessary for distribution to
existing contractowners or participants. If requested by the Company in lieu
thereof, the Fund shall provide such documentation including a final copy of
a current prospectus set in type at the Fund's expense and other assistance
as is reasonably necessary in order for the Company at least annually (or
more frequently if the Fund prospectus is amended more frequently) to have
the new prospectus for the Contracts and the Fund's new prospectus printed
together in one document. In such case the Fund shall bear its share of
expenses as described above.
3.2. The Fund's prospectus shall state that the Statement of Additional
Information for the Fund is available from the Underwriter or alternatively
from the
<PAGE>
Company (or, in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund), and the Underwriter (or the Fund)
shall provide such Statement, at its expense, to the Company-and to any owner
of or participant under a Contract who requests such Statement or, at the
Company's expense, to any prospective contractowner and applicant who
requests such statement.
3.3. The Fund, at its expense, shall provide the Company with copies of its
proxy material, if any, reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require and
shall bear the costs of distributing them to existing contractowners or
participants.
3.4. If and to the extent required by law the Company shall:
(ii) solicit voting instructions from contractowners or participants;
(iii) vote the Fund shares held in an Account in accordance with instructions
received from contractowners or participants; and vote Fund shares held in an
Account for which no timely instructions have been received, in the same
proportion as Fund shares of such Portfolio for which instructions have been
received from the Company's contractowners or participants; so long as and to
the extent THAT THE SEC CONTINUES TO INTERPRET the 1940 Act to require pass
through voting privileges for variable contractowners. The Company reserves
the right
<PAGE>
to vote Fund shares held in any segregated asset account in its own right, to
the extent permitted by law. Participating Insurance Companies shall be
responsible for assuring that each of their separate accounts participating
in the Fund calculates voting privileges in a manner consistent with other
Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders, and in particular as required, the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of
that Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the SEC interpretation of the
requirements of Section 16(a) with respect to periodic elections of directors
and with whatever rules the Commission may promulgate with respect thereto.
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to the Fund
or the Underwriter, each piece of sales literature or other promotional
material in which the Fund or the Fund's adviser or the Underwriter is named,
at least fifteen business days prior to its use. No such material shall be
used if the Fund or the Underwriter reasonably objects in writing to such use
within ten business days after receipt of such material.
4.2. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund in connection with
the sale of
<PAGE>
the Contracts other than the information or representations contained in the
registration statement or prospectus for the Fund shares, as such
registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or by the
Underwriter, except with the permission of the Fund or the Underwriter. The
Fund and the Underwriter agree to respond to any request for approval on a
prompt and timely basis.
4.3. The Fund or the Underwriter shall furnish, or shall cause to be
furnished, to the Company or its designee, each piece of sales literature or
other promotional material in which the Company or its separate account is
named, at least fifteen business days prior to its use. No such material
shall be used if the Company reasonably objects in writing to such use within
ten business days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information or make any
representations on behalf of the Company or concerning the Company, each
Account, or the Contracts-other than the information or representations
contained in a registration statement or prospectus for the Contracts, as
such registration statement and prospectus may be amended or supplemented
from time to time, or IN PUBLISHED REPORTS for each Account which are in the
public domain or approved by the Company for distribution to contractowners
or participants, or in sales
<PAGE>
literature or other promotional material approved by the Company, except with
the permission of the Company. timely basis. The Company agrees to respond to
any request for approval on a prompt and
4.5. The Fund will provide to the Company at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, proxy statements, sales literature and other promotional materials,
applications for exemptions, requests for no-action LETTERS, AND ALL
AMENDMENTS TO ANY OF THE above, that relate to the Fund or its shares, within
20 days after the filing of such document with the SEC or other regulatory
authorities.
4.6. The Company will provide to the Fund at least one complete copy of all
registration statements, prospectuses, statements of additional information,
reports, solicitations for voting instructions, sales literature and other
promotional materials, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to the Fund,
within 20 days after the filing of such document with the SEC or other
regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such
as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media),
<PAGE>
sales literature (I.E., any written communication distributed or made
generally available to customers- or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
registration statements, prospectuses, statements of additional information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under NASD rules, the 1940 Act or the 1933
Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other compensation to the
Company under this Agreement, except that if the Fund or any Portfolio adopts
and implements a plan pursuant to Rule 12b-1 to finance distribution
expenses, then, subject to obtaining any required exemptive orders or other
regulatory approvals, the Underwriter may make payments to the Company or to
the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund of this Agreement
shall be paid by the Fund to the extent permitted by law. All Fund shares
will be duly authorized for issuance and registered in accordance with
applicable federal law and to the extent deemed advisable by the Fund, in
accordance with applicable state law, prior to sale. The Fund shall bear the
expenses for the cost of registration and qualification of the Fund's shares,
<PAGE>
preparation and filing of the Fund's prospectus and registration statement,
Fund proxy materials and reports, setting in-type, printing and distributing
the prospectuses, the proxy materials and reports to existing shareholders
and contractowners, the preparation of all statements and notices required by
any federal or state law, all taxes on the issuance or transfer of the Fund's
shares, and any expenses permitted to be paid or assumed by the Fund pursuant
to a plan, if any, under Rule 12b- I under the 1940 Act.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in such a
manner as to ensure that the Contracts will be treated as variable contracts
under the Internal Revenue Code and the regulations issued thereunder.
Without limiting the scope of the foregoing, the Fund will comply with
Section 817(h) of the Internal Revenue Code and Treasury Regulation 1.817-5,
relating to the diversification requirements for variable annuity, endowment,
or life insurance contracts and any amendments or other modifications to such
Section or Regulations in accordance with guidelines provided by the Company
prior to the execution of this Agreement and as necessary thereafter. In the
event of a breach of this Article VI by the Fund, it will take all reasonable
steps (a) to notify the Company of such breach and (b) to adequately
diversify the Fund so as to achieve compliance with the grace period afforded
by Treasury Regulation 1.817-5.
<PAGE>
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board of Trustees of the Fund (the "Fund Board") will monitor the
Fund for the existence of any material irreconcilable conflict among the
interests of the contractowners of all separate accounts investing in the
Fund. An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in- applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of any Portfolio
are being managed; (e) a difference in voting instructions given by
Participating Insurance Companies or by variable annuity contract and
variable life insurance contractowners; or (f) a decision by an insurer to
disregard the voting instructions of contractowners. The Board shall promptly
inform the Company if it determines that an irreconcilable material conflict
exists and the implications thereof. A majority of the Fund Board shall
consist of persons who are not "interested" persons of the Fund.
7.2. The Company has reviewed a copy of the Mixed and Shared Funding
Exemptive Order, and in particular, has reviewed the conditions to the
requested relief set forth therein. As set forth in the Mixed and Shared
Funding Exemptive Order, the Company will report
<PAGE>
any potential or existing conflicts of which it is aware to the Fund Board.
The Company agrees to assist the Fund Board in carrying out its
responsibilities under the Mixed and Shared Funding Exemptive Order, by
providing the Fund Board upon its request with all information reasonably
necessary for the Fund Board to consider any issues raised. This includes,
but is not limited to, an obligation by the Company to inform the Fund Board
whenever contractowner voting instructions are disregarded. The Fund Board
shall record in its minutes or other appropriate records, all reports
received by it and all action with regard to a conflict.
7.3. If it is determined by a majority of the Fund Board, or a majority of
its disinterested Directors, that an irreconcilable material conflict exists,
the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested Directors), take whatever steps are necessary to remedy
or eliminate the irreconcilable material conflict, up to and including: (1)
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting- such assets in a different
investment medium, including (but not limited to) another Portfolio of the'
Fund, or submitting the question whether such segregation should be
implemented to a vote of all affected contractowners and, as appropriate,
segregating the assets of any appropriate group (Le., variable annuity
contractowners or variable life insurance contractowners, of one or more
Participating Insurance Companies) that votes in favor of such
<PAGE>
segregation, or offering to the affected contractowners the option of making
such a change; and (2) establishing a new registered management investment
company or managed separate account.
7.4. If the Company's disregard of voting instructions could conflict with
the majority of contractowner voting instructions, and the Company's judgment
represents a minority position or would preclude a majority vote, the Company
may be required, at the Fund's election, to withdraw the Account's investment
in the FUND AND TERMINATE THIS AGREEMENT with respect to such Account. Any
such withdrawal and termination must take place within 90 days after the Fund
gives written notice to the Company that this provision is being implemented.
Until the end of such 90 day period the Underwriter and Fund shall continue
to accept and implement orders by the Company for the purchase (and
redemption) of shares of the Fund.
7.5. If a particular state insurance regulator's decision applicable to the
Company conflicts with the majority of other state insurance regulators, then
the Company will withdraw the Account's investment in the Fund and terminate
this Agreement with respect to such Account. Any such withdrawal and
termination must take place within 90 days after the Fund gives written
notice to the Company that this provision is being implemented. Until the end
of such 90 day period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares
of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a majority
of the
<PAGE>
disinterested members of the Fund Board shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no
event will the Fund or the Underwriter be required to establish a new funding
medium for the Contracts. The Company shall not be required by Section 7.3
to establish a new funding medium for the Contracts if an offer to do so has
been declined by vote of a majority of contractowners materially adversely
affected by the irreconcilable material conflict.
7.7. The Company shall from time to time submit to the Fund Board such
reports, materials or data as the Fund Board may reasonably request so that
the Fund Board may fully carry out the duties imposed upon it as delineated
in the Mixed and Shared Funding Exemptive Order, and said reports, materials
and data shall be submitted more frequently if deemed appropriate by the Fund
Board.
7.8. If and to the extent that Rule 6e-2 and Rule 6e-3 (T) are amended, or
Rule 6e-3 is adopted, to provide exemptive relief from any provision of the
Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Mixed and Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Mixed and
Shared Funding Exemptive Order, (a) the Fund and/or the Participating
Insurance Companies, as appropriate, shall take such steps as may be
necessary to comply with Rules 6e-2 and 6e-3 (T), as amended, and Rule 6e-3,
as adopted, to the extent such
<PAGE>
rules are applicable; and (b) Sections 3.4, 3.5, 7.1, 7.2, 7.3, 7.4, and 7.5
of this Agreement shall continue in effect only to the extent that terms and
conditions substantially identical to such Sections are contained in such
Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY (a) The Company agrees to indemnify and
hold harmless the Fund, the Underwriter, and each of the Fund's or the
Underwriter's directors, officers, employees or agents and each person, if
any, who controls or is associated with the Fund or the Underwriter within
the meaning of such terms under the federal securities laws (collectively,
the "indemnified parties" for purposes of this Section 8. 1) against any and
all losses, claims, damages, liabilities (including amounts paid in
settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the indemnified parties may
become sub ect under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions
in respect thereof) or settlements: (i) arise out of or are based upon any
untrue statements or alleged untrue statements of any material fact contained
in the registration statement, prospectus or statement of additional
information for the Contracts or contained in the Contracts or sales
literature or other promotional material for the Contracts (or any amendment
or supplement to any of the foregoing), or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading
in light of the circumstances in which they were made; provided that this
agreement to indemnify shall not apply as to any indemnified party if such
statement or omission or such alleged statement or omission
<PAGE>
was made in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Fund for use in the registration statement,
prospectus or statement of additional information for the Contracts or in the
Contracts or sales literature or other promotional material for the Contracts
(or any amendment or supplement to any of the foregoing) or otherwise for use
in connection with the sale of the Contracts or Fund shares; or
<PAGE>
(ii) arise out of or as a result of untrue statements or representations by
or on behalf of the Company (other than statements or representations
contained in the Fund registration statement, Fund prospectus, Fund statement
of additional information or sales literature or other promotional material
of the Fund not supplied by the Company or persons under its control) or
willful malfeasance, bad faith or gross negligence of the Company or persons
under its control, with respect to the sale or distribution of the Contracts
or Fund shares; or arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund registration statement,
Fund prospectus, statement of additional information or sales literature or
other promotional material of the FUND OR ANY AMENDMENT thereof or supplement
thereto or the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made, if such a
statement or omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the Company or persons
under its control; or arise as a result of any failure by the Company to
provide the SERVICES AND FURNISH the materials or to make any payments under
the terms of this Agreement; or
(v) arise out of any material breach of any representation and/or warranty
made by the Company in this Agreement or arise out of or result from any
other material breach by the Company of this Agreement; except to the extent
provided in Sections 8. 1 (b) and 8.3 hereof This indemnification shall be in
addition to any liability which the Company may otherwise have. (b) No party
shall be entitled to indemnification if such loss, claim, damage, liability
or litigation is due to the willful misfeasance, bad faith, gross negligence
or reckless disregard of duty by the party seeking indemnification.
(c) The indemnified parties will promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or
<PAGE>
sale of THE Fund shares or the Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter, on its own behalf and on behalf of the Fund, agrees to
indemnify and hold harmless the Company and each of its directors, officers,
employees or agents and each person, if any, who controls or is associated
with the Company within the meaning of such terms under the federal
securities laws (collectively, the "indemnified parties" for purposes of this
Section 8.2) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of the
Underwriter) or litigation (including reasonable legal and other expenses) to
which the indemnified parties may become subject under any statute,
regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or expenses (or actions in respect thereof) or
settlements:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement,
prospectus or statement of additional information for the Fund or sales
literature or other promotional material of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances in which they were made;
provided that this agreement to indemnify shall not apply as to any
indemnified party if such statement or omission or such alleged statement
or omission was made in reliance upon and in conformity 'with information
furnished to the Underwriter or Fund by or on behalf of the Company for
use in the registration statement, prospectus or statement of additional
information for the Fund or in sales literature or other promotional
material of the Fund (or any amendment or supplement to any of the
foregoing) or otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of untrue statements or representations
(other than statements or representations contained in the Contracts
<PAGE>
or in the Contract or Fund registration statement, the Contract or Fund
prospectus, statement of additional information, or sales literature or
other promotional material for the Contracts or of the Fund not supplied
by the Underwriter or the Fund or persons under the control of the
Underwriter or the Fund respectively) or willful malfeasance, bad faith
or gross negligence of the Underwriter or the Fund or persons under the
control of the Underwriter or the Fund respectively, with respect to the
sale or distribution of the Contracts or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus,
statement of additional information or sales literature or other
promotional material covering the Contracts (or any amendment thereof or
supplement thereto), or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statement or statements therein not misleading in light of the
circumstances in which they were made, if such statement or omission was
made in reliance upon and in conformity with information furnished to the
Company by or on behalf of the Underwriter or the Fund or persons under
the control of the Underwriter or the Fund; or
(iv) arise as a result of any failure by the Fund to provide the services AND
FURNISH THE MATERIALS UNDER THE terms of this Agreement (including a
failure, whether unintentional or in good faith or otherwise, to comply
with the diversification requirements and procedures related thereto
specified in Article VI of this Agreement except if such failure is a
result of the Company's failure to comply with the notification
procedures specified in Article VI); or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Underwriter or the Fund in this Agreement or
arise out of or result from any other material breach of this Agreement
by the Underwriter or the Fund;
except to the extent provided in Sections 8.2(b) and 8.3 hereof This
indemnification shall be in addition to any liability which the Underwriter
may otherwise have.
(b) No party shall be entitled to indemnification if such loss, claim,
damage, liability or litigation is due to the willful misfeasance, bad faith,
gross negligence or reckless disregard -of duty by the party seeking
indemnification.
(c) The indemnified parties will promptly notify the Underwriter of the
commencement of any litigation or Proceedings against them in connection with
the issuance or
<PAGE>
sale of THE Contracts or the operation of the Account.
8.3. INDEMNIFICATION PROCEDURE
Any person obligated to provide indemnification under this Article VIII
("indemnifying party" for the purpose of this Section 8.3) shall not be
liable under the indemnification provisions of this Article VIII with respect
to any claim made against a party entitled to indemnification under this
Article VIII ("indemnified party" for the purpose of this Section 8.3) unless
such indemnified party shall have notified the indemnifying party in writing
within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon
such indemnified party (or after such party shall have received notice of
such service on any designated agent), but failure to notify the indemnifying
party of any such claim shall not relieve the indemnifying party from any
liability which it may have to the indemnified party against whom such action
is brought under the indemnification provision of this Article VIII, except
to the extent that the failure to notify results in the failure of actual
notice to the indemnifying party and such indemnifying party is damaged
solely as a result of failure to give such notice. In case any such action is
brought against the indemnified party, the indemnifying party will be
entitled to participate, at its own expense, in the defense thereof The
indemnifying party also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
indemnifying party to
<PAGE>
the indemnified party of the indemnifying party's election to assume the
defense thereof, the indemnified party shall bear the fees and expenses of
any additional counsel retained by it, and the indemnifying party will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense there of other than reasonable costs of investigation, unless (1) the
indemnifying party and the indemnified party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both parties by the
same counsel would be inappropriate due to actual or potential differing
interests between them. The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party from and
against any loss or liability by reason of such settlement or judgment. A
successor by law of the parties to this Agreement shall be entitled to the
benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
8.4. CONTRIBUTION
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in this Article VIII is due in
accordance with its terms
<PAGE>
but for any reason is held to be unenforceable with respect to a party
entitled to indemnification ("indemnified party" for purposes of this Section
8.4) pursuant to the terms of this Article VIII, then each party obligated to
indemnify pursuant to the terms of this Article VIII shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities and litigations in such proportion as is
appropriate to reflect the relative benefits received by the parties to this
Agreement in connection with the offering of Fund shares to the Account and
the acquisition, holding or sale of Fund shares by the Account, or if such
allocation is not permitted by applicable law, in such proportions as is
appropriate to reflect the relative net benefits referred to above but also
the relative fault of the parties to this Agreement in connection with any
actions that lead to such losses, claims, damages, liabilities or
litigations, as well as any other relevant equitable considerations.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of New York.
9.2. This Agreement shall be subject to the provisions of the 1933, 1934 and
1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may
grant (including, but not limited to the Mixed and Shared Funding Exemptive
Order) and the terms hereof shall be interpreted and
<PAGE>
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon six months' advance written notice to
the other parties unless otherwise agreed in a separate written agreement
among the parties; or
(b) at the option of the Company if shares of the Portfolios delineated in
Schedule 2 are not reasonably available to meet the requirements of the
Contracts as determined by the Company; or
(c) at the option of the Fund upon institution of formal proceedings against
the Company by the NASD, the SEC, the insurance commission of any state or
any other regulatory body regarding the Company's duties under this Agreement
or related to the sale of the Contracts, the administration of the Contracts,
the operation of the Account, or the purchase of the Fund shares, which the
Fund reasonably believes would have a material adverse effect on the
Company"s ability, to perform its obligations under this Agreement; or
(d) AT THE OPTION OF THE COMPANY UPON INSTITUTION of formal proceedings
against the Fund or the Underwriter by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body, which the
Company reasonably believes would have a material adverse effect on the
Fund's or the Underwriter's ability to perform its obligations under this
Agreement; or
<PAGE>
(e) at the option of the Company or the Fund upon receipt of any necessary
regulatory approvals and/or the vote of the contractowners having an interest
in the Account (or any subaccount) to substitute the shares of another
investment company for the corresponding Portfolio shares of the Fund in
accordance with the terms of the Contracts for which those Portfolio shares
had been selected to serve as the underlying investment media. The Company
will give 30 days prior written notice to the Fund of the date of any
proposed vote or other action taken to replace the Fund's shares; or
(f) at the option of the Company or the Fund upon a determination by a
majority of the Fund Board, or a majority of the disinterested Fund Board
members, that an irreconcilable material conflict exists among the interests
of (i) all contractowners of variable insurance products of all separate
accounts or (ii) the interests of the Participating Insurance Companies
investing in the Fund as delineated in Article VII of this Agreement; or
(g) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code,
or under any successor or similar provision, or if the Company reasonably
believes that the Fund may fall to so qualify; or
(h) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Article VI hereof, or
(i) at the option of any party to this Agreement, upon another party's
material breach of any provision of this Agreement; or
<PAGE>
(j) at the option of the Company, if the Company determines in its sole
judgment exercised in GOOD FAITH, THAT EITHER THE Fund or the Underwriter has
suffered a material adverse change in its business, operations or financial
condition since the date of this Agreement; or
(k) at the option of the Fund or Underwriter, if the Fund or Underwriter
respectively, shall determine in its sole judgment exercised in good faith,
that the Company has suffered a material adverse change in its business,
operations or financial condition since the date of this Agreement; or
(l) at the option of the Fund in the event any of the Contracts are not
issued or sold in accordance with applicable federal and/or state law.
Termination shall be effective immediately upon such occurrence without
notice.
10.2. NOTICE REQUIREMENT
(a) In the event that any termination of this Agreement is based upon the
provisions of Article VII, such prior written notice shall be given in
advance of the effective date of termination as required by such provisions.
(b) In the event that any termination of this Agreement is based upon the
provisions of Sections 10.1(b) - (d) or 10.1(g) - (i), prompt written notice
of the election to terminate this Agreement for cause shall be furnished by
the party terminating the Agreement to the non-terminating parties, with said
termination to be effective upon receipt of such notice by the
non-terminating parties.
<PAGE>
(c) In the event that any termination of this Agreement is based upon the
provisions of Sections 10.10) or 10.1(k), prior written notice of the
election to terminate this Agreement for cause shall be furnished by the
party terminating this Agreement to the non terminating parties. Such prior
written notice shall be given by the party terminating this Agreement to the
non-terminating parties at least 30 days before the effective date of
termination.
10.3. It is understood and agreed that the right to terminate this Agreement
pursuant to Section 10. 1 (a) may be exercised for any reason or for no
reason.
10.4. EFFECT OF TERMINATION
(a) Notwithstanding any termination of this Agreement pursuant to Section
10. 1 of this Agreement, and subject to Section 1.3 of this Agreement, the
Company may require the Fund and the Underwriter to, continue to make
available additional shares of the Fund for so long after the termination of
this Agreement as the Company desires pursuant to the terms and conditions of
this Agreement as provided in paragraph (b) below, for all Contracts in
effect on the effective date of termination of this Agreement (hereinafter
referred to as "Existing Contracts"). Specifically, without limitation, the
owners of the Existing Contracts shall be permitted to reallocate investments
in the Fund, redeem investments in the Fund and/or invest in the Fund upon
the making of additional purchase payments under the Existing Contracts. The
parties agree that this Section 10.4 shall not apply to any terminations
under Article VII and the effect of such Article VII terminations shall be
governed by Article VII of this Agreement.
<PAGE>
(b) If shares of the Fund continue to be made available after termination of
this Agreement pursuant to this Section 10.4, the provisions of this
Agreement shall remain in effect except for Section 10.1 (a) and thereafter
the Fund, the Underwriter, or the Company may terminate the Agreement, as so
continued pursuant to this Section 10.4, upon written notice to the other
party, such notice to be for a period that is reasonable under the
circumstances but, if given by the Fund or Underwriter, need not be for more
than 90 days.
10.5. Except as necessary to implement contractowner initiated or approved
transactions, or as required by state insurance laws or regulations, the
Company shall not redeem Fund shares attributable to the Contracts (as
opposed to Fund shares attributable to the Company's assets held in the
Account), and the Company shall not prevent contractowners from allocating
payments to a Portfolio that was otherwise available under the Contracts,
until 90 days after the Company shall have notified the Fund or Underwriter
of its intention to do so.
ARTICLE XI. NOTICES
Any notice shall be deemed duly given only if sent by hand, evidenced by
written receipt or by certified mail, return receipt requested, to the other
party at the address of such party set forth below or at such other address
as such party may from time to time specify in writing to the other party.
All notices shall be deemed given three business days after the date received
or rejected by the addressee.
If to the Fund:
<PAGE>
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
Kelly D. Clevenger
The Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, IN 46802-3 506
If to the Underwriter:
Mr. Thomas E. Duggan
Secretary
OCC Distributors
200 Liberty Street
New York, NY 10281
ARTICLE XII. MISCELLANEOUS
12.1. All persons dealing with the Fund must look solely to the property of
the Fund for the enforcement of any claims against the Fund as neither the
Directors, officers, agents or shareholders assume any personal liability for
obligations entered into on behalf of the Fund.
12.2. Subject to law and regulatory authority, each party hereto shall treat
as confidential all information reasonably identified as such in writing by
any other party hereto (including without limitation the names and addresses
of the owners of the Contracts) and, except as contemplated by this
Agreement, shall not disclose, disseminate or utilize such confidential
information until such time as it may come into the public domain without the
express prior written consent of the affected party.
12.3. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect
<PAGE>
their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
12.6. This Agreement shall not be assigned by any party hereto without the
prior written consent of all the parties.
12.7. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit each other and such
authorities reasonable access to its books and records in connection with any
investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
12.8. Each party represents that the execution and delivery of this Agreement
and the consummation of the transactions contemplated herein have been duly
authorized by all necessary corporate or trust action, as applicable, by such
party and when so executed and delivered this Agreement will be the valid and
binding obligation of such party enforceable in accordance with its terms.
12.9. The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts, the
Accounts or the Portfolios of the Fund.
IN" WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed in its name and behalf by its duly authorized representative as
of the date and
<PAGE>
year first WRITTEN above.
SEAL
SEAL
COMPANY
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
FUND:
OCC ACCUMULATION TRUST
By:
UNDERWRITER:
OCC DISTRIBUTORS
By:
SCHEDULE I
Participation Agreement
Among
OCC Accumulation Trust, The Lincoln National Life Insurance Company
and
OCC Distributors
The following separate accounts of The Lincoln National Life Insurance
Company are permitted in accordance with the provisions of this Agreement to
invest in Portfolios of the Fund shown in Schedule 2:
Lincoln Life Flexible Premium Variable Life Separate Account M
Lincoln Life Flexible Premium Variable Life Separate Account R
May 15, 1998
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, The Lincoln National Life Insurance Company
and
<PAGE>
OCC Distributors
The Separate Account(s) shown on Schedule I may invest in the following
Portfolios of the OCC Accumulation Trust:
Global Equity Portfolio
Managed Portfolio
May 15, 1998
S:\LEGALDEP\FUNDS\ASSET\WORD\PARTAGR2.LNL
<PAGE>
AMENDMENT TO THE PARTICIPATION AGREEMENT
DATED MAY 15, 1998
BY AND AMONG
OCC ACCUMULATION TRUST,
OCC DISTRIBUTORS and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
This is an amendment to the May 15, 1998 Participation Agreement
("Agreement") among OCC Accumulation Trust, OCC Distributors, and The Lincoln
National Life Insurance Company.
The following separate accounts of The Lincoln National Life Insurance
Company are permitted in accordance with the provisions of this Agreement to
invest In Portfolios of the Fund shown in Schedule 2:
Lincoln Life Flexible Premium Variable Life Separat e Acount M Lincoln Life
Premium Variable Life Separate Account R Lincoln Life Variable Annuity Account N
October 7, 1998
S:\LEGALDEP\FUNDS\ASSET\WORD\AMEND-98.LNL
OCC ACCUMULATION TRUST
By: NameTitle:
OCC DISTRIBUTORS
By: Name: Title:
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: Name: Title:
<PAGE>
Exhibit 10
Consent of Ernst & Young LLP, Independent Auditors
We consent to the reference to our firm under the caption "Independent
Auditors" in the Post Effective Amendment No. 2 to the Registration Statement
(Form N-4 No. 333-40937) and the related Statement of Additional Information
appearing therein and pertaining to Lincoln Life Variable Annuity Account N,
and to the use therein of our reports dated (a) February 1, 1999, with
respect to the statutory-basis financial statements of The Lincoln National
Life Insurance Company, and (b) March 30, 1999, with respect to the financial
statements of Lincoln Life Variable Annuity Account N.
/s/ ERNST & YOUNG LLP
Fort Wayne, Indiana
April 14, 1999
<PAGE>
<TABLE>
<CAPTION>
<S><C>
ORGANIZATIONAL CHART OF THE
LINCOLN NATIONAL INSURANCE HOLDING COMPANY SYSTEM
All the members of the holding company system are corporations, with
the exception of, Delaware Distributors, L.P and Founders CBO, L.P.
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| ---------------------------------------------
|--| Lincoln National Management Corporation |
| | 100% - Pennsylvania - Management Company |
| ---------------------------------------------
| ---------------------------------------------
|--| City Financial Partners Ltd. |
| | 100% - England/Wales - Distribution of life |
| | assurance & pension products |
| ---------------------------------------------
| ------------------------------------------------
|--| LNC Administrative Services Corporation |
| | 100% - Indiana - Third Party Administrator |
| ------------------------------------------------
| ---------------------------------------------------
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| |100% - Indiana - Insurance Agency |
| ---------------------------------------------------
| | ---------------------------------
| |--| The Financial Alternative, Inc. |
| | | 100% - Utah- Insurance Agency |
| | ---------------------------------
| | ---------------------------------------
| |--| Financial Alternative Resources, Inc. |
| | | 100% - Kansas - Insurance Agency |
| | ---------------------------------------
| | -----------------------------------------
| |--| Financial Choices, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| | -----------------------------------------
| | -----------------------------------------------
| | | Financial Investment Services, Inc. |
| |--| (formerly Financial Services Department, Inc.)|
| | | 100% - Indiana - Insurance Agency |
| | -----------------------------------------------
| | -----------------------------------------
| | | Financial Investments, Inc. |
| |--| (formerly Insurance Alternatives, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| | -----------------------------------------
| | -------------------------------------------
| |--| The Financial Resources Department, Inc. |
| | | 100% - Michigan - Insurance Agency |
| | -------------------------------------------
| | -----------------------------------------
| |--| Investment Alternatives, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| | -----------------------------------------
| | --------------------------------------
| |--| The Investment Center, Inc. |
| | | 100% - Tennessee - Insurance Agency |
| | --------------------------------------
| | --------------------------------------
| |--| The Investment Group, Inc. |
| | | 100% - New Jersey - Insurance Agency |
--------------------------------------
<PAGE>
-------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
-------------------------------
| ---------------------------------------------------
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| |100% - Indiana - Insurance Agency |
| ---------------------------------------------------
| | ------------------------------------
| |--| Personal Financial Resources, Inc. |
| | | 100% - Arizona - Insurance Agency |
| | ------------------------------------
| | ----------------------------------------
| |--| Personal Investment Services, Inc. |
| | 100% - Pennsylvania - Insurance Agency |
| ----------------------------------------
| -------------------------------------------
|--| LincAm Properties, Inc. |
| | 50% - Delaware - Real Estate Investment |
| -------------------------------------------
| ----------------------------------------------
| | Lincoln Life and Annuity Distributors, Inc. |
|--| (formerly Lincoln Financial Group, Inc.) |
| | 100% - Indiana - Insurance Agency |
| ----------------------------------------------
| | ----------------------------------------
| |--| Lincoln Financial Advisors Corporation |
| | | (formerly LNC Equity Sales Corporation)|
| | | 100% - Indiana - Broker-Dealer |
| | ----------------------------------------
| | -------------------------------------------------------------
| | |Corporate agencies: Lincoln Life and Annuity Distributors, |
| | |Inc. ("LLAD")has subsidiaries of which LLAD owns from |
| | |80%-100% of the common stock (see Attachment #1). These |
| | |subsidiaries serve as the corporate agency offices for the |
| | |marketing and servicing of products of The Lincoln National |
| | |Life Insurance Company. Each subsidiary's assets are less |
| | |than 1% of the total assets of the ultimate controlling |
| | |person. |
| | -------------------------------------------------------------
| | ------------------------------------------------
| |--| Professional Financial Planning, Inc. |
| | 100% - Indiana - Financial Planning Services |
| ------------------------------------------------
| ---------------------------------------
|--| Lincoln Life Improved Housing, Inc. |
| | 100% - Indiana |
| ---------------------------------------
|
| -----------------------------------------------
|--| Lincoln National (China) Inc. |
| | 100% - Indiana - China Representative Office |
| -----------------------------------------------
|
| ---------------------------------------------
|--| Lincoln National Intermediaries, Inc. |
| | 100% - Indiana - Reinsurance Intermediary |
| ---------------------------------------------
|
| --------------------------------------------------
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| |
| | --------------------------------------------
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
--------------------------------------------
<PAGE>
-------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
-------------------------------
| --------------------------------------------------
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| | --------------------------------------------
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | --------------------------------------------
| | | ----------------------------------
| | |--|Delaware Management Holdings, Inc.|
| | | |100% - Delaware - Holding Company |
| | | ----------------------------------
| | | | ------------------------------------
| | | |--| DMH Corp. |
| | | | 100% - Delaware - Holding Company |
| | | ------------------------------------
| | | | ----------------------------------------
| | | ---| Delaware International Advisers Ltd. |
| | | | 81.1% - England - Investment Advisor |
| | | ----------------------------------------
| | | --------------------------------------
| | |--| Delaware Management Trust Company |
| | | | 100% - Pennsylvania - Trust Service |
| | | --------------------------------------
| | | | -------------------------------------------------
| | | |__| Delaware International Holdings, Ltd. |
| | | | | 100% - Bermuda - Investment Advisor |
| | | | -------------------------------------------------
| | | | | --------------------------------------
| | | | |--| Delaware International Advisers, Ltd.|
| | | | | 18.9% - England - Investment Advisor |
| | | | --------------------------------------
| | | | -------------------------------------------------
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | -------------------------------------------------
| | | | | ---------------------------------------
| | | | |--| Delaware Management Company, Inc. |
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | ---------------------------------------
| | | | | | ------------------------------------------------------
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & Broker/Dealer |
| | | | | | | 1% Equity-Delaware Capital Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, Inc. |
| | | | | | ------------------------------------------------------
| | | | | | ------------------------------------
| | | | | |--| Founders Holdings, Inc. |
| | | | | | | 100% - Delaware - General Partner |
| | | | | | ------------------------------------
| | | | | | | -----------------------------------------
| | | | | | |--| Founders CBO, L.P. |
| | | | | | | 1% - Delaware - Investment Partnership |
| | | | | | | 99% held by outside investors |
| | | | | | -----------------------------------------
| | | | | | | ------------------------------------------
| | | | | | |--|Founders CBO Corporation |
| | | | | | | |100%-Delaware-Co-Issuer with Founders CBO |
| | | | | | | ------------------------------------------
<PAGE>
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| --------------------------------------------------
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| | --------------------------------------------
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | --------------------------------------------
| | | ----------------------------------
| | |--|Delaware Management Holdings, Inc.|
| | | |100% - Delaware - Holding Company |
| | | ----------------------------------
| | | | -----------------------------------
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | | -----------------------------------
| | | | -------------------------------------------------
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | -------------------------------------------------
| | | | | ------------------------------------
| | | | |--| Delaware Distributors, Inc. |
| | | | | | 100% - Delaware - General Partner |
| | | | | ------------------------------------
| | | | | | -------------------------------------------------------
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & Broker/Dealer |
| | | | | | 1% Equity-Delaware Capital Management, Inc. |
| | | | | | 1% Equity-Delaware Distributors, Inc. |
| | | | | -------------------------------------------------------
| | | | | -----------------------------------------------
| | | | |--| Delaware Capital Management, Inc. |
| | | | | |(formerly Delaware Investment Counselors, Inc.)|
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | -----------------------------------------------
| | | | | | -----------------------------------------------------------
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & Broker/Dealer |
| | | | | | | 1% Equity-Delaware Capital Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, Inc. |
| | | | | -----------------------------------------------------------
| | | | | -----------------------------------------------------
| | | | |--| Delaware Service Company, Inc. |
| | | | | | 100%-Delaware-Shareholder Services & Transfer Agent |
| | | | | -----------------------------------------------------
| | | | | -------------------------------------------------
| | | | |__| Delaware Investment & Retirement Services, Inc. |
| | | | | | 100% - Delaware - Registered Transfer Agent |
| | | | | -------------------------------------------------
| | | -----------------------------------------
| | |--| Lynch & Mayer, Inc. |
| | | | 100% - Indiana - Investment Adviser |
| | | -----------------------------------------
| | | | ---------------------------------------
| | | |--| Lynch & Mayer Securities Corp. |
| | | | 100% - Delaware - Securities Broker |
| | | ---------------------------------------
| | | ----------------------------------------------------
| | | | Vantage Global Advisors, Inc. |
| | |--| (formerly Modern Portfolio Theory Associates, Inc.)|
| | | | 100% - Delaware - Investment Adviser |
----------------------------------------------------
<PAGE>
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| --------------------------------------------------
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| --------------------------------------------------
| | -----------------------------------------------------------
| | | Lincoln Investment Management, Inc. |
| |--| (formerly Lincoln National Investment Management Company) |
| | | 100% - Illinois - Mutual Fund Manager and |
| | | Registered Investment Adviser |
| | -----------------------------------------------------------
| -----------------------------------------------
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| -----------------------------------------------
| | --------------------------------------------------
| |--|AnnuityNet, Inc. |
| | |100% - Indiana - Distribution of annuity products |
| | --------------------------------------------------
| | | -------------------------------------
| | |--| AnnuityNet Insurance Agency, Inc. |
| | | | 100% - Indiana - Insurance Agency |
| | -------------------------------------
| | -------------------------------------------
| |--|Lincoln National Insurance Associates, Inc.|
| | |(fka Cigna Associates, Inc.) |
| | |100% - Connecticut - Insurance Agency |
| | -------------------------------------------
| | | --------------------------------------------------------
| | |--|Lincoln National Insurance Associates of Alabama, Inc. |
| | | |100% - Alabama - Insurance Agency |
| | | --------------------------------------------------------
| | | -------------------------------------------------------------
| | | | Lincoln National Insurance Associates of Massachusetts, Inc.|
| | | | (formerly Cigna Associates of Massachusetts, Inc.) |
| | |--| 100% - Massachusetts - Insurance Agency |
| | -------------------------------------------------------------
| | -------------------------------------------
| |--| Sagemark Consulting, Inc. |
| | | (fka Cigna Financial Advisors, Inc.) |
| | | 100% - Connecticut - Broker Dealer |
| | -------------------------------------------
| | -------------------------------------------
| |--| First Penn-Pacific Life Insurance Company |
| | | 100% - Indiana |
| | -------------------------------------------
| | -----------------------------------------------
| |--| Lincoln Life & Annuity Company of New York |
| | | 100% - New York |
| | -----------------------------------------------
| | ------------------------------------------------
| |--| Lincoln National Aggressive Growth Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------
| | -----------------------------------
| |--| Lincoln National Bond Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | -----------------------------------
| | --------------------------------------------------
| |--| Lincoln National Capital Appreciation Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | --------------------------------------------------
| | --------------------------------------------
| |--| Lincoln National Equity-Income Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | --------------------------------------------
| | ------------------------------------------------------
| | | Lincoln National Global Asset Allocation Fund, Inc. |
| |--| (formerly Lincoln National Putnam Master Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------------
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| -----------------------------------------------
| | ------------------------------------------------
| | | Lincoln National Growth and Income Fund, Inc. |
| |--| (formerly Lincoln National Growth Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| | ------------------------------------------------
| | --------------------------------------------------------
| |--| Lincoln National Health & Casualty Insurance Company |
| | | 100% - Indiana |
| | --------------------------------------------------------
| | -----------------------------------------------
| |--| Lincoln Re, S.A. |
| | | 1% Argentina - General Business Corp |
| | | (Remaining 99% owned by Lincoln National |
| | | Reassurance Company) |
| | -----------------------------------------------
| | -------------------------------------------
| |--| Lincoln National International Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | -------------------------------------------
| | ---------------------------------------
| |--| Lincoln National Managed Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | ---------------------------------------
| | --------------------------------------------
| |--| Lincoln National Money Market Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | --------------------------------------------
| | -----------------------------------------------
| |--| Lincoln National Social Awareness Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | -----------------------------------------------
| | -----------------------------------------------------
| |--| Lincoln National Special Opportunities Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| | -----------------------------------------------------
| | ------------------------------------------------------
| |--| Lincoln National Reassurance Company |
| | 100% - Indiana - Life Insurance |
| ------------------------------------------------------
| | -----------------------------------------------
| |--| Lincoln Re, S.A. |
| | | 99% Argentina - General Business Corp |
| | | (Remaining 1% owned by Lincoln National Health|
| | | & Casualty Insurance Company) |
| | -----------------------------------------------
| | -----------------------------------------------
| |--| Special Pooled Risk Administrators, Inc. |
| | 100% - New Jersey - Catastrophe Reinsurance |
| | Pool Administrator |
| -----------------------------------------------
| ---------------------------------------------------------
|--| Lincoln National Management Services, Inc. |
| | 100% - Indiana - Underwriting and Management Services |
| ---------------------------------------------------------
| ---------------------------------------
|--| Lincoln National Realty Corporation |
| | 100% - Indiana - Real Estate |
| ---------------------------------------
| -----------------------------------------------------------
|--| Lincoln National Reinsurance Company (Barbados) Limited |
| | 100% - Barbados |
| -----------------------------------------------------------
| ----------------------------------------------
|--| Lincoln National Reinsurance Company Limited |
| | (formerly Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
----------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| ----------------------------------------------
|--| Lincoln National Reinsurance Company Limited |
| | (formerly Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
| ----------------------------------------------
| | ---------------------------------------------------------
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 90% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 10% owned by Old Fort Ins. Co. Ltd.) |
| | ---------------------------------------------------------
| | --------------------------------------------------------
| | | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
| |--| 51% - Mexico - Reinsurance Underwriter |
| | (Remaining 49% owned by Lincoln National Corp.) |
| --------------------------------------------------------
| ---------------------------------------------
|--| Lincoln National Risk Management, Inc. |
| | 100% - Indiana - Risk Management Services |
| ---------------------------------------------
| ------------------------------------------------
|--| Lincoln National Structured Settlement, Inc. |
| | 100% - New Jersey |
| ------------------------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | -------------------------------------------------------
| |--| Allied Westminster & Company Limited |
| | | (formerly One Olympic Way Financial Services Limited) |
| | | 100% - England/Wales - Sales Services |
| | -------------------------------------------------------
| | --------------------------------------------------------
| |--| Culverin Property Services Limited |
| | | 100% - England/Wales - Property Development Services |
| | --------------------------------------------------------
| | ---------------------------------------------------------
| |--| HUTM Limited |
| | | 100% - England/Wales - Unit Trust Management (Inactive) |
| | ---------------------------------------------------------
| | --------------------------------------------
| |--| ILI Supplies Limited |
| | | 100% - England/Wales - Computer Leasing |
| | --------------------------------------------
| | ------------------------------------------------
| |--| Lincoln Financial Advisers Limited |
| | | (formerly: Laurentian Financial Advisers Ltd.) |
| | | 100% - England/Wales - Sales Company |
| | ------------------------------------------------
| | --------------------------------------------------
| |--| Lincoln Financial Group PLC |
| | | (formerly: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | --------------------------------------------------
| | | ----------------------------------------------------
| | |--| Lincoln ISA Management Limited |
| | | | (formerly Lincoln Unit Trust Management Limited; |
| | | | Laurentian Unit Trust Management Limited) |
| | | | 100% - England/Wales - Unit Trust Management |
----------------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | --------------------------------------------------
| |--| Lincoln Financial Group PLC |
| | | (formerly: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | --------------------------------------------------
| | | ---------------------------------------
| | |--| Lincoln Milldon Limited |
| | | | (formerly: Laurentian Milldon Limited)|
| | | | 100% - England/Wales - Sales Company |
| | | ---------------------------------------
| | | -----------------------------------------------------------
| | |--| Laurtrust Limited |
| | | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | | -----------------------------------------------------------
| | | --------------------------------------------------
| | |--|Lincoln Management Services Limited |
| | | |(formerly: Laurentian Management Services Limited)|
| | | |100% - England/Wales - Management Services |
| | | --------------------------------------------------
| | | | ------------------------------------------------
| | | |--|Laurit Limited |
| | | | |100% - England/Wales - Data Processing Systems |
| | | | ------------------------------------------------
| | --------------------------------------------------------
| |--| Liberty Life Pension Trustee Company Limited |
| | | 100% - England/Wales - Corporate Pension Fund (Dormat) |
| | --------------------------------------------------------
| | ----------------------------------------------------------
| |--| LN Management Limited |
| | | 100% - England/Wales - Administrative Services (Dormat) |
| | ----------------------------------------------------------
| | | -----------------------------------
| | |--| UK Mortgage Securities Limited |
| | | 100% - England/Wales - Inactive |
| | -----------------------------------
| | ------------------------------------------
| |--| Liberty Press Limited |
| | | 100% - England/Wales - Printing Services |
------------------------------------------
<PAGE>
--------------------------------
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | ----------------------------------------------
| |--| Lincoln General Insurance Co. Ltd. |
| | | 100% - Accident & Health Insurance |
| | ----------------------------------------------
| | --------------------------------------------
| |--|Lincoln Assurance Limited |
| | |100% ** - England/Wales - Life Assurance |
| | --------------------------------------------
| | | | ---------------------------------------------
| | | |--|Barnwood Property Group Limited |
| | | | |100% - England/Wales - Property Management Co|
| | | | ---------------------------------------------
| | | | | ------------------------------------------
| | | | |--| Barnwood Developments Limited |
| | | | | | 100% England/Wales - Property Development|
| | | | | ------------------------------------------
| | | | | --------------------------------------------
| | | | |--| Barnwood Properties Limited |
| | | | | | 100% - England/Wales - Property Investment |
| | | | | --------------------------------------------
| | | | -----------------------------------------------------
| | | |--|IMPCO Properties G.B. Ltd. |
| | | | |100% - England/Wales - Property Investment (Inactive)|
| | | -----------------------------------------------------
| | | ----------------------------------------------------
| | |--| Lincoln Insurance Services Limited |
| | | | 100% - Holding Company |
| | | ----------------------------------------------------
| | | | ---------------------------------
| | | |--| British National Life Sales Ltd.|
| | | | | 100% - Inactive |
| | | | ---------------------------------
| | | | ----------------------------------------------------------
| | | |--| BNL Trustees Limited |
| | | | | 100% - England/Wales - Corporate Pension Fund (Inactive) |
| | | | ----------------------------------------------------------
| | | | -------------------------------------
| | | |--| Chapel Ash Financial Services Ltd. |
| | | | | 100% - Direct Insurance Sales |
-------------------------------------
<PAGE>
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -----------------------------------------
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| -----------------------------------------
| | |----------------------------------------------
| |--| Lincoln Unit Trust Managers Limited |
| | | 100% - England/Wales - Investment Management |
| | ----------------------------------------------
| | ----------------------------------------------------------
| |--| LIV Limited (formerly Lincoln Investment Management Ltd.)|
| | | 100% - England/Wales - Investment Management Services |
| | ----------------------------------------------------------
| | | -----------------------------------------------
| | |--| CL CR Management Ltd. |
| | | 50% - England/Wales - Administrative Services |
| | -----------------------------------------------
| | -----------------------------------------------------------
| |--| Lincoln Independent Limited |
| | | (formerly: Laurentian Independent Financial Planning Ltd.)|
| | | 100% - England/Wales - Independent Financial Adviser |
| | -----------------------------------------------------------
| | ----------------------------------------------
| |--| Lincoln Investment Management Limited |
| | | (formerly: Laurentian Fund Management Ltd.) |
| | | 100% - England/Wales - Investment Management |
| | ----------------------------------------------
| | ------------------------------------------
| |--| LN Securities Limited |
| | | 100% - England/Wales - Nominee Company |
| | ------------------------------------------
| | --------------------------------------------
| |--| Niloda Limited |
| | | 100% - England/Wales - Investment Company |
| | --------------------------------------------
| | ------------------------------------------------
| |--| Lincoln National Training Services Limited |
| | | 100% - England/Wales - Training Company |
| | ------------------------------------------------
| | ------------------------------------------------
| |--| Lincoln Pension Trustees Limited |
| | | 100% - England/Wales - Corporate Pension Fund |
| | ------------------------------------------------
| | ------------------------------------------------
| |--| Lincoln Independent (Jersey) Limited |
| | | (formerly Lincoln National (Jersey) Limited) |
| | | 100% - England/Wales - Dormat |
| | ------------------------------------------------
| | ------------------------------------------------
| |--| Lincoln National(Guernsey) Limited |
| | | 100% - England/Wales - Dormat |
| | ------------------------------------------------
| | ------------------------------------------------
| |--| Lincoln SBP Trustee Limited |
| | | 100% - England/Wales |
------------------------------------------------
<PAGE>
--------------------------------
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
--------------------------------
| -------------------------------------------------
| | Linsco Reinsurance Company |
|--| (formerly Lincoln National Reinsurance Company) |
| | 100% - Indiana - Property/Casualty |
| -------------------------------------------------
| ------------------------------------
|--| Old Fort Insurance Company, Ltd. |
| | 100% ** - Bermuda |
| ------------------------------------
| | --------------------------------------------------------
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 10% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 90% owned by Lincoln Natl. Reinsurance Co.) |
| | --------------------------------------------------------
| | ---------------------------------------------------
| | | Solutions Holdings, Inc. |
| |--| 100% - Delaware - General Business Corporation |
| | ---------------------------------------------------
| | | -----------------------------------------
| | |--|Solutions Reinsurance Limited |
| | | |100% - Bermuda - Class III Insurance Co |
| -----------------------------------------
| ----------------------------------------------------------
| | Seguros Serfin Lincoln, S.A. |
|--| 49% - Mexico - Insurance |
| ----------------------------------------------------------
| ----------------------------------------------------------
| | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
|--| 49% - Mexico - Reinsurance Underwriter |
| | (Remaining 51% owned by Lincoln Natl. Reinsurance Co.) |
| ----------------------------------------------------------
| --------------------------------------------
|--| Underwriters & Management Services, Inc. |
| 100% - Indiana - Underwriting Services |
--------------------------------------------
</TABLE>
FOOTNOTES:
* The funds contributed by the Underwriters were, and continue to be subject
to trust agreements between American States Insurance Company, the grantor,
and each Underwriter, as trustee.
** Except for director-qualifying shares
# Lincoln National Corporation has subscribed for and paid for 100 shares of
Common Stock (with a par value of $1.00 per share) at a price of $10 per
share, as part of the organizing of the fund. As such stock is further
sold, the ownership of voting securities by Lincoln National Corporation
will decline and fluctuate.
<PAGE>
ATTACHMENT #1
LINCOLN LIFE AND ANNUITY DISTRIBUTORS, INC.
CORPORATE AGENCY SUBSIDIARIES
1) Lincoln Financial Group, Inc. (AL)
2) Lincoln Financial and Insurance Services Corporation (Walnut Creek, CA)
3) California Fringe Benefit and Insurance Marketing Corporation
DBA/California Fringe Benefit Company (Walnut Creek, CA)
4) Colorado-Lincoln Financial Group, Inc. (Denver, CO)
5) Lincoln National Financial Services, Inc. (Lake Worth, FL)
6) CMP Financial Services, Inc. (Chicago, IL)
7) Lincoln Financial Group of Northern Indiana, Inc. (Fort Wayne, IN)
8) Financial Planning Partners, Ltd. (Mission, KS)
9) The Lincoln National Financial Group of Louisiana, Inc. (Shreveport,
LA)
10) Benefits Marketing Group, Inc. (D.C. & Chevy Chase, MD)
11) Lincoln Financial Services and Insurance Brokerage of New England, Inc.
(formerly: Lincoln National of New England Insurance Agency, Inc.)
(Worcester, MA)
12) Financial Consultants of Michigan, Inc. (Troy, MI)
13) Lincoln Financial Group of Missouri, Inc. (formerly: John J. Moore &
Associates, Inc.) (St. Louis, MO)
14) Beardslee & Associates, Inc. (Clifton, NJ)
15) Lincoln Financial Group, Inc. (formerly: Resources/Financial, Inc.
(Albuquerque, NM)
16) Lincoln Cascades, Inc. (Portland, OR)
17) Lincoln Financial Group, Inc. (Salt Lake City, (UT)
<PAGE>
Summary of Changes to Organizational Chart:
JANUARY 1, 1995-DECEMBER 31, 1995
SEPTEMBER 1995
a. Lincoln National (Jersey) Limited was incorporated on September 18, 1995.
Company is dormat and was formed for tax reasons per Barbara Benoit,
Assistant Corporate Secretary at Lincoln UK.
JANUARY 1, 1996-DECEMBER 1, 1996
MARCH 1996
a. Delaware Investment Counselors, Inc. changed its name to Delaware Capital
Management, Inc. effective March 29, 1996.
AUGUST 1996
a. Lincoln National (Gernsey) Limited was incorporated on August 9, 1996;
company is dormat and was formed for tax reasons.
SEPTEMBER 1996
a. Morgan Financial Group, Inc. changed its name to Lincoln National Sales
Corporation of Maryland effective September 23, 1996.
OCTOBER 1996
a. Addition of Lincoln National (India) Inc., incorporated as an Indiana
corporation on October 17, 1996.
NOVEMBER 1996
a. Lincoln National SBP Trustee Limited was bought "off the shelf" and was
incorporated on November 26, 1996; it was formed to act as Trustee for
Lincoln Staff Benefits Plan.
DECEMBER 1996
a. Addition of Lincoln National Investments, Inc., incorporated as an Indiana
corporation on December 12, 1996.
JANUARY 1, 1997-DECEMBER 31, 1997
JANUARY 1997
a. Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and Vantage Global
Advisors, Inc. were transferred via capital contribution to Lincoln
National Investments, Inc. effective January 2, 1997.
b. Lincoln National Investments, Inc. changed its name to Lincoln National
Investment Companies, Inc. effective January 24, 1997.
c. Lincoln National Investment Companies, Inc. changed its named to Lincoln
National Investments, Inc. effective January 24, 1997.
JANUARY 1997 CON'T
<PAGE>
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (formerly Laurentian
Financial Group PLC); Lincoln Milldon Limited (formerly Laurentian Milldon
Limited); Lincoln Management Services Limited (formerly Laurentian
Management Services Limited).
FEBRUARY 1997
a. Removal of Lincoln National Financial Group of Philadelphia, Inc. which was
dissolved effective February 25, 1997.
MARCH 1997
a. Removal of Lincoln Financial Services, Inc. which was dissolved effective
March 4, 1997.
APRIL 1997
a. Acquisition of Dougherty Financial Group, Inc. on April 30, 1997. Company
then changed its name to Delvoy, Inc. The acquisition included the mutual
fund group of companies as part of the Voyager acquisition. The following
companies all then were moved under the newly formed holding company,
Delvoy, Inc. effective April 30, 1997: Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc., Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.
b. Acquisition of Voyager Fund Managers, Inc. and Voyager Fund Distributors,
Inc. on April 30, 1997; merger is scheduled for May 31, 1997 for Voyager
Fund Managers, Inc. into Delaware Management Company, Inc. and Voyager Fund
Distributors, Inc. is to merge into Delaware Distributors, L.P.
c. Removal of Aseguradora InverLincoln, S.A. Compania de Seguros y Reaseguros,
Grupo Financiero InverMexico. Stock was sold to Grupo Financiero
InverMexico effective April 18, 1997.
MAY 1997
a. Name change of The Richard Leahy Corporation to Lincoln National Financial
Institutions Group, Inc. effective May 6, 1997.
b. Voyager Fund Managers, Inc. merged into Delaware Management Company, Inc.
effective May 30, 1997 at 10:00 p.m. with Delaware Management Company, Inc.
surviving.
c. On May 31, 1997 at 2:00 a.m., Voyager Fund Distributors, Inc. merged into a
newly formed company Voyager Fund Distributors (Delaware), Inc.,
incorporated as a Delaware corporation on May 23, 1997. Voyager Fund
Distributors (Delaware), Inc. then merged into Delaware Distributors, L.P.
effective May 31, 1997 at 2:01 a.m. Delaware Distributors, L.P. survived.
JUNE 1997
a. Removal of Lincoln National Sales Corporation of Maryland -- company
dissolved June 13, 1997.
b. Addition of Lincoln Funds Corporation, incorporated as a Delaware
corporation on June 10, 1997 at 2:00 p.m.
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on June
30, 1997.
<PAGE>
JULY 1997
a. LNC Equity Sales Corporation changed its name to Lincoln Financial Advisors
Corporation effective July 1, 1997.
b. Addition of Solutions Holdings, Inc., incorporated as a Delaware
corporation on July 27, 1997.
SEPTEMBER 1997
a. Addition of Solutions Reinsurance Limited, incorporated as a Bermuda
corporation on September 29, 1997.
OCTOBER 1997
a. Removal of the following companies: American States Financial Corporation,
American States Insurance Company, American Economy Insurance Company,
American States Insurance Company of Texas, American States Life Insurance
Company, American States Lloyds Insurance Company, American States
Preferred Insurance Company, City Insurance Agency, Inc. and Insurance
Company of Illinois -- all were sold 10-1-97 to SAFECO Corporation.
b. Liberty Life Assurance Limited was sold to Liberty International Holdings
PLC effective 10-6-97.
c. Addition of Seguros Serfin Lincoln, S.A., acquired by LNC on 10-15-97.
DECEMBER 1997
a. Addition of City Financial Partners Ltd. as a result of its acquisition by
Lincoln National Corporation on December 22, 1997. This company will
distribute life assurance and pension products of Lincoln Assurance
Limited.
b. Removal of Lynch & Mayer Asia, Inc. which was dissolved December 24, 1997.
JANUARY 1998
a. Addition of Cigna Associates, Inc., Cigna Financial Advisors, Inc. and
Cigna Associates of Massachusetts, Inc., acquired by The Lincoln National
Life Insurance Company on January 1, 1998. Cigna Associates of
Massachusetts is 100% owned by Cigna Associates, Inc.
b. Removal of Lincoln National Mezzanine Corporation and Lincoln National
Mezzanine Fund, L.P. Lincoln National Mezzanine Corporation was dissolved
on January 12, 1998 and Lincoln National Mezzanine Fund, L.P. was cancelled
January 12, 1998.
c. Corporate organizational changes took place in the UK group of companies on
January 21, 1998: Lincoln Insurance Services Limited and its subsidiaries
were moved from Lincoln National (UK) PLC to Lincoln Assurance Limited;
Lincoln General Insurance Co. Ltd. was moved from Lincoln Insurance
Services Limited to Lincoln National (UK) PLC.
d. Addition of AnnuityNet, Inc., incorporated as an Indiana corporation on
January 16, 1998 and a wholly-owned subsidiary of The Lincoln National Life
Insurance Company.
JUNE 1998
<PAGE>
a. Name Change of CIGNA Financial Advisors, Inc. to Sagemark Consulting, Inc.
effective June 1, 1998.
b. Name Change of CIGNA Associates, Inc. to Lincoln National Insurance
Associates, Inc. effective June 1, 1998.
c. Addition of Lincoln National Insurance Associates of Alabama, Inc.,
incorporated as a wholly-owned subsidiary of Lincoln National Insurance
Associates, Inc. as an Alabama domiciled corporation.
d. Dissolution of LUTM Nominees Limited effective June 10, 1998.
e. Dissolution of Cannon Fund Managers Limited June 16, 1998.
f. Dissolution of P.N. Kemp Gee & Co. Ltd. June 2, 1998.
JULY 1998
a. Name change of CIGNA Associates of Massachusetts, Inc. to Lincoln National
Insurance Associates of Massachusetts, Inc. effective July 22, 1998.
SEPTEMBER 1998
a. Removal of Lincoln Financial Group of Michigan, Inc., voluntarily dissolved
September 15, 1998.
b. Name change of Lincoln Financial Group, Inc. to Lincoln Life and Annuity
Distributors, Inc. on September 29, 1998.
c. Removal of Lincoln European Reinsurance S.A. -- company dissolved September
30, 1998.
d. Removal of Lincoln Funds Corporation -- company voluntarily dissolved
September 30, 1998.
OCTOBER 1998
a. Addition of AnnuityNet Insurance Agency, Inc., incorporated as an Indiana
corporation October 2, 1998., a wholly-owned subsidiary of AnnuityNet, Inc.
b. Removal of Lincoln National (India) Inc., voluntarily dissolved October 26,
1998.
DECEMBER 1998
a. Removal of The Insurers' Fund, Inc., voluntarily dissolved December 10,
1998.
b. Addition of Lincoln National Management Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Lincoln National Corporation,
incorporated on December 17, 1998.
JANUARY 1999
Lincoln Unit Trust Management changed its name on January 5, 1999 to Lincoln ISA
Management Limited.
FEBRUARY 1999
Removal of Lincoln Soutwest Financial Group, Inc. -- company's term of existence
expired July 18, 1998.
<PAGE>
BOOKS AND RECORDS
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT N
RULES UNDER SECTION 31 OF THE INVESTMENT COMPANY ACT OF 1940
Records to Be Maintained by Registered Investment Companies, Certain
Majority-Owned Subsidiaries Thereof, and Other Persons Having
Transactions with Registered Investment Companies.
Reg. 270.31a-1. (a) Every registered investment company, and every underwriter,
broker, dealer, or investment advisor which is a majority-owned subsidiary of
such a company, shall maintain and keep current the accounts, books, and other
documents relating to its business which constitute the record forming the basis
for financial statements required to be filed pursuant to Section 30 of the
Investment Company Act of 1940 and of the auditor's reports relating thereto.
LN-RECORD LOCATION PERSON TO CONTACT RETENTION
Annual Reports Finance Eric Jones Permanently, the first two
To Shareholders years in an easily accessible
place
Semi-Annual Finance Eric Jones Permanently, the first two
Reports years in an easily accessible
place
Form N-SAR Finance Eric Jones Permanently, the first two
years in an easily accessible
place
(b) Every registered investment company shall maintain and keep current the
following books, accounts, and other documents:
TYPE OF RECORD
(1) Journals (or other records of original entry) containing an itemized daily
record in detail of all purchases and sales of securities (including sales and
redemptions of its own securities), all receipts and deliveries of securities
(including certificate numbers if such detail is not recorded by custodian or
transfer agent), all receipts and disbursements of cash and all other debits and
credits. Such records shall show for each such transaction the name and quantity
of securities, the unit and aggregate purchase or sale price, commission paid,
the market on which effected, the trade date, the settlement date, and the name
of the person through or from whom purchased or received or to whom sold or
delivered.
PURCHASES AND SALES JOURNALS
Daily reports CSRM Nancy Alford Permanently, the first two
of securities Finance Eric Jones years in an easily accessible
transactions place
PORTFOLIO SECURITIES
C-Port Purchase/ Finance Eric Jones Permanently, the first two
Sales Reports years in an easily accessible
place
<PAGE>
LN-RECORD LOCATION PERSON TO CONTACT RETENTION
RECEIPTS AND DELIVERIES OF SECURITIES (UNITS)
Not Applicable.
Portfolio Securities
Not Applicable.
RECEIPTS AND DISBURSEMENTS OF CASH AND OTHER DEBITS AND CREDITS
Daily Journals CSRM Nancy Alford Permanently, the first two
Finance Eric Jones years in an easily accessible
place
(2) General and auxiliary ledgers (or other record) reflecting all asset,
liability, reserve, capital, income and expense accounts, including:
(i) Separate ledger accounts (or other records) reflecting the
following:
(a) Securities in transfer;
(b) Securities in physical possession;
(c) Securities borrowed and securities loaned;
(d) Monies borrowed and monies loaned (together with a record
of the collateral therefore and
substitutions in such collateral);
(e) Dividends and interest received;
(f) Dividends receivable and interest accrued.
Instructions. (a) and (b) shall be stated in terms of securities
quantities only; (c) and (d) shall be stated in dollar amounts and
securities quantities as appropriate; (e) and (f) shall be stated in
dollar amounts only.
GENERAL LEDGER
LNL trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
SECURITIES IN TRANSFER
Not Applicable.
SECURITIES IN PHYSICAL POSSESSION
Not Applicable.
SECURITIES BORROWED AND LOANED
Not Applicable.
MONIES BORROWED AND LOANED
Not Applicable.
DIVIDENDS AND INTEREST RECEIVED
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
<PAGE>
LN-RECORD LOCATION PERSON TO CONTACT RETENTION
DIVIDENDS RECEIVABLE AND INTEREST ACCRUED
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
(ii) Separate ledger accounts (or other records) for each portfolio security,
showing (as of trade dates), (a) the quantity and unit and aggregate price for
each purchase, sale, receipt, and delivery of securities and commodities for
such accounts, and (b) all other debits and credits for such accounts.
Securities positions and money balances in such ledger accounts (or other
records) shall be brought forward periodically but not less frequently than at
the end of fiscal quarters. Any portfolio security, the salability of which is
conditioned, shall be so noted. A memorandum record shall be available setting
forth, with respect to each portfolio security accounts, the amount and
declaration, ex-dividend, and payment dates of each dividend declared thereon.
LEDGER ACCOUNT FOR EACH PORTFOLIO SECURITY
Daily Report Finance Eric Jones Permanently, the first two
Of Securities years in an easily accessible
Transaction (Daily place
Trade File)
(iii) Separate ledger accounts (or other records) for each broker-dealer, bank
or other person with or through which transactions in portfolio securities are
affected, showing each purchase or sale of securities with or through such
persons, including details as to the date of the purchase or sale, the quantity
and unit and aggregate prices of such securities, and the commissions or other
compensation paid to such persons. Purchases or sales effected during the same
day at the same price may be aggregated.
Not Applicable.
(iv) Separate ledger accounts (or other records), which may be maintained by a
transfer agent or registrar, showing for each shareholder of record of the
investment company the number of shares of capital stock of the company held. in
respect of share accumulation accounts (arising from periodic investment plans,
dividend reinvestment plans, deposit of issued shares by the owner thereof,
etc.), details shall be available as to the dates and number of shares of each
accumulation, and except with respect to already issued shares deposited by the
owner thereof, prices of each such accumulation.
SHAREHOLDER ACCOUNTS
Master file Finance Eric Jones Permanently, the first two
Record (Daily CSRM Nancy Alford years in an easily accessible
Trade File & Leg place
Syst Client Rpt)
(3) A securities record or ledger reflecting separately for each portfolio
security as of trade date all "long" and "short" positions carried by the
investment company for its own account and showing the location of all
securities long and the off-setting position to all securities short. The record
called for by this paragraph shall not be required in circumstances under which
all portfolio securities are maintained by a bank or banks or a member or
members of a national securities exchange as custodian under a custody agreement
or as agent for such custodian.
<PAGE>
LN-RECORD LOCATION PERSON TO CONTACT RETENTION
Not Applicable
(4) Corporate charters, certificates of incorporation or trust agreements, and
bylaws, and minute books of stockholders' and directors' or trustees' meetings;
and minute books of directors' or trustees' committee and advisory board or
advisory committee meetings.
CORPORATE DOCUMENTS
Memorandum Legal Janet Lindenberg Permanently, the first two
Establishing SA years in an easily accessible
place
(5) A record of each brokerage order given by or in behalf of the investment
company for, or in connection with, the purchase or sale of securities, whether
executed or unexecuted. Such record shall include the name of the broker, the
terms and conditions of the order and of any modification or cancellation
thereof, the time of entry or cancellation, the price at which executed, and the
time of receipt of report of execution. The record shall indicate the name of
the person who placed the order in behalf of the investment company.
ORDER TICKETS
UIT applica- CSRM Nancy Alford Six years, the first two
tions and Finance Eric Jones years in an easily accessible
daily reports place
of securities
transactions
(6) A record of all other portfolio purchase or sales showing details comparable
to those prescribed in paragraph 5 above.
COMMERCIAL PAPER
Not Applicable.
(7) A record of all puts, calls, spreads, straddles, and other options in which
the investment company has any direct or indirect interest or which the
investment company has granted or guaranteed; and a record of any contractual
commitments to purchase, sell, receive or deliver securities or other property
(but not including open orders placed with broker-dealers for the purchase or
sale of securities, which may be cancelled by the company on notices without
penalty or cost of any kind); containing at least an identification of the
security, the number of units involved, the option price, the date of maturity,
the date of issuance, and the person to whom issued.
RECORD OF PUTS, CALLS, SPREADS, ETC.
Not Applicable.
(8) A record of the proof of money balances in all ledger accounts (except
shareholder accounts), in the form of trial balances. Such trial balances shall
be prepared currently at least once a month.
<PAGE>
LN-RECORD LOCATION PERSON TO CONTACT RETENTION
TRIAL BALANCE
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily accessible
series) place
(9) A record for each fiscal quarter, which shall be completed within 10 days
after the end of such quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio securities
to named brokers or dealers and the division of brokerage commissions or other
compensation on such purchase and sale orders among named persons were made
during such quarter. The record shall indicate the consideration given to (a)
sales of shares of the investment company by brokers or dealers, (b) the
supplying of services or benefits by brokers or dealers to the investment
company, its investment advisor or principal underwriter or any persons
affiliated therewith, and (c) any other considerations other than the technical
qualifications of the brokers and the dealers as such. The record shall show the
nature of their services or benefits made available, and shall describe in
detail the application of any general or specific formula or other determinant
used in arriving at such allocation of purchase and sales orders and such
division of brokerage commissions or other compensation. The record shall also
include the identifies of the person responsible for the determination of such
allocation and such division of brokerage commissions or other compensation.
Not Applicable.
(10) A record in the form of an appropriate memorandum identifying the person or
persons, committees, or groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee or group, a record
shall be kept in the names of its members who participated in the authorization.
There shall be retained a part of the record required by this paragraph any
memorandum, recommendation, or instruction supporting or authorizing the
purchase or sale of portfolio securities. The requirements of this paragraph are
applicable to the extent they are not met by compliance with the requirements of
paragraph 4 of this Rule 31a1(b).
Advisory Legal Janet Lindenberg Six years, the first two
Agreements years in an easily accessible
place
(11) Files of all advisory material received from the investment advisor, any
advisory board or advisory committee, or any other persons from whom the
investment company accepts investment advice publications distributed generally.
Not Applicable.
(12) The term "other records" as used in the expressions "journals (or other
records of original entry)" and "ledger accounts (or other records)" shall be
construed to include, where appropriate, copies of voucher checks,
confirmations, or similar documents which reflect the information required by
the applicable rule or rules in appropriate sequence and in permanent form,
including similar records developed by the use of automatic data processing
systems.
Correspondence CSRM Nancy Alford Six years, the first two
years in an easily accessible
place
<PAGE>
LN-RECORD LOCATION PERSON TO CONTACT RETENTION
Proxy State- CSRM Nancy Alford Six years, the first two
ments and years in an easily accessible
Proxy Cards place
Pricing Sheets Finance Eric Jones Permanently, the first two
years in an easily accessible
place
Bank State- Treasurers Rusty Summers Six years, the first two
ments years in an easily accessible
place
March 24, 1999
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby revoke all powers of attorney authorizing any person
to act as attorney-in-fact relative to Lincoln National Variable Annuity Account
N (Delaware-Lincoln ChoicePlus), which were previously executed by us and do
hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K.
Dellinger, and Steven M. Kluever, our true and lawful attorneys-in-fact, with
full power in each of them to sign for us, in our names and in the capacities
indicated below, any and all amendments to Registration Statement No. 333-40937
filed with the Securities and Exchange Commission under the Securities Act of
1933, on behalf of the Company in its own name or in the name of one of its
Separate Accounts, hereby ratifying and confirming our signatures as they may be
singed by any of our attorneys-in-fact to any such amendment to that
Registration Statement. The power of attorney was signed by us on February 3,
1999.
SIGNATURE TITLE
- ------------ ------
/s/Gabriel L. Shaheen
Gabriel L. Shaheen President, Chief Executive Officer and Director
(Principal Executive Officer)
Lawrence T. Rowland Executive Vice President and Director
Keith J. Ryan Senior Vice President, Assistant
Treasurer and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
H. Thomas McMeekin Director
Richard C. Vaughan Director
Jon A. Boscia Director
STATE OF INDIANA)
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
3rd day of February, 1999.
/s/Janet L. Lindenberg
Notary public
Commission Expires: 7-10-2001
---------
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby revoke all powers of attorney authorizing any person
to act as attorney-in-fact relative to Lincoln National Variable Annuity Account
N (Delaware-Lincoln ChoicePlus), which were previously executed by us and do
hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K.
Dellinger, and Steven M. Kluever, our true and lawful attorneys-in-fact, with
full power in each of them to sign for us, in our names and in the capacities
indicated below, any and all amendments to Registration Statement No. 333-40937
filed with the Securities and Exchange Commission under the Securities Act of
1933, on behalf of the Company in its own name or in the name of one of its
Separate Accounts, hereby ratifying and confirming our signatures as they may be
singed by any of our attorneys-in-fact to any such amendment to that
Registration Statement. The power of attorney was signed by us on February 3,
1999.
SIGNATURE TITLE
- --------- -----
Gabriel L. Shaheen President, Chief Executive Officer and Director
(Principal Executive Officer)
/s/Lawrence T. Rowland
Lawrence T. Rowland Executive Vice President and Director
Keith J. Ryan Senior Vice President, Assistant
Treasurer and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
H. Thomas McMeekin Director
Richard C. Vaughan Director
Jon A. Boscia Director
STATE OF INDIANA)
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
3rd day of February, 1999.
/s/Janet L. Lindenberg
Notary public
Commission Expires: 7-10-2001
---------
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby revoke all powers of attorney authorizing any person
to act as attorney-in-fact relative to Lincoln National Variable Annuity Account
N (Delaware-Lincoln ChoicePlus), which were previously executed by us and do
hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K.
Dellinger, and Steven M. Kluever, our true and lawful attorneys-in-fact, with
full power in each of them to sign for us, in our names and in the capacities
indicated below, any and all amendments to Registration Statement No. 333-40937
filed with the Securities and Exchange Commission under the Securities Act of
1933, on behalf of the Company in its own name or in the name of one of its
Separate Accounts, hereby ratifying and confirming our signatures as they may be
singed by any of our attorneys-in-fact to any such amendment to that
Registration Statement. The power of attorney was signed by us on February 3,
1999.
SIGNATURE TITLE
- --------- -----
Gabriel L. Shaheen President, Chief Executive Officer and Director
(Principal Executive Officer)
Lawrence T. Rowland Executive Vice President and Director
/s/Keith J. Ryan
Keith J. Ryan Senior Vice President, Assistant
Treasurer and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
H. Thomas McMeekin Director
Richard C. Vaughan Director
Jon A. Boscia Director
STATE OF INDIANA)
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
3rd day of February, 1999.
/s/Janet L. Lindenberg
Notary public
Commission Expires: 7-10-2001
---------
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby revoke all powers of attorney authorizing any person
to act as attorney-in-fact relative to Lincoln National Variable Annuity Account
N (Delaware-Lincoln ChoicePlus), which were previously executed by us and do
hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K.
Dellinger, and Steven M. Kluever, our true and lawful attorneys-in-fact, with
full power in each of them to sign for us, in our names and in the capacities
indicated below, any and all amendments to Registration Statement No. 333-40937
filed with the Securities and Exchange Commission under the Securities Act of
1933, on behalf of the Company in its own name or in the name of one of its
Separate Accounts, hereby ratifying and confirming our signatures as they may be
singed by any of our attorneys-in-fact to any such amendment to that
Registration Statement. The power of attorney was signed by us on February 3,
1999.
SIGNATURE TITLE
- --------- -----
Gabriel L. Shaheen President, Chief Executive Officer and Director
(Principal Executive Officer)
Lawrence T. Rowland Executive Vice President and Director
Keith J. Ryan Senior Vice President, Assistant
Treasurer and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
/s/H. Thomas McMeekin
H. Thomas McMeekin Director
Richard C. Vaughan Director
Jon A. Boscia Director
STATE OF INDIANA)
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
3rd day of February, 1999.
/s/Janet L. Lindenberg
Notary public
Commission Expires: 7-10-2001
---------
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby revoke all powers of attorney authorizing any person
to act as attorney-in-fact relative to Lincoln National Variable Annuity Account
N (Delaware-Lincoln ChoicePlus), which were previously executed by us and do
hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K.
Dellinger, and Steven M. Kluever, our true and lawful attorneys-in-fact, with
full power in each of them to sign for us, in our names and in the capacities
indicated below, any and all amendments to Registration Statement No. 333-40937
filed with the Securities and Exchange Commission under the Securities Act of
1933, on behalf of the Company in its own name or in the name of one of its
Separate Accounts, hereby ratifying and confirming our signatures as they may be
singed by any of our attorneys-in-fact to any such amendment to that
Registration Statement. The power of attorney was signed by us on February 3,
1999.
SIGNATURE TITLE
- --------- -----
Gabriel L. Shaheen President, Chief Executive Officer and Director
(Principal Executive Officer)
Lawrence T. Rowland Executive Vice President and Director
Keith J. Ryan Senior Vice President, Assistant
Treasurer and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
H. Thomas McMeekin Director
/s/Richard C. Vaughan
Richard C. Vaughan Director
Jon A. Boscia Director
STATE OF INDIANA)
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
3rd day of February, 1999.
/s/Janet L. Lindenberg
Notary public
Commission Expires: 7-10-2001
---------
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of The Lincoln National Life
Insurance Company, hereby revoke all powers of attorney authorizing any person
to act as attorney-in-fact relative to Lincoln National Variable Annuity Account
N (Delaware-Lincoln ChoicePlus), which were previously executed by us and do
hereby severally constitute and appoint Kelly D. Clevenger, Jeffrey K.
Dellinger, and Steven M. Kluever, our true and lawful attorneys-in-fact, with
full power in each of them to sign for us, in our names and in the capacities
indicated below, any and all amendments to Registration Statement No. 333-40937
filed with the Securities and Exchange Commission under the Securities Act of
1933, on behalf of the Company in its own name or in the name of one of its
Separate Accounts, hereby ratifying and confirming our signatures as they may be
singed by any of our attorneys-in-fact to any such amendment to that
Registration Statement. The power of attorney was signed by us on February 3,
1999.
SIGNATURE TITLE
- --------- -----
Gabriel L. Shaheen President, Chief Executive Officer and Director
(Principal Executive Officer)
Lawrence T. Rowland Executive Vice President and Director
Keith J. Ryan Senior Vice President, Assistant
Treasurer and Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
H. Thomas McMeekin Director
Richard C. Vaughan Director
/s/Jon A. Boscia
Jon A. Boscia Director
STATE OF INDIANA)
)SS:
COUNTY OF ALLEN )
Subscribed and sworn to before me this
3rd day of February, 1999.
/s/Janet L. Lindenberg
Notary public
Commission Expires: 7-10-2001
---------
