<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 2000
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. 5
/X/
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / /
AMENDMENT NO. 7 /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
Elizabeth A. Frederick, Esquire Kimberly J. Smith, Esquire
1300 S. Clinton St. Sutherland Asbill &
Ft. Wayne, IN 46802 Brennan LLP
(NAME AND ADDRESS OF 1275 Pennsylvania Ave. N.W.
AGENT FOR SERVICE) Washington, DC 20004
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, 2000, 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>
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
www.LincolnLife.com
This prospectus describes the individual flexible premium deferred variable an-
nuity contract that is issued by Lincoln National Life Insurance Company (Lin-
coln 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. Gen-
erally, 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 ben-
efit.
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 Lin-
coln 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 in-
come. 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. Al-
so, 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:
AIM V.I. Capital Appreciation Fund
AIM V.I Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Equity Fund
Alliance Variable Products Series Fund (Class B):
Alliance Premier Growth Portfolio
Alliance Growth and Income Portfolio
Alliance Growth Portfolio
Alliance Technology Portfolio
American Funds Insurance Series (AFIS) also known as American Variable Insur-
ance Series (AVIS) (Class 2):
AFIS Global Small Capitalization Fund
AFIS Growth Fund
AFIS International Fund
AFIS Growth-Income Fund
Deutsche Asset Management VIT Funds (formerly BT Insurance Funds Trust):
Deutsche VIT Equity 500 Index Fund
Delaware Group Premium Fund (Standard Class):
Delaware Premium Growth & Income Series
Delaware Premium High Yield Series (formerly Delchester)
Delaware Premium Emerging Markets Series
Delaware Premium Select Growth Series
Delaware Premium REIT Series
Delaware Premium Small Cap Value Series
Delaware Premium Social Awareness Series
Delaware Premium Trend Series
Variable Insurance Products Fund (Initial Class):
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Variable Insurance Products Fund III (Initial Class):
Fidelity VIP III Growth Opportunities Portfolio
Franklin Templeton Variable Insurance Products Trust (Class 2):
Franklin Small Cap Securities Fund
Franklin Mutual Shares Securities Fund
1
<PAGE>
Templeton Growth Securities Fund (formerly Global Growth)
Templeton International Securities Fund
Liberty Variable Investment Trust:
Newport Tiger Fund
Lincoln National:
Bond Fund
Money Market Fund
MFS(R) Variable Insurance Trust:
MFS Emerging Growth Series
MFS Research Series
MFS Total Return Series
MFS Utilities Series
The following eight investment options are no longer available for allocation
for purchase payments under Contracts issued on or after February 22, 2000.
However, contractowners who purchased a Contract prior to February 22, 2000 may
continue to allocate purchase payments or contract value to these investment
options. It is currently anticipated that during the fourth quarter of 2000, we
will close and replace these eight funds. See page 14 for further information.
Delaware Group Premium Fund, Inc.:
Delaware Premium Devon Series
Delaware Premium International Equity Series
Dreyfus Variable Investment Fund:
Dreyfus Small Cap Portfolio
Kemper Variable Series:
Kemper Small Cap Growth Portfolio
Kemper Government Securities Portfolio
Liberty Variable Investment Trust:
Colonial U.S. Growth & Income Fund
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 pro-
spectuses 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), dated the same date
as this Prospectus about the contracts that has more information. Its terms are
made part of this Prospectus. For a free copy, write: Lincoln National Life In-
surance 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 con-
tents for the SAI on the last page of this Prospectus.
May 1, 2000
2
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
- -------------------------------------------------
<S> <C>
Special terms 3
- -------------------------------------------------
Expense tables 4
- -------------------------------------------------
Summary 9
- -------------------------------------------------
Condensed financial information for the VAA 10
- -------------------------------------------------
Investment results 13
- -------------------------------------------------
Financial statements 13
- -------------------------------------------------
Lincoln National Life Insurance Company 13
- -------------------------------------------------
Variable annuity account (VAA) 13
- -------------------------------------------------
Investments of the variable annuity account 13
- -------------------------------------------------
Charges and other deductions 17
- -------------------------------------------------
The contracts 19
- -------------------------------------------------
Annuity payouts 23
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Page
- -------------------------------------------------
<S> <C>
Fixed side of the contract 24
- -------------------------------------------------
Federal tax matters 26
- -------------------------------------------------
Voting rights 29
- -------------------------------------------------
Distribution of the contracts 29
- -------------------------------------------------
Return privilege 29
- -------------------------------------------------
State regulation 30
- -------------------------------------------------
Records and reports 30
- -------------------------------------------------
Other information 30
- -------------------------------------------------
Statement of additional information
Table of contents for Lincoln Life Variable
Annuity Account N Lincoln ChoicePlus B-1
- -------------------------------------------------
</TABLE>
Special terms
(We have italicized the terms that have special meaning throughout the Pro-
spectus).
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 may be 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.
Free amount--The amount that can be withdrawn each contract year without in-
curring a surrender charge. The free amount is equal to 15% of the total Pur-
chase Payments.
Lincoln Life (we, us, our)--The 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 trad-
ing.
Valuation period--The period starting at the close of trading (currently, nor-
mally, 4:00 p.m. New York time) on each day that the NYSE is open for trading
(valuation date) and ending at the close of such trading on the next valuation
date.
3
<PAGE>
Expense tables
Summary of contractowner expenses:
The maximum surrender charge (contingent deferred sales charge) as a per-
centage of purchase payments surrendered/withdrawn: 7%
Account fee: $35
Transfer fee: $10
The surrender charge percentage is reduced over time. The later the redemption
occurs, the lower the surrender charge with respect to that surrender or with-
drawal. 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 con-
tract year. We reserve the right to charge a $10 fee for the 13th and each ad-
ditional transfer during any contract year. Automatic dollar cost averaging and
automatic rebalancing transfers are not included in these first twelve trans-
fers.
- --------------------------------------------------------------------------------
Account N annual expenses for Lincoln ChoicePlus subaccounts:
(as a percentage of average daily net assets)
<TABLE>
<S> <C>
Mortality and expense risk charge 1.25%
Administrative charge .15%
-----
Total annual charge for each Lincoln ChoicePlus subaccount 1.40%
</TABLE>
Fund Annual expenses of the funds for the year ended December 31, 1999:
(as a percentage of each fund's average net assets):
<TABLE>
<CAPTION>
Management Other Total
Fees (after any Expenses (after Expenses (after
waivers/ + 12b-1 any waivers/ any waivers/
reimbursements) Fees + reimbursements) = reimbursements)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 0.62% N/A 0.11% 0.73%
- --------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 0.63 N/A 0.10 0.73
- --------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 0.75 N/A 0.22 0.97
- --------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61 N/A 0.15 0.76
- --------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio (class B) 0.75 0.25 0.12 1.12
- --------------------------------------------------------------------------------------------------------------
Alliance Growth and Income Portfolio (class B) 0.63 0.25 0.09 0.97
- --------------------------------------------------------------------------------------------------------------
Alliance Premier Growth Portfolio (class B) 1.00 0.25 0.04 1.29
- --------------------------------------------------------------------------------------------------------------
Alliance Technology Portfolio (class B) 0.71 0.25 0.24 1.20
- --------------------------------------------------------------------------------------------------------------
AFIS Global Small Capitalization Fund (class 2) 0.78 0.25 0.03 1.06
- --------------------------------------------------------------------------------------------------------------
AFIS Growth Fund (class 2) 0.38 0.25 0.01 0.64
- --------------------------------------------------------------------------------------------------------------
AFIS International Fund (class 2) 0.55 0.25 0.05 0.85
- --------------------------------------------------------------------------------------------------------------
AFIS Growth-Income Fund (class 2) 0.34 0.25 0.01 0.60
- --------------------------------------------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund/1/ 0.14 N/A 0.16 0.30
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Growth and Income Series
(Standard class)/2/ 0.60 N/A 0.11 0.71
- --------------------------------------------------------------------------------------------------------------
Delaware Premium High Yield Series (formerly
Delchester) (Standard class)/2/ 0.65 N/A 0.07 0.72
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Devon Series (Standard
class)/2/ 1.65 N/A 0.10 1.75
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Emerging Markets Series
(Standard class)/2/ 1.19 N/A 0.28 1.47
- --------------------------------------------------------------------------------------------------------------
Delaware Premium International Equity Series
(Standard class)/2/ 0.83 N/A 0.09 0.92
- --------------------------------------------------------------------------------------------------------------
Delaware Premium REIT Series (Standard 0.64 N/A 0.21 0.85
class)/2/
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Select Growth Series (Standard 0.75 N/A 0.06 0.81
class)/2/
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Small Cap Value Series
(Standard class)/2/ 0.75 N/A 0.10 0.85
- --------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Management Other Total
Fees (after any Expenses (after Expenses (after
waivers/ 12b-1 any waivers/ any waivers/
reimbursements) + Fees reimbursements) = reimbursements)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Delaware Premium Social Awareness Series 0.70% N/A 0.15% 0.85%
(Standard class)/2/
- ------------------------------------------------------------------------------------------------------------
Delaware Premium Trend Series (Standard 0.75 N/A 0.07 0.82
class)/2/
- ------------------------------------------------------------------------------------------------------------
Dreyfus Variable Fund Small Cap Portfolio 0.75 N/A 0.03 0.78
- ------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio (Initial 0.48 N/A 0.09 0.57
class)/3/
- ------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio (Initial 0.58 N/A 0.0 0.66
class)/3/
- ------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio (Initial 0.73 N/A 0.18 0.91
class)/3/
- ------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 0.58 N/A 0.11 0.69
(Initial class)/3/
- ------------------------------------------------------------------------------------------------------------
Franklin Small Cap Securities Fund (class 0.55 0.25 0.27 1.07
2)/4/,/9/
- ------------------------------------------------------------------------------------------------------------
Franklin Mutual Shares Securities Fund (class 0.60 0.25 0.19 1.04
2)/5/,/9/
- ------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (formerly 0.83 0.25 0.05 1.13
Global Growth) (class 2)/7/,/8/,/9/
- ------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund (class 0.69 0.25 0.19 1.13
2)/6/,/9/
- ------------------------------------------------------------------------------------------------------------
Kemper KVS Small Cap Growth Portfolio 0.65 N/A 0.06 0.71
- ------------------------------------------------------------------------------------------------------------
Kemper KVS Government Securities Portfolio 0.55 N/A 0.08 0.63
- ------------------------------------------------------------------------------------------------------------
Liberty Variable Trust Colonial U.S. Growth & 0.80 N/A 0.08 0.88
Income Fund
- ------------------------------------------------------------------------------------------------------------
Liberty Variable Trust Newport Tiger Fund 0.49 N/A 0.31 1.21
- ------------------------------------------------------------------------------------------------------------
Lincoln National Bond Fund 0.45 N/A 0.08 0.53
- ------------------------------------------------------------------------------------------------------------
Lincoln National Money Market Fund 0.48 N/A 0.11 0.59
- ------------------------------------------------------------------------------------------------------------
MFS Variable Trust Emerging Growth Series/10/ 0.75 N/A .09 0.84
- ------------------------------------------------------------------------------------------------------------
MFS Variable Trust Research Series/10/ 0.75 N/A 0.11 0.86
- ------------------------------------------------------------------------------------------------------------
MFS Variable Trust Total Return Series/10/ 0.75 N/A 0.15 0.90
- ------------------------------------------------------------------------------------------------------------
MFS Variable Trust Utilities Series/10/ 0.75 N/A 0.16 0.91
- ------------------------------------------------------------------------------------------------------------
OCC Trust Global Equity Portfolio 0.80 N/A 0.30 1.10
- ------------------------------------------------------------------------------------------------------------
OCC Trust Managed Portfolio 0.77 N/A 0.06 0.83
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(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 Equity 500 Index 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 that the
fund's total operating expenses will not exceed 0.30% of average daily net
assets. Without the reimbursement to the Funds for the year ended 12/31/99
total expenses would have been 0.43% for the Equity 500 Index Fund.
(2) Effective May 1, 2000 through October 31, 2000, Delaware Management Compa-
ny, "DMC" has voluntarily agreed to waive its management fee and reimburse
the Series for expenses to the extent that total expenses will not exceed
0.80% for Devon, High Yield and Growth and Income; 0.85% for REIT, Select
Growth, Small Cap Value, Social Awareness and Trend; 0.95% for Interna-
tional Equity; 1.50% for Emerging Markets. Without such an arrangement, the
total operating expenses would have been 0.96% for REIT, 0.90% for Social
Awareness, 0.94% for International and 1.53% for Emerging Markets. DMC vol-
untarily elected to cap its management fee for the Growth and Income Series
at 0.60% indefinitely.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain
funds', or Fidelity Management & Research, "FMR" on behalf of certain
funds' custodian, credits realized as a result of uninvested cash balances
were used to reduce a portion of each applicable fund's expenses. The total
operating expenses, after reimbursement would have been: Equity-Income
0.56%; Growth 0.65%; Growth Opportunities 0.68%.
(4) On 2/8/00, a merger and reorganization was approved that combined the as-
sets of the fund with a similar fund of the Templeton Variable Products Se-
ries Fund, effective 5/01/00. On 2/8/00, fund shareholders approved new
management fees, which apply to the combined fund effective 5/1/00. The ta-
ble shows restated total expenses based on the new fees and assets of the
fund as of 12/31/99, and not the assets of the combined fund. However, if
the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.55%, Distri-
bution and Service Fees 0.25%, Other Expenses 0.27% and Total Fund Operat-
ing Expenses 1.07%.
(5) On 2/8/00, a merger and reorganization was approved that combined the as-
sets of the fund with a similar fund of the Templeton Variable Products Se-
ries Fund, effective 5/01/00. The table shows restated total expenses based
on the new fees and assets of the fund as of 12/31/99, and not the assets
of the combined fund. However, if the table reflected both the new fees and
the combined assets, the fund's expenses after 5/1/00 would be estimated
as: Management Fees 0.60%, Distribution and Service Fees 0.25%, Other Ex-
penses 0.19% and Total Fund Operating Expenses 1.04%.
(6) On 2/8/00, a merger and reorganization was approved that combined the as-
sets of the fund with a similar fund of the Templeton International Equity
Fund, effective 5/01/00. The shareholders of that fund approved new manage-
ment fees, which apply to the combined fund effective 5/1/00. The table
shows restated total expenses based on the new fees and assets of the fund
as of 12/31/99, and not the assets of the combined fund. However, if the
table reflected both the new fees and the combined assets, the fund's ex-
penses after 5/1/00 would be estimated as: Management Fees 0.65%, Distribu-
tion and Service Fees 0.25%, Other Expenses 0.20% and Total Fund Operating
Expenses 1.10%.
(7) On 2/8/00, a merger and reorganization was approved that combined the as-
sets of the fund with a similar fund of the Templeton Variable Products Se-
ries Fund, effective 5/01/00. The table shows restated total expenses based
on the new fees
5
<PAGE>
and assets of the fund as of 12/31/99, and not the assets of the combined
fund. However, if the table reflected both the new fees and the combined as-
sets, the fund's expenses after 5/1/00 would be estimated as: Management
Fees 0.80%, Distribution and Service Fees 0.25%, Other Expenses 0.05% and
Total Fund Operating Expenses 1.10%.
(8) The Fund administration fee is paid indirectly through the management fee.
(9) The fund's class 2 distribution plan or "rule 12b-1 plan" is described in
the fund's prospectus. While the maximum amount payable under the fund's
class 2 rule 12b-1 plan is 0.35% per year of the fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year.
(10) Each series has an expense offset arrangement which reduces the series'
custodian fee based on the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangement and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses"
do not take into account these expense reductions, and are therefore
higher than the actual expenses of the series. Had the fee reductions
been taken into account, "Net Expenses" would be lower for certain series
and would equal: 0.83% for Emerging Growth Series; 0.85% for Research Se-
ries; 0.89% for Total Return Series; 0.90% for Utilities Series.
6
<PAGE>
EXAMPLES
(expenses of the subaccounts and the funds)
If you surrender your contract at the end of the time period shown, you would
pay the following expenses on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund $92 $115 $140 $223
- ------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 92 117 144 246
- ------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 94 122 151 243
- ------------------------------------------------------------------------------------------
AIM V.I. Value Fund 92 116 141 226
- ------------------------------------------------------------------------------------------
Alliance Premier Growth Portfolio 97 131 165 267
- ------------------------------------------------------------------------------------------
Alliance Growth and Income Portfolio 94 122 151 243
- ------------------------------------------------------------------------------------------
Alliance Growth Portfolio 96 126 157 254
- ------------------------------------------------------------------------------------------
Alliance Technology Portfolio 96 129 161 260
- ------------------------------------------------------------------------------------------
AFIS Global Small Capitalization Fund 95 125 155 250
- ------------------------------------------------------------------------------------------
AFIS Growth Fund 91 113 135 215
- ------------------------------------------------------------------------------------------
AFIS International Fund 93 119 145 233
- ------------------------------------------------------------------------------------------
AFIS Growth-Income Fund 90 111 133 212
- ------------------------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund 87 103 119 186
- ------------------------------------------------------------------------------------------
Delaware Premium Growth and Income Series 91 115 139 221
- ------------------------------------------------------------------------------------------
Delaware Premium High Yield Series (formerly Delchester) 92 115 139 222
- ------------------------------------------------------------------------------------------
Delaware Premium Devon Series 92 116 140 225
- ------------------------------------------------------------------------------------------
Delaware Premium Emerging Markets Series 99 136 173 280
- ------------------------------------------------------------------------------------------
Delaware Premium International Equity Series 94 121 148 239
- ------------------------------------------------------------------------------------------
Delaware Premium REIT Series 93 119 145 233
- ------------------------------------------------------------------------------------------
Delaware Premium Select Growth Series 92 118 143 230
- ------------------------------------------------------------------------------------------
Delaware Premium Small Cap Value Series 93 119 145 233
- ------------------------------------------------------------------------------------------
Delaware Premium Social Awareness Series 93 119 145 233
- ------------------------------------------------------------------------------------------
Delaware Premium Trend Series 93 118 144 231
- ------------------------------------------------------------------------------------------
Dreyfus Variable Fund Small Cap Portfolio 92 117 142 227
- ------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 90 111 132 210
- ------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 91 113 136 217
- ------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 93 120 148 238
- ------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 91 114 138 220
- ------------------------------------------------------------------------------------------
Franklin Small Cap Securities Fund 95 125 155 250
- ------------------------------------------------------------------------------------------
Franklin Mutual Shares Securities Fund 95 124 154 248
- ------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (formerly Global Growth) 96 127 158 255
- ------------------------------------------------------------------------------------------
Templeton International Securities Fund 96 127 158 255
- ------------------------------------------------------------------------------------------
Kemper KVS Small Cap Growth Portfolio 91 115 139 221
- ------------------------------------------------------------------------------------------
Kemper KVS Government Securities Portfolio 91 112 135 215
- ------------------------------------------------------------------------------------------
Liberty Variable Trust Colonial U.S. Growth & Income Fund 93 120 146 235
- ------------------------------------------------------------------------------------------
Liberty Variable Trust Newport Tiger Fund 96 129 161 261
- ------------------------------------------------------------------------------------------
Lincoln National Bond Fund 90 109 130 206
- ------------------------------------------------------------------------------------------
Lincoln National Money Market Fund 90 111 133 211
- ------------------------------------------------------------------------------------------
MFS Variable Trust Emerging Growth Series 93 118 145 232
- ------------------------------------------------------------------------------------------
MFS Variable Trust Research Series 93 119 146 234
- ------------------------------------------------------------------------------------------
MFS Variable Trust Total Return Series 93 120 147 237
- ------------------------------------------------------------------------------------------
MFS Variable Trust Utilities Series 93 120 148 238
- ------------------------------------------------------------------------------------------
OCC Trust Global Equity Portfolio 95 126 156 253
- ------------------------------------------------------------------------------------------
OCC Trust Managed Portfolio 93 118 144 231
- ------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
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>
AIM V.I. Capital Appreciation Fund $22 $65 $110 $223
- ------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 22 67 114 246
- ------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 24 72 121 243
- ------------------------------------------------------------------------------------------
AIM V.I. Value Fund 22 66 111 226
- ------------------------------------------------------------------------------------------
Alliance Premier Growth Portfolio 27 81 135 267
- ------------------------------------------------------------------------------------------
Alliance Growth and Income Portfolio 24 72 121 243
- ------------------------------------------------------------------------------------------
Alliance Growth Portfolio 26 76 127 254
- ------------------------------------------------------------------------------------------
Alliance Technology Portfolio 26 79 131 260
- ------------------------------------------------------------------------------------------
AFIS Global Small Capitalization Fund 25 75 125 250
- ------------------------------------------------------------------------------------------
AFIS Growth Fund 21 63 105 215
- ------------------------------------------------------------------------------------------
AFIS International Fund 23 69 115 233
- ------------------------------------------------------------------------------------------
AFIS Growth-Income Fund 20 61 103 212
- ------------------------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund 17 53 89 186
- ------------------------------------------------------------------------------------------
Delaware Premium Growth and Income Series 21 65 109 221
- ------------------------------------------------------------------------------------------
Delaware Premium High Yield Series (formerly Delchester) 22 65 109 222
- ------------------------------------------------------------------------------------------
Delaware Premium Devon Series 22 66 110 225
- ------------------------------------------------------------------------------------------
Delaware Premium Emerging Markets Series 29 86 143 280
- ------------------------------------------------------------------------------------------
Delaware Premium International Equity Series 24 71 118 239
- ------------------------------------------------------------------------------------------
Delaware Premium REIT Series 23 69 115 233
- ------------------------------------------------------------------------------------------
Delaware Premium Select Growth Series 22 68 113 230
- ------------------------------------------------------------------------------------------
Delaware Premium Small Cap Value Series 23 69 115 233
- ------------------------------------------------------------------------------------------
Delaware Premium Social Awareness Series 23 69 115 233
- ------------------------------------------------------------------------------------------
Delaware Premium Trend Series 23 68 114 231
- ------------------------------------------------------------------------------------------
Dreyfus Variable Fund Small Cap Portfolio 22 67 112 227
- ------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20 61 102 210
- ------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 21 63 106 217
- ------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 23 70 118 238
- ------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 21 64 108 220
- ------------------------------------------------------------------------------------------
Franklin Small Cap Securities Fund 25 75 125 250
- ------------------------------------------------------------------------------------------
Franklin Mutual Shares Securities Fund 25 74 124 248
- ------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (formerly Global Growth) 26 77 128 255
- ------------------------------------------------------------------------------------------
Templeton International Securities Fund 26 77 128 255
- ------------------------------------------------------------------------------------------
Kemper KVS Small Cap Growth Portfolio 21 65 109 221
- ------------------------------------------------------------------------------------------
Kemper KVS Government Securities Portfolio 21 62 105 215
- ------------------------------------------------------------------------------------------
Liberty Variable Trust Colonial U.S. Growth & Income Fund 23 70 116 235
- ------------------------------------------------------------------------------------------
Liberty Variable Trust Newport Tiger Fund 26 79 131 261
- ------------------------------------------------------------------------------------------
Lincoln National Bond Fund 20 59 100 206
- ------------------------------------------------------------------------------------------
Lincoln National Money Market Fund 20 61 103 211
- ------------------------------------------------------------------------------------------
MFS Variable Trust Emerging Growth Series 23 68 115 232
- ------------------------------------------------------------------------------------------
MFS Variable Trust Research Series 23 69 116 234
- ------------------------------------------------------------------------------------------
MFS Variable Trust Total Return Series 23 70 117 237
- ------------------------------------------------------------------------------------------
MFS Variable Trust Utilities Series 23 70 118 238
- ------------------------------------------------------------------------------------------
OCC Trust Global Equity Portfolio 25 76 126 253
- ------------------------------------------------------------------------------------------
OCC Trust Managed Portfolio 23 68 114 231
- ------------------------------------------------------------------------------------------
</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 repre-
sentation of past or future expenses. Actual expenses may be more or less than
those shown.
8
<PAGE>
Summary
What kind of contract am I buying? It is an individual annuity contract be-
tween you and Lincoln Life. It may provide for a fixed annuity and/or a vari-
able 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 estab-
lished under Indiana insurance law, and registered with the SEC as a unit in-
vestment trust. VAA assets are allocated to one or more subaccounts, according
to your investment choices. VAA assets are not chargeable with liabilities
arising out of any other business which Lincoln Life may conduct. See 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: See
Investments of the variable annuity account--Description of Funds.
Who invests purchase payments? Several different investment advisors manage
the investment options. See Investments of the variable annuity account--In-
vestment 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 pay-
ments, 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 deduc-
tions--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% of the
surrendered or withdrawn Purchase Payments, 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 the 13th and each additional
transfer 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.
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 (minus withdrawals), contract value or the
highest contract value as of the most recent contract year occurring on or be-
fore your 80th birthday. Your beneficiary has options as to how the death ben-
efit 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 con-
tracts--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 59 1/2, a 10% Inter-
nal 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 allo-
cate to the variable side of the contract. See Return privilege.
9
<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 Lincoln ChoicePlus subaccounts for the following pe-
riods ended December 31, 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 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. Growth Fund Accumulation unit value
. Beginning of period......................................... $10.000 $11.112
. End of period............................................... 11.112 14.816
Number of accumulation units
. End of period (000s omitted)................................ 25 1,650
- -------------------------------------------------------------------------------
AIM V.I. International Equity Fund Accumulation unit value
Beginning of period........................................... $10.000 $10.278
. End of period............................................... 10.278 15.710
Number of accumulation units
. End of period (000s omitted)................................ 7 686
- -------------------------------------------------------------------------------
AIM V.I. Value Equity Fund Accumulation unit value
. Beginning of period......................................... $10.000 $10.937
. End of period............................................... 10.937 14.003
Number of accumulation units
. End of period (000s omitted)................................ 37 3,157
- -------------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund Accumulation unit value
. Beginning of period......................................... $10.000 $10.353
. End of period............................................... 10.353 12.299
Number of accumulation units
. End of period (000s omitted)................................ 91 3,772
- -------------------------------------------------------------------------------
Delaware Premium Growth and Income Series
Accumulation unit value
. Beginning of period......................................... $10.000 $10.021
. End of period............................................... 10.021 9.580
Number of accumulation units
. End of period (000s omitted)................................ 23 806
- -------------------------------------------------------------------------------
Delaware Premium High Yield Series (formerly Delchester)
Accumulation unit value
. Beginning of period......................................... $10.000 $ 9.970
. End of period............................................... 9.970 9.575
Number of accumulation units
. End of period (000s omitted)................................ 41 637
- -------------------------------------------------------------------------------
Delaware Premium Devon Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.313
. End of period............................................... 10.313 9.138
Number of accumulation units
. End of period (000s omitted)................................ 44 975
- -------------------------------------------------------------------------------
Delaware Premium Emerging Markets Series Accumulation unit
value
. Beginning of period......................................... $10.000 $ 9.268
. End of period............................................... 9.268 13.551
Number of accumulation units
. End of period (000s omitted)................................ 2 99
- -------------------------------------------------------------------------------
Delaware Premium International Equity Series Accumulation unit
value
. Beginning of period......................................... $10.000 $10.152
. End of period............................................... 10.152 11.574
Number of accumulation units
. End of period (000s omitted)................................ 2 314
- -------------------------------------------------------------------------------
Delaware Premium REIT Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.119
. End of period............................................... 10.119 9.718
Number of accumulation units
. End of period (000s omitted)................................ 9 73
- -------------------------------------------------------------------------------
Delaware Premium Small Cap Value Series Accumulation unit
value
. Beginning of period......................................... $10.000 $10.489
. End of period............................................... 10.489 9.841
Number of accumulation units
. End of period (000s omitted)................................ 17 319
- -------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
*1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Delaware Premium Social Awareness Series Accumulation unit
value
. Beginning of period......................................... $10.000 $10.659
. End of period............................................... 10.659 11.870
Number of accumulation units
. End of period (000s omitted)................................ 55 611
- -------------------------------------------------------------------------------
Delaware Premium Trend Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.854
. End of period............................................... 10.854 18.244
Number of accumulation units
. End of period (000s omitted)................................ 7 878
- -------------------------------------------------------------------------------
Dreyfus Variable Fund Small Cap Portfolio Accumulation unit
value
. Beginning of period......................................... $10.000 $10.715
. End of period............................................... 10.715 13.012
Number of accumulation units
. End of period (000s omitted)................................ 13 296
- -------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $10.101
. End of period............................................... 10.101 10.588
Number of accumulation units
. End of period (000s omitted)................................ 37 1,473
- -------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $10.605
. End of period............................................... 10.605 14.360
Number of accumulation units
. End of period (000s omitted)................................ 43 2,654
- -------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $10.106
. End of period............................................... 10.106 14.210
Number of accumulation units
. End of period (000s omitted)................................ 13 628
- -------------------------------------------------------------------------------
Fidelity VIP Growth Opportunities Portfolio Accumulation unit
value
. Beginning of period......................................... $10.000 $10.389
. End of period............................................... 10.389 10.677
Number of accumulation units
. End of period (000s omitted)................................ 64 1,770
- -------------------------------------------------------------------------------
Lincoln National Bond Fund Accumulation unit value
. Beginning of period......................................... $10.000 $10.095
. End of period............................................... 10.095 9.631
Number of accumulation units
. End of period (000s omitted)................................ 46 1,260
- -------------------------------------------------------------------------------
Lincoln National Money Market Fund Accumulation unit value
. Beginning of period......................................... $10.000 $10.034
. End of period............................................... 10.034 10.364
Number of accumulation units
. End of period (000s omitted)................................ 348 1,721
- -------------------------------------------------------------------------------
MFS Variable Trust Emerging Growth Series Accumulation unit
value
. Beginning of period......................................... $10.000 $11.242
. End of period............................................... 11.242 19.557
Number of accumulation units
. End of period (000s omitted)................................ 6 1,212
- -------------------------------------------------------------------------------
MFS Variable Trust Research Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.586
. End of period............................................... 10.586 12.928
Number of accumulation units
. End of period (000s omitted)................................ 8 631
- -------------------------------------------------------------------------------
MFS Variable Trust Total Return Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.136
. End of period............................................... 10.136 10.303
Number of accumulation units
. End of period (000s omitted)................................ 51 1,271
- -------------------------------------------------------------------------------
Kemper KVS Small Cap Growth Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $11.014
. End of period............................................... 11.014 14.602
Number of accumulation units
. End of period (000s omitted)................................ 4 405
- -------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
*1998 1999
- ------------------------------------------------------------------------------
<S> <C> <C>
Kemper KVS Government Securities Portfolio Accumulation unit
value
. Beginning of period......................................... $10.000 $10.032
. End of period............................................... 10.032 9.962
Number of accumulation units
. End of period (000s omitted)................................ 77 1,219
- ------------------------------------------------------------------------------
Liberty Variable Trust Newport Tiger Fund Accumulation unit
value
. Beginning of period......................................... $10.000 $ 9.923
. End of period............................................... 9.923 16.441
Number of accumulation units
. End of period (000s omitted)................................ 2 186
- ------------------------------------------------------------------------------
Liberty Variable Trust Colonial U.S. Growth & Income Fund
Accumulation unit value
. Beginning of period......................................... $10.000 $10.395
. End of period............................................... 10.395 11.436
Number of accumulation units
. End of period (000s omitted)................................ 2 388
- ------------------------------------------------------------------------------
MFS Variable Trust Utilities Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.244
. End of period............................................... 10.244 13.213
Number of accumulation units
. End of period (000s omitted)................................ 67 1,277
- ------------------------------------------------------------------------------
OCC Trust Global Equity Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $10.062
. End of period............................................... 10.062 12.554
Number of accumulation units
. End of period (000s omitted)................................ 11 294
- ------------------------------------------------------------------------------
OCC Trust Managed Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $ 9.815
. End of period............................................... 9.815 10.162
Number of accumulation units
. End of period (000s omitted)................................ 4 541
- ------------------------------------------------------------------------------
</TABLE>
*These values do not reflect a full year's experience because they are calcu-
lated for the period from the beginning of investment activity of the
subaccounts (November 20) through December 31.
Because the new subaccounts AIM V.I. Capital Appreciation, Alliance Premier
Growth Portfolio, Alliance Growth and Income Portfolio, Alliance Growth Portfo-
lio, Alliance Technology Portfolio, AFIS Global Small Capitalization, AFIS
Growth, AFIS International, AFIS Growth-Income, Delaware Premium Select Growth
Series, Franklin Small Cap Securities, Franklin Mutual Shares Securities, Tem-
pleton Growth Securities, and Templeton International Securities which are
available under the Contracts did not begin operation prior to December 31,
1999, financial information for the subaccounts is not included in this pro-
spectus or the SAI.
12
<PAGE>
Investment results
At times, the VAA may compare its investment results to various unmanaged in-
dices or other variable annuities in reports to shareholders, sales literature
and advertisements. The results will be calculated on a total return basis for
various periods, with or without contingent deferred sales charges. Results
calculated without contingent deferred sales charges will be higher. Total re-
turns include the reinvestment of all distributions, which are reflected in
changes in unit value. The Money Market subaccount's yield is based upon in-
vestment performance over a 7-day period, which is then annualized.
The money market yield figure and annual performance of the subaccounts are
based on past performance and do not indicate or represent future performance.
See the SAI for further information.
Financial statements
The financial statements of the VAA and the statutory-basis financial state-
ments 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 servic-
es.
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 liabili-
ties 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 ac-
cordance 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 con-
tracts 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, ("AIM V.I. Funds"), managed by AIM Advisors,
Inc.
Alliance Variable Products Series Fund is managed by Alliance Capital Manage-
ment, L.P.
American Funds Insurance Series is managed by Capital Research and Management
Company.
Deutsche Asset Management VIT Funds (formerly the "BT Insurance Trust") man-
aged by Bankers Trust Company.
Delaware Group Premium Fund, ("Delaware Group"), managed by Delaware Manage-
ment Company. The Social Awareness Series is sub-advised by Vantage Investment
Advisors. The REIT Series is sub-advised by Lincoln Investment Management. The
International Equity and Emerging Markets Series are managed by Delaware In-
ternational Advisers Ltd.
Dreyfus Variable Investment Fund ("Dreyfus Variable Fund") managed by The
Dreyfus Corporation.
Variable Insurance Products Fund ("Fidelity VIP") and Variable Insurance Prod-
ucts Fund III ("Fidelity VIP III") managed by Fidelity Management & Research
Company.
Franklin Templeton Variable Insurance Products Trust--Franklin Small Cap is
managed by Franklin Advisers, Inc.; Mutual Shares Securities is managed by
Franklin Mutual Advisers, LLC; Templeton Growth Securities is managed by Tem-
pleton Global Advisors Limited; Templeton International Securities is managed
by Templeton Investment Counsel, Inc.
Kemper Variable Series ("Kemper KVS") managed by Scudder Kemper Investments,
Inc.
Liberty Variable Investment Trust ("Liberty Variable Trust") managed by Lib-
erty Advisory Series Corp., and sub-advised by Colonial Management Associates,
Inc. and Newport Fund Management, Inc.
13
<PAGE>
Lincoln National Bond Fund, Inc., and Lincoln National Money Market Fund,
Inc., managed by Lincoln Investment Management, Inc. Lincoln Investment Man-
agement has informed the funds to which it provides advisory services that it
intends to merge into a newly created series of its affiliate, Delaware Man-
agement Business Trust, during the second or third quarter of 2000. Lincoln
Investment Management does not expect the merger to result in any change in
the level of advisory services that it currently provides to these funds, al-
though there may be some changes in, and additions to, personnel. See the pro-
spectuses for these funds for more information.
MFS--Variable Insurance Trust ("MFS Variable Trust") managed by Massachusetts
Financial Services
Company.
OCC Accumulation Trust ("OCC Trust") managed by OpCap Advisors.
As compensation for their services to the fund, the investment advisors re-
ceive 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 Re-
demption of Shares, in the Prospectus for the fund.
With respect to a fund, the advisor and/or distributor, or an affiliate there-
of, may compensate Lincoln Life (or an affiliate) for administrative, distri-
bution, or other services. Some funds may compensate us more than other funds.
It is anticipated that such compensation will be based on assets of the par-
ticular Fund attributable to the contracts along with certain other variable
contracts issued or administered by Lincoln Life (or an affiliate). As of the
date of this Prospectus, we were receiving compensation from each fund company
except Delaware.
The funds' shares are issued and redeemed only in connection with variable an-
nuity 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 ac-
counts 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 subaccounts of the VAA is invested solely in shares of one of the
funds available under the contract. Each fund is registered as a diversified,
open-end management investment company under the 1940 Act, except for the Del-
aware Premium REIT Series and Delaware Premium 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. Man-
agement investment company is the legal term for a mutual fund. These defini-
tions are very general. The precise legal definitions for these terms are con-
tained in the 1940 Act.
Certain funds offered as part of this contract have similar investment objec-
tives and policies to other portfolios managed by the advisor. The investment
results of the funds, however, may be higher or lower than the other portfo-
lios that are managed by the advisor or sub-advisor. There can be no assur-
ance, 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 man-
aged by the advisor or sub-advisor.
We currently anticipate closing and replacing eight funds during the fourth
quarter of 2000:
Colonial U.S. Growth & Income Fund with AFIS Growth-Income Fund (Class 2)
Delaware Premium Devon Series with AFIS Growth- Income Fund (Class 2)
Delaware Premium International Series with AFIS International Fund (Class 2)
Dreyfus Small Cap Portfolio with Delaware Premium Trend Series
Kemper KVS Government Securities Portfolio with Lincoln National Bond Fund
Kemper KVS Small Cap Growth Portfolio with Delaware Premium Trend Series
OCC Global Equity Portfolio with Templeton Global Growth Fund (Class 2)
OCC Managed Portfolio with AFIS Growth-Income Fund (Class 2)
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 as-
surance that any of the funds will achieve their stated objectives.
AIM V.I. Capital Appreciation Fund: Seeks growth of capital through investment
in common stocks, with emphasis on medium- and small-sized growth companies.
The investment advisor will be particularly interested in companies that are
likely to benefit from new or innovative products, services or processes as
well as those that have experienced above average, long-term growth in earn-
ings and have excellent prospects for future growth.
AIM V.I. Growth Fund: Seeks growth of capital primarily by investing in sea-
soned and better capitalized companies considered to have strong earnings mo-
mentum.
AIM V.I. International Equity Fund: Seeks to provide long-term growth of capi-
tal by investing in a diversified portfolio of international equities whose
issuers are considered to have strong earnings momentum.
AIM V.I. Value Fund: Seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by its investment advisor to be underval
-
14
<PAGE>
ued relative to the investment advisor's appraisal of the current or projected
earnings of the companies issuing the securities, or relative to the current
market values of assets owned by the companies issuing the securities or rela-
tive to the equity market generally. Income is a secondary objective.
Alliance Premier Growth Portfolio: Seeks long-term growth of capital by pursu-
ing aggressive investment policies. The portfolio invests predominantly in the
equity securities of a limited number of large, carefully selected, high-qual-
ity U.S. companies that are judged likely to achieve superior earnings growth.
Alliance Growth and Income Portfolio: Seeks reasonable current income and rea-
sonable appreciation through investments primarily in dividend-paying common
stocks of good quality. The portfolio also may invest in fixed-income securi-
ties and convertible securities.
Alliance Growth Portfolio: Seeks to provide long-term growth of capital. Cur-
rent income is only an incidental consideration. The portfolio invests primar-
ily in equity securities of companies with favorable earnings outlooks, which
have long-term growth rates that are expected to exceed that of the U.S. econ-
omy over time.
Alliance Technology Portfolio: Seeks to emphasizes growth of capital and in-
vests for capital appreciation. Current income is only an incidental consider-
ation. The portfolio may seek income by writing listed call options. The port-
folio invests primarily in securities of companies expected to benefit from
technological advances and improvements (i.e., companies that use technology
extensively in the development of new or improved products or processes).
AFIS Global Small Capitalization Fund: Seeks to make your investment grow over
time by investing primarily in stocks of smaller companies located around the
world that typically have market capitalizations of $50 million to $1.5 bil-
lion. The fund is designed for investors seeking capital appreciation through
stocks. Investors in the fund should have a long-term perspective and be able
to tolerate potentially wide price fluctuations
AFIS Growth Fund: Seeks to make your investment grow by investing primarily in
common stocks of companies that appear to offer superior opportunities for
growth of capital. The fund is designed for investors seeking capital appreci-
ation through stocks. Investors in the fund should have a long-term perspec-
tive and be able to tolerate potentially wide price fluctuations.
AFIS International Fund: Seeks to make your investment grow over time by in-
vesting primarily in common stocks of companies located outside the United
States. The fund is designed for investors seeking capital appreciation
through stocks. Investors in the fund should have a long-term perspective and
be able to tolerate potentially wide price fluctuations.
AFIS Growth-Income Fund: Seeks to make your investment grow and provide you
with income over time by investing primarily in common stocks or other securi-
ties which demonstrate the potential for appreciation and/or dividends. The
fund is designed for investors seeking both capital appreciation and income.
Deutsche VIT Equity 500 Index Fund: Seeks to match the performance of the
stock market as represented by Standard & Poor's 500 Index, before fund ex-
penses.
Delaware Premium Growth and Income Series: Seeks the highest possible total
return by investing in stocks that exhibit the potential for growth while pro-
viding higher than average dividend income.
Delaware Premium High Yield Series (formerly Delchester): Seeks total return
and, as a secondary objective, high current income. The series invests in
rated and unrated corporate bonds (including high-risk, high-yield bonds com-
monly known as junk bonds), foreign bonds, U.S. government securities and com-
mercial paper. An investment in this series may involve greater risks than an
investment in a portfolio comprised primarily of investment-grade bonds.
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.
Delaware Premium Emerging Markets Series: Seeks long-term growth by investing
primarily in stocks of companies located or operating in emerging or develop-
ing countries.
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.
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.
Delaware Premium Select Growth Series: Seeks long-term capital appreciation by
primarily investing in common stocks of companies that have the potential for
high earnings growth. Companies of any size are considered, as long as they
are larger than $300 million in market capitalization.
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.
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.
15
<PAGE>
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.
Dreyfus Variable Fund Small Cap Portfolio: Seeks to maximize capital apprecia-
tion by investing primarily in common stocks of domestic and foreign issuers
with market capitalizations of less than $1.5 billion at time of purchase. The
portfolio manager seeks companies believed to be characterized by new or inno-
vative products or services which should enhance prospects for growth in fu-
ture earnings. The Portfolio may also invest in special situations such as
corporate restructurings, mergers or acquisitions.
Fidelity VIP Equity-Income Portfolio: Seeks reasonable income by investing
primarily in income-producing equity securities, with some potential for capi-
tal appreciation, seeking a yield that exceeds the composite yield on the se-
curities comprising the Standard and Poor's 500 Index (S&P 500).
Fidelity VIP Growth Portfolio: Seeks long-term capital appreciation. The port-
folio normally purchases common stocks.
Fidelity VIP Overseas Portfolio: Seeks long-term growth of capital by invest-
ing primarily in foreign securities.
Fidelity VIP III Growth Opportunities Portfolio: Seeks capital growth by in-
vesting primarily in common stocks.
Franklin Small Cap Securities Fund: Seeks long-term capital growth. It invests
primarily in equity securities of U.S. small cap growth companies. Small cap
companies are generally those with market cap values of less than $1.5 billion
at time of purchase.
Franklin Mutual Shares Securities Fund: Seeks capital appreciation with income
as a secondary goal. It invests primarily in equity securities of companies
that the manager believes are available at market prices less than their ac-
tual value based on certain recognized or objective criteria.
Templeton Growth Securities Fund: Seeks long-term capital growth. It invests
primarily in equity securities of companies in various nations throughout the
world, including the U.S. and emerging markets.
Templeton International Securities Fund: Seeks long-term capital growth. It
invests primarily in equity securities of companies outside the United States,
including emerging markets.
Kemper KVS Small Cap Growth Portfolio: Seeks maximum appreciation of invest-
or's capital from a portfolio primarily of growth stocks of smaller companies.
Kemper KVS Government Securities Portfolio: Seeks high current return consis-
tent with preservation of capital from a portfolio composed primarily of U.S.
government securities.
Liberty Variable Trust Colonial U.S. Growth & Income 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.
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, Indo-
nesia, the Philippines, South Korea and Taiwan.
Lincoln National Bond Fund: Seeks maximum current income consistent with pru-
dent investment strategy. The fund invests primarily in medium- and long-term
corporate and government bonds.
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.
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.
MFS Variable Trust Research Series: Seeks long-term growth and future income
by investing primarily in equity companies believed to possess better than av-
erage prospects for long-term growth. A committee of investment research ana-
lysts selects the securities for the fund, with individual analysts responsi-
ble for choosing securities within an assigned industry.
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.
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.
OCC Trust Global Equity Portfolio: Seeks long-term growth through a global in-
vestment strategy primarily involving equity securities.
OCC Trust Managed Portfolio: Seeks capital growth over time by investing in
varying percentages of common stocks, bonds and cash equivalents. The percent-
age of the fund allocated to the different asset classes will vary based on
the manager's assessment of the relative outlook for each investment.
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<PAGE>
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.
When a fund sells any of its shares both to variable annuity and to variable
life insurance separate accounts, it is said to engage in mixed funding. When
a fund sells any of its shares to separate accounts of unaffiliated life in-
surance companies, it is said to engage in shared funding.
The funds currently engage in mixed and shared funding. Therefore, due to dif-
ferences in redemption rates or tax treatment, or other considerations, the
interest of various contractowners participating in a fund could conflict.
Each of the fund's Board of Directors will monitor for the existence of any
material conflicts, and determine what action, if any, should be taken. See
the Prospectuses for the funds.
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 addi-
tional units, but are reflected as changes in unit values.
Addition, deletion or substitution of investments
We reserve the right, within the law, to add, delete and substitute series
and/or funds within the VAA. We may also add, delete, or substitute series or
funds only for certain classes of contractowners. New or substitute funds may
have different fees and expenses, and may only be offered to certain classes
of contractowners. This substitution might occur if shares of a fund should no
longer be available, or if investment in any fund's shares should become inap-
propriate, in the judgment of our management, for the purposes of the con-
tract. We cannot substitute shares of one fund for another without the ap-
proval 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 ad-
ministrative 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 ac-
counting 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 as-
sumed 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 corre-
spond to the costs associated with providing the services or benefits indi-
cated by the description of the charge. For example, the surrender charge col-
lected may not fully cover all of the sales and distribution expenses actually
incurred by us.
Deductions from the VAA for 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.
Surrender charge
A surrender charge applies (except as described below) to surrenders and with-
drawals 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
One year At Least
Surrender charge as a percentage of the 7% 1 2 3 4 5 6 7+
surrendered or withdrawn purchase payments 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.)
17
<PAGE>
A surrender charge does not apply to:
1. A surrender or withdrawal of purchase payments that have been invested for
at least 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 the free amount which is equal to 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 re-
sult of 180 days of continuous confinement of the contractowner in an ac-
credited 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,
joint owner or annuitant.
7. A surrender of a contract or withdrawal of contract value of a contract is-
sued to employees and registered representatives of any member of the sell-
ing group and their spouses and minor children, or to officers, directors,
trustees or bona-fide full-time employees of Lincoln Financial Group, AIM,
Alliance Capital, The Capital Group, Bankers Trust, The Dreyfus Corpora-
tion, Fidelity Management & Research Company, Franklin Advisors, Inc.,
Franklin Mutual Advisors, LLC, Templeton Global Advisors Limited, Templeton
Investment Counsel, Inc., Scudder Kemper Investments, Liberty Advisory
Services Corp., Inc., MFS 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.).
For purposes of calculating the surrender charge on withdrawals on contracts
where the contractowner is not a Charitable Remainder Trust, Lincoln Life as-
sumes that:
a. the free amount will be withdrawn from purchase payments on a "first in-
first out (FIFO)" basis.
b. Prior to the seventh anniversary of the contract, any amount withdrawn
above the free amount during a contract year will be withdrawn in the fol-
lowing order:
1. from purchase payments (on a FIFO basis) until exhausted; then
2. from earnings.
c. On or after the seventh anniversary of the contract, any amount withdrawn
above the free amount during a contract year will be withdrawn in the fol-
lowing order:
1. from purchase payments (on a FIFO basis) to which a surrender charge no
longer applies until exhausted; then
2. from earnings until exhausted; then
3. from purchase payments (on a FIFO basis) to which a surrender charge
still applies.
In some states paragraph c does not apply and paragraph b continues to apply
after the seventh anniversary of the contract.
For purposes of calculating the surrender charge on withdrawals on contracts
where the contractowner is a Charitable Remainder Trust, Lincoln Life assumes
that:
a. the free amount will be withdrawn from purchase payments on a FIFO basis.
b. Any amount withdrawn above the free amount during a contract year will be
withdrawn in the following order:
1. from purchase payments (on a FIFO basis) to which a surrender charge no
longer applies until exhausted; then
2. from earnings until exhausted; then
3. from purchase payments (on a FIFO basis) to which a surrender charge
still applies.
The surrender charge is calculated separately for each contract year's pur-
chase payments to which a charge applies. The surrender charges associated
with surrender or withdrawal are paid to us to compensate us for the loss we
experience on contract distribution costs when contractowners surrender or
withdraw before distribution costs have been recovered.
If the contractowner is a corporation or other non-individual (non-natural
person), the annuitant or joint annuitant will be considered the contractowner
or joint owner for purposes of determining when a surrender charge does not
apply.
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 the 13th and each additional
transfer during any contract year. Automatic dollar cost averaging and auto-
matic 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.
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<PAGE>
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 gener-
ally depend upon the law of your state of residence. The tax ranges from 0% to
5%.
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 previ-
ously may be reduced or eliminated for any particular contract. However, these
charges will be reduced only to the extent that we anticipate lower distribu-
tion and/or administrative expenses, or that we perform fewer sales or adminis-
trative 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 rep-
resentative 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 con-
tract 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 com-
pleted within those five days, you will be informed of the reasons, and the
purchase payment will be returned immediately. Once the application is com-
plete, 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 con-
tracts 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 maxi-
mum 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 pur-
chase payments for nonqualified and qualified contracts is $100. There is no
set maximum for additional purchase payments. However, purchase payments in ex-
cess 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 cancella-
tion of the contract.
Valuation date
Accumulation and annuity units will be valued once daily at the close of trad-
ing (currently, normally, 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 vari-
able 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 accumu-
lation units credited is determined by dividing the amount allocated to each
subaccount by the value of an accumulation unit for that subaccount on the val-
uation date on which the purchase payment is received at our home office if re-
ceived 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 com-
puted 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 accumu-
lation unit. However, the dollar value of an accumulation unit will vary de-
pending not only upon how well the underlying fund's investment perform, but
19
<PAGE>
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 es-
tablished 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
(2) The liabilities of the subaccount at the end of the valuation period;
these liabilities include daily charges imposed on the subaccount, and may in-
clude 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 Tele-
phone Exchange Authorization form (available from us) is on file with us, by a
toll-free telephone call or by the Lincoln Life internet site. 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 Identifi-
cation Number (PIN) to serve as identification. We will not be liable for fol-
lowing telephone instructions we reasonably believe are genuine. Telephone re-
quests 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 in-
herent 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 mod-
ify 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 practic-
es, 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 ac-
count to the various subaccount(s) except that 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.
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.
20
<PAGE>
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 an-
other subaccount in the VAA or to the fixed side of the contract. Those trans-
fers 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
You may designate a beneficiary during your lifetime and change the benefi-
ciary by filing a written request with our home office. Each change of benefi-
ciary revokes any previous designation. We reserve the right to request that
you send us the contract for endorsement of a change of beneficiary.
If the contractowner, joint owner or annuitant dies before the annuity com-
mencement date, the death benefit will be equal to the greatest of: the con-
tract value for the valuation period during which the death benefit election
becomes effective; the sum of all purchase payments less the sum of all with-
drawals; or the highest contract value as of any contract anniversary occur-
ring on or before the 80th birthday of the deceased person upon whose death
the death benefit is payable; increased by the sum of purchase payments made
since such contract anniversary and decreased by the sum of all partial with-
drawals, partial annuitizations, and premium tax deductions made since such
contract anniversary.
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, joint owner or annuitant; (2) written election
of a method of settlement; and (3) any other required claim forms, fully com-
pleted.
Notwithstanding any provision of this contract to the contrary, the payment of
death benefits provided under this contract must be made in compliance with
Code Section 72(s) or 401(a)(9) as applicable, as amended from time to time.
Death benefits may be taxable. See Federal tax matters.
Upon the death of the contractowner, a death benefit will be paid to the bene-
ficiary. Upon the death of a joint owner, the death benefit will be paid to
the surviving joint owner. Upon the death of an annuitant who is not the
contractowner or joint owner, a death benefit may be paid to the contractowner
(and joint owner, if applicable, in equal shares). If the contractowner is a
corporation or other non-individual (non-natural person), the death of the an-
nuitant will be treated as death of the contractowner.
If there are joint owners, upon the death of the first contractowner, Lincoln
Life will pay a death benefit to the surviving joint owner. The surviving
joint owner will be treated as the primary, designated beneficiary. Any other
beneficiary designation on record at the time of death will be treated as a
contingent beneficiary. If the surviving joint owner is the spouse of the de-
ceased joint owner he/she may continue the contract as a sole contractowner.
Upon the death of the spouse who continues the contract, Lincoln Life will pay
a death benefit to the designated beneficiary.
If the beneficiary is the spouse of the contractowner, then the spouse may
elect to continue the contract as contractowner.
Upon the death of a contractowner, joint owner or annuitant, if the surviving
spouse continues the contract, any portion of the death benefit that would
have been payable (if the contract had not been continued) that exceeds the
current contract value will be credited to the contract. This provision ap-
plies only one time for each contract.
If an annuitant who is not the contract owner or a joint owner dies, then the
contingent annuitant, if named, becomes the annuitant and no death benefit is
payable on the death of the annuitant. If no contingent annuitant is named,
the contractowner (or younger of joint owners) becomes the annuitant. Alterna-
tively, a death benefit may be paid to the contractowner and joint owner, if
applicable in equal shares, provided the annuitant named on this contract has
not been changed (except within the first 30 days after the contract is issued
or upon the death of a prior annuitant). Notification of the election of this
death benefit must be received by Lincoln Life within 75 days of the death of
the annuitant. If no contractowner is living on the date of death of the annu-
itant, the death benefit will be paid to the beneficiary. The contract termi-
nates when any death benefit is paid due to the death of the annuitant. A
death benefit payable on the death of the annuitant will not be paid if the
annuitant has been changed later than 30 days subsequent to the effective date
of this contract, unless the change occurred because of the death of a prior
annuitant.
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; and/or
2. If no beneficiary survives the contractowner, the proceeds will be paid
to the contractowner's estate.
Unless the contractowner has already selected a settlement option, the benefi-
ciary may choose the method of payment of the death benefit. The death benefit
payable to
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<PAGE>
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 or an an-
nuity for a designated period not extending beyond the beneficiary's life ex-
pectancy.
The death benefit payable on the death of the annuitant will be distributed in
either a lump sum or under an annuity payout. The annuity payout must be se-
lected within 60 days after Lincoln Life has approved the death claim.
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 the laws and regulations governing payment of death benefits. This
payment may be postponed as permitted by the Investment Company Act of 1940.
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 guaranteed
payouts, the number of payouts which remain unpaid at the annuitant's death (or
surviving annuitant's death in the case of a joint life annuity) will be paid
to the beneficiary as payouts become due.
Surrenders and withdrawals
Before the annuity commencement date, we will allow the surrender of the con-
tract 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 val-
uation period during which the written request for surrender/withdrawal is re-
ceived 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. The maximum amount which can be withdrawn without incurring any
surrender charges is explained under charges and other deductions. Unless pro-
hibited, surrender/withdrawal payments will be mailed within seven days after
we receive a valid written request at the home office. The payment may be post-
poned as permitted by the 1940 Act.
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 that portion of the
surrender/withdrawal charges attributable to the amount returned. 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 ac-
cumulation unit(s) on the next valuation date. This computation will occur fol-
lowing receipt of the proceeds and request for reinvestment at the home office.
You may utilize the reinvestment privilege only once. For tax reporting purpos-
es, 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 noti-
fied in writing of any changes, modifications or waivers.
Commissions
The commissions paid to dealers are a maximum of 7.0% 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 pur-
chase payments or contract value, they are paid by us.
Ownership
The Owner on the date of issue will be the person designated in the contract
specifications. If no owner is designated, the annuitant(s) will be the owner.
The owner may name a Joint Owner. Joint owner(s) shall be treated as having
equal, undivided interests in the contract, including rights of survivorship.
Either joint owner, independently of the other, may exercise any ownership
rights in the contract.
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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 collater-
ally assigned. We assume no responsibility for the validity or effect of any
assignment, an assignment affects the death benefit calculated under our con-
tract. 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 date
permitted by law which is usually on or before the contractowner's 90th birth-
day. (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 op-
tions), some of which are payable on a variable basis, fixed basis or a combi-
nation 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. Fol-
lowing 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 beneficia-
ries. However, there 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 annu-
itant. 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 fur-
ther 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 guaran-
tee that upon death, should (a) the number of annuity units purchased, as de-
termined 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 mul-
tiplied 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 annu-
ity 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 pay-
ments 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
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(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 applica-
ble. 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 mor-
tality 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 op-
tion 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, vari-
able or combination fixed and variable basis, in proportion to the account al-
location at the time of annuitization) except when a joint life payout is re-
quired 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;
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 de-
pend 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 expe-
rience of the VAA. The general account is subject to regulation and supervi-
sion 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 com-
pany under the 1940 Act. Accordingly, neither the general account nor any in-
terests 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 dis-
closures which are included in this Prospectus which relate to our general ac-
count 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 Pro-
spectus is generally intended to serve as a disclosure document only for as-
pects of the contract involving the VAA, and therefore contains only selected
information regarding the fixed side of the contract. Complete details regard-
ing 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.
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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 av-
eraging. 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 ac-
count. 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 annual effective 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 guaran-
teed period will be subject to the MVA. Each guaranteed period purchase pay-
ment amount will be treated separately for purposes of determining any appli-
cable 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 guaran-
teed period will begin automatically at the end of the previous guaranteed pe-
riod, 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 expi-
ration of the applicable guaranteed period are not subject to the limitation
of twelve transfers per contract year or the additional fixed account transfer
restrictions.
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 sub-
ject 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 ac-
count fees and before any applicable surrender or transfer charges. In gener-
al, 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 sur-
render or transfer is lower than the index rate at the time the purchase pay-
ment 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 in-
dex 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 by multiplying the transaction amount by:
(1+A)n
----
-1
(1+B)n
where:
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 trans-
fer, 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 adjusted to "B" will be made, unless
required by state law. This adjustment builds into the formula a factor repre-
senting 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 antic-
ipated that a substantial portion of applicable general account portfolio as-
sets will be in relatively illiquid securities. Thus, in addition to direct
transaction costs, if such securities must be sold (e.g., because of surren-
ders), the market price may be lower. Accordingly, even if interest rates de-
cline, 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, there will be no MVA.
N = The number of years remaining in the guaranteed period (e.g., 1 year and
73 days = 1 X (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.
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The adjustments represent the direct and indirect costs Lincoln Life can incur
due to the liquidation of general account assets in order to satisfy surrender
requests.
Federal tax matters
Introduction
The Federal income tax treatment of the contract is complex and sometimes un-
certain. The Federal income tax rules may vary with your particular circum-
stances. This discussion does not include all the Federal income tax rules
that may affect 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 ap-
plicable 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 con-
tract value until you receive a contract distribution. However, for this gen-
eral rule to apply, certain requirements 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.
. 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 pur-
poses. 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 earn-
ings are contracts issued to a corporation or a trust. Exceptions to this rule
exist. For example, the tax code treats a contract as owned by an individual
if the named owner is a trust or other entity that holds the contract as an
agent for an individual. However, this exception does not apply in the case of
any employer that owns a contract to provide deferred compensation for its em-
ployees.
Investments in the VAA must be diversified
For a contract to be treated as an annuity for Federal Income tax purposes,
the investments of the VAA must be "adequately diversified." IRS regulations
define standards for determining whether the investments of the VAA are ade-
quately diversified. If the VAA fails to comply with these diversification
standards, 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 un-
derlying 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 the 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 Fed-
eral 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
con-
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tract) 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 circumstanc-
es, your purchase payments are reduced by amounts received from your contract
that were not included in income.
Taxation of annuity payouts
The tax code imposes tax on a portion of each annuity payout (at ordinary in-
come tax rates) and treats a portion as a nontaxable return of 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 op-
tion, they are taxed in the same manner as annuity payouts.
. If the beneficiary does not receive death benefits under an annuity pay-
out 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 your con-
tract which you must include in your gross income. The 10% penalty tax does
not apply if one of several exceptions exists. These exceptions include with-
drawals, 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 your
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 an-
nuity 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 insur-
ance 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 con-
tract could affect the amount of a surrender, a withdrawal or an annuity pay-
out 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 re-
ceived 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 pay-
ments not previously received, the new owner's purchase payments in the con-
tract 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 indi-
vidual, or if a contract is held for the benefit of an entity, the entity will
lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
contract value. Entities that are considering purchasing a contract, or enti-
ties that will benefit from someone else's ownership of a contract, should
consult a tax advisor.
Qualified retirement plans
We have also designed the contracts for use in connection with certain types
of retirement plans that receive favorable treatment under the tax code. Con-
tracts 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
com -
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<PAGE>
plex 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 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 quali-
fied 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 or-
ganizations ("457 plans")
We may issue a contract for use with other types of qualified plans in the fu-
ture.
We will amend contracts to be used with a qualified plan as generally 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 con-
tracts 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 par-
ticipant's specific circumstances, e.g., the participant's compensation.
. Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the an-
nuitant must begin receiving payments from the contract in certain minimum
amounts by a certain age, typically age 70 1/2. However, these "minimum dis-
tribution rules" do not apply to a Roth IRA.
. Loans are allowed under certain types of qualified plans, but Federal income
tax rules 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 dura-
tion, and the manner of repayment. Your contract or plan may not permit
loans.
Tax treatment of payments
Federal income tax rules generally include distributions from a qualified con-
tract in the 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 pay-
ments. 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 mini-
mum required distribution exceeds the actual distribution from the qualified
plan.
Federal penalty taxes payable on distributions
The tax code may impose a 10% penalty tax on the amount received from the qual-
ified contract that must be included in income. The tax code does not impose
the penalty tax if one of several exceptions applies. The exceptions vary de-
pending on the type of qualified contract 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 dis-
ability (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 re-
quirements 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 al-
ways be consulted before you move or attempt to move funds between any quali-
fied 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 re-
cipient with a notice explaining these requirements and how the 20% withhold-
ing 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 in-
vestment income and realized capital gains of the VAA. Lincoln Life does not
expect that it will incur any Federal income tax liability on the income and
gains earned by the VAA. We, therefore, do not impose a charge for Federal in-
come taxes. If Federal income tax law changes and we must pay tax on some or
all of the income and gains earned by the VAA, we may impose a charge against
the VAA to pay the taxes.
Changes in the law
The above discussion is based on the tax code, IRS regulations, and interpre-
tations 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 in-
structions of contractowners who have interests in the subaccounts which in-
vest 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 inter-
pretations should change, and if as a result we determine that we are permit-
ted 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 ap-
plying 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 inter-
est in a subaccount will receive proxy voting material, reports and other ma-
terials 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 func-
tions in support of the selling group. The contracts will be sold by our prop-
erly 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. Included among these broker-deal-
ers is Lincoln Financial Advisors (LFA). LFA is affiliated with us and in ad-
dition to selling our contracts, may also act as a principal underwriter for
certain other contracts issued by 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 con-
tract 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 con-
tract value as of the date of receipt of the cancellation, plus any premium
taxes
29
<PAGE>
which had been deducted. No surrender charge will be assessed. A purchaser who
participates in the VAA 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 pur-
chase 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 re-
sponsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with the Delaware Management Company, 2005 Mar-
ket Street, Philadelphia, PA 19203, to provide accounting services to the VAA.
We will mail to you, at your last known address of record at the home office,
at least semiannually after the first contract year, reports containing infor-
mation required by 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 informa-
tion about the VAA, Lincoln Life and the contracts offered. Statements in this
Prospectus about the content of contracts and other legal instruments are sum-
maries. For the complete text of those contracts and instruments, please refer
to those documents as filed 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 ad-
vertisements. 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.
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 rou-
tine 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 ad-
verse effect on the financial position of Lincoln Life.
Lincoln Life is presently defending several lawsuits in which Plaintiffs seek
to represent national classes of policyholders in connection with alleged
fraud, breach of contract and other claims relating to the sale of interest-
sensitive universal and participating whole life 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 de-
fending these suits vigorously. The amount of liability, if any, which may ul-
timately arise as a result of these suits cannot be reasonably determined at
this time.
Statement of Additional
Information
Table of contents for Lincoln Life Variable Annuity
Account N
(Lincoln ChoicePlus)
<TABLE>
<CAPTION>
Item
- ---------------------------------------------------------------------
<S> <C>
General information and history of Lincoln Life B-1
- ---------------------------------------------------------------------
Special terms B-1
- ---------------------------------------------------------------------
Services B-1
- ---------------------------------------------------------------------
Principal underwriter B-2
- ---------------------------------------------------------------------
For a free copy of the SAI please see page one of this booklet.
<CAPTION>
Item
- ---------------------------------------------------------------------
<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-10
</TABLE>
30
<PAGE>
...........................................................................
Please send me a free copy of the current Statement of Additional Information
for Lincoln Life Variable Annuity Account N (ChoicePlus).
(Please Print)
Name: _________________________ Social Security No.: __________________________
Address: _______________________________________________________________________
City State Zip
Mail to Lincoln National Life Insurance Company, P.O. Box 2340, Fort Wayne, In-
diana 46801
31
<PAGE>
(This page has been left blank intentionally.)
32
<PAGE>
LINCOLN LIFE VARIABLE ANNUITY
Account N (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 (Lincoln ChoicePlus) dated May 1, 2000. You may obtain a
copy of the Lincoln ChoicePlus Prospectus on request and without charge.
Please write 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-1
Special terms.............................................................. B-1
Services................................................................... B-1
Principal underwriter...................................................... B-2
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-10
</TABLE>
The following eight investment options are no longer available for allocation
for purchase payments under Contracts issued on or after February 22, 2000.
However, contractowners who purchased a Contract prior to February 22, 2000
may continue to allocate purchase payments or contract value to these
investment options. It is currently anticipated that during the fourth quarter
of 2000, we will close and replace these eight funds: Delaware Premium Devon
Series, Delaware Premium International Equity Series, Dreyfus Small Cap
Portfolio, Kemper Small Cap Growth Portfolio, Kemper Government Securities
Portfolio, Colonial U.S. Growth & Income Fund, OCC Global Equity Portfolio,
OCC Managed Portfolio.
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.
<PAGE>
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 Fund Subaccount:
At times the VAA may advertise the Money Market subaccount's yield. The yield
refers to the income generated by an investment in the subaccount over a
seven-day period. This income is then annualized. The process of annualizing,
results when the amount of income generated by the investment during that week
is assumed to be generated each week over a 52-week period and is shown as a
percentage of the investment. The yield figure is based on historical earnings
and is not intended to indicate future performance.
The seven-day yield for the Lincoln National Money Market Fund subaccount is
determined by calculating the change in unit value for the base period (the 7-
day period ended December 31, 1999); then dividing this figure by the account
value at the beginning of the period; then annualizing this result by the
factor of 365/7. This yield includes all deductions charged to the
contractowner's account, and excludes any realized gains and losses from the
sale of securities. The Lincoln National Money Market yield was 3.86% as of
December 31, 1999.
Standard investment results:
Standard performance is based on a formula to calculate performance that is
prescribed by the SEC. Under rules issued by the SEC, standard performance
must be included in any marketing material that discusses the performance of
the VAA and the subaccounts. This information represents past performance and
does not indicate or represent future performance.
Average annual return for each period is determined by finding the average
annual compounded rate of return over each period that would equate the
initial amount invested to the ending redeemable value for that period,
according to the following formula:
P(1+T)n = ERV
Where:
P= a hypothetical initial purchase payment of $1,000
T= average annual total return for the period in question
n= number of years
ERV= ending redeemable value (as of the end of the period in question)
of a hypothetical $1,000 purchase payment made at the beginning of
the 1-year, 5-year, or 10-year period in question (or fractional
portion thereof)
B-2
<PAGE>
The formula assumes that: (1) all recurring fees have been charged to the
contractowner accounts; (2) all applicable non-recurring charges (including
any surrender charges) are deducted at the end of the period in question; and
(3) there will be a complete redemption upon the anniversary of the 1-year, 5-
year, or 10-year period in question.
In accordance with SEC guidelines, we will report standard performance back to
the first date that the Fund became available in the VAA. Because standard
performance reporting periods of less than one year could be misleading, we
may report "N/A's" for standard performance until one year after the option
became available in the VAA.
Standard performance data for the period ending December 31, 1999:
<TABLE>
<CAPTION>
Subaccount 10-year/
Subaccount Commenced 1-year 5-year Since Inception
- ---------- ---------- ------ ------ ---------------
<S> <C> <C> <C> <C>
Delaware Growth and Income Series 11/20/98 -10.41% N/A -9.28%
Delaware High Yield Series 11/20/98 -9.93% N/A -9.36%
Delaware Devon Series 11/20/98 -17.39% N/A -13.34%
Delaware Emerging Markets Series 11/20/98 40.22% N/A 23.39%
Delaware International Equity Series 11/20/98 8.01% N/A 8.79%
Delaware REIT Series 11/20/98 -9.97% N/A -8.03%
Delaware Select 2/22/00 N/A N/A N/A
Delaware Small Cap Value Series 11/20/98 -12.19% N/A -6.90%
Delaware Social Awareness Series 11/20/98 5.35% N/A 11.43%
Delaware Trend Series 11/20/98 62.08% N/A 67.24%
AIM V.I. Cap Appreciation 2/22/00 N/A N/A N/A
AIM V.I. Growth Fund 11/20/98 27.33% N/A 37.52%
AIM V.I. International Equity Fund 11/20/98 46.85% N/A 45.33%
AIM V.I. Value Fund 11/20/98 22.03% N/A 30.38%
Alliance Growth 2/22/00 N/A N/A N/A
Alliance Growth & Income 2/22/00 N/A N/A N/A
Alliance Premier Growth 2/22/00 N/A N/A N/A
Alliance Technology 2/22/00 N/A N/A N/A
AFIS Global Small Cap 2/22/00 N/A N/A N/A
AFIS Growth 2/22/00 N/A N/A N/A
AFIS Growth-Income 2/22/00 N/A N/A N/A
AFIS International 2/22/00 N/A N/A N/A
Deutsche VIT Equity 500 Index Fund 11/20/98 12.80% N/A 15.28%
Colonial U.S. Growth & Income Fund,
Variable Series 11/20/98 4.01% N/A 7.55%
Dreyfus VIF: Small Cap Portfolio 11/20/98 15.44% N/A 21.62%
Fidelity VIP Equity-Income Portfolio 11/20/98 -1.18% N/A -0.11%
Fidelity VIP Growth Portfolio 11/20/98 29.41% N/A 33.52%
Fidelity VIP Overseas Portfolio 11/20/98 34.60% N/A 32.20%
Fidelity VIP III Growth
Opportunities Portfolio 11/20/98 -3.23% N/A 0.70%
Kemper Government Securities
Portfolio 11/20/98 -6.71% N/A -5.80%
Kemper Small Cap Growth Portfolio 11/20/98 26.58% N/A 35.65%
Lincoln National Bond Fund 11/20/98 -10.60% N/A -8.82%
Lincoln National Money Market Fund 11/20/98 -2.71% N/A -2.14%
MFS(R) Emerging Growth Series 11/20/98 67.97% N/A 78.48%
MFS(R) Research Series 11/20/98 16.13% N/A 20.87%
MFS(R) Total Return Series 11/20/98 -4.36% N/A -2.69%
MFS(R) Utilities Series 11/20/98 22.98% N/A 23.40%
Newport Tiger Fund, Variable Series 11/20/98 59.68% N/A 51.69%
OCC Accum. Trust Global Equity
Portfolio 11/20/98 18.78% N/A 17.54%
OCC Accum. Trust Managed Portfolio 11/20/98 -2.46% N/A -3.98%
Templeton Growth 2/22/00 N/A N/A N/A
Templeton International 2/23/00 N/A N/A N/A
Templeton Mutual Shares 2/24/00 N/A N/A N/A
Templeton Small Cap 2/25/00 N/A N/A N/A
</TABLE>
B-3
<PAGE>
Non-standard investment results:
The VAA may report its results over various periods--daily, monthly, three-
month, six-month, year-to-date, yearly (fiscal year), three, five, ten years
or more and lifetime--and compare its results to indices and other variable
annuities in sales materials including advertisements, brochures and reports.
Performance information for the periods prior to the date that a Fund became
available in the VAA will be calculated based on (1) the performance of the
Fund adjusted for Contract charges (ie: mortality and expense risk fees, any
applicable administrative charges, and the management and other expenses of
the fund) and (2) the assumption that the subaccounts were in existence for
the same periods as indicated for the Fund. It may or may not reflect charges
for any Riders (ie: EGMDB) that were in effect during the time periods shown.
This performance is referred to as non-standardized performance data. Such
results may be computed on a cumulative and/or annualized basis. We may also
report performance assuming that you deposited $10,000 into a subaccount at
inception of the underlying fund or 10 years ago (whichever is less). This
non-standard performance may be shown as a graph illustrating how that deposit
would have increased or decreased in value over time based on the performance
of the underlying fund adjusted for Contract charges. This information
represents past performance and does not indicate or represent future
performance. The investment return and value of a Contract will fluctuate so
that contractowner's investment may be worth more or less than the original
investment.
Cumulative quotations are arrived at by calculating the change in Accumulation
Unit Value between the first and last day of the base period being measured,
and expressing the difference as a percentage of the unit value at the
beginning of the base period. Annualized quotations are arrived at by applying
a formula which reflects the level rate of return, which if earned over the
entire base period, would produce the cumulative return.
NONSTANDARD PERFORMANCE FOR THE PERIOD ENDING DECEMBER 31, 1999 (ADJUSTED FOR
CONTRACT EXPENSE CHARGES)
<TABLE>
<CAPTION>
10- As if
Subaccount YTD 1-year 3-year 5-year year Lifetime Commenced
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Delaware Growth and
Income Series -4.40% -4.40% 10.69% 16.79% 10.42% 10.20% 7/28/88
Delaware High Yield
Series -3.94% -3.94% 1.33% 5.68% 7.24% 6.86% 7/28/88
Delaware Devon Series -11.39% -11.39% N/A N/A N/A 12.43% 5/1/97
Delaware Emerging
Markets Series 46.22% 46.22% N/A N/A N/A -5.64% 5/1/97
Delaware International
Equity Series 14.01% 14.01% 9.25% 11.64% N/A 10.20% 10/29/92
Delaware REIT Series -3.96% -3.96% N/A N/A N/A -8.28% 5/1/98
Delaware Select 41.58% N/A N/A N/A N/A 41.58% 5/3/99
Delaware Small Cap Value
Series -6.18% -6.18% 4.90% 11.24% N/A 9.53% 12/27/93
Delaware Social
Awareness Series 11.35% 11.35% N/A N/A N/A 19.61% 5/1/97
Delaware Trend Series 68.08% 68.08% 32.04% 28.20% N/A 22.98% 12/27/93
AIM V.I. Cap
Appreciation 42.63% 42.63% 23.38% 23.87% N/A 20.64% 5/5/93
AIM V.I. Growth Fund 33.33% 33.33% 30.17% 27.82% N/A 21.20% 5/5/93
AIM V.I. International
Equity Fund 52.85% 52.85% 22.43% 20.22% N/A 17.15% 5/5/93
AIM V.I. Value Fund 28.03% 28.03% 26.80% 25.44% N/A 21.33% 5/5/93
Alliance Growth 32.27% 32.27% 28.90% 29.66% N/A 28.50% 9/15/94
Alliance Growth & Income 9.56% 9.56% 18.18% 21.95% N/A 13.58% 1/14/91
Alliance Premier Growth 30.14% 30.14% 35.61% 33.59% N/A 24.25% 6/26/92
Alliance Technology 72.95% 72.95% 42.90% N/A N/A 33.70% 1/11/96
AFIS Global Small Cap 88.71% 88.71% N/A N/A N/A 47.37% 4/30/98
AFIS Growth 55.08% 55.08% 38.34% 31.09% 19.40% 17.99% 2/8/84
AFIS Growth-Income 9.65% 9.65% 16.49% 19.29% 12.78% 13.97% 2/8/84
AFIS International 73.53% 73.53% 30.46% 23.27% N/A 14.86% 4/30/90
Colonial U.S. Growth &
Income Fund, Variable
Series 10.01% 10.01% 19.33% 21.19% N/A 19.86% 7/5/94
Deutsche VIT Equity 500
Index Fund 18.80% 18.80% N/A N/A N/A 20.84% 10/1/97
Dreyfus VIF: Small Cap
Portfolio 21.44% 21.44% 10.00% 14.31% N/A 33.76% 8/31/90
Fidelity VIP Equity-
Income Portfolio 4.82% 4.82% 13.38% 16.95% 12.89% 12.19% 10/9/86
Fidelity VIP Growth
Portfolio 35.41% 35.41% 31.38% 27.91% 18.25% 17.09% 10/9/86
Fidelity VIP Overseas
Portfolio 40.60% 40.60% 19.79% 15.73% 9.87% 9.36% 1/28/87
Fidelity VIP III Growth
Opportunities Portfolio 2.77% 2.77% 17.39% N/A N/A 19.83% 1/3/95
Kemper Government
Securities Portfolio -0.71% -0.71% 3.94% 5.91% 5.61% 5.73% 9/3/87
Kemper Small Cap Growth
Portfolio 32.58% 32.58% 26.92% 27.03% N/A 24.14% 5/2/94
Lincoln National Bond
Fund -4.60% -4.60% 3.55% 5.65% 5.96% 8.68% 12/28/81
Lincoln National Money
Market Fund 3.29% 3.29% 3.53% 3.67% 3.47% 5.06% 1/7/82
</TABLE>
B-4
<PAGE>
<TABLE>
<CAPTION>
10- As if
Subaccount YTD 1-year 3-year 5-year year Lifetime Commenced
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MFS(R) Emerging Growth
Series 73.97% 73.97% 40.40% N/A N/A 34.49% 7/24/95
MFS(R) Research Series 22.13% 22.13% 20.80% N/A N/A 21.13% 7/26/95
MFS(R) Total Return
Series 1.64% 1.64% 10.43% N/A N/A 13.81% 1/3/95
MFS(R) Utilities Series 28.98% 28.98% 24.93% N/A N/A 24.69% 1/3/95
Newport Tiger Fund,
Variable Series 65.68% 65.68% 1.23% N/A N/A 5.81% 5/1/95
OCC Accum. Trust Global
Equity Portfolio 24.77% 24.77% 16.15% N/A N/A 16.44% 3/1/95
OCC Accum. Trust Managed
Portfolio 3.54% 3.54% 9.62% 18.02% 14.98% 16.07% 8/1/88
Templeton Growth 19.26% 19.26% 12.61% 13.66% N/A 12.01% 3/15/94
Templeton International 21.55% 21.55% 13.69% 15.25% N/A 13.50% 5/1/92
Templeton Mutual Shares 12.06% 12.06% 8.60% N/A N/A 9.24% 11/1/96
Templeton Small Cap 93.63% 93.63% 27.84% N/A N/A 27.02% 10/31/95
</TABLE>
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 $3,000 $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>
B-5
<PAGE>
ANNUITY VALUE CALCULATION
<TABLE>
<CAPTION>
Contract Year
-------------
<S> <C> <C> <C> <C> <C> <C> <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>
SC Surrender
Contract Year factor 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>
Market Value Adjustment Example
INTEREST RATE FACTOR CALCULATION
<TABLE>
<CAPTION>
Adj.
Contract Year Index A Index B Index 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> <C> <C> <C> <C> <C> <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
B-6
<PAGE>
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 in 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.
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.
Lincoln Financial Group is the marketing name for Lincoln National Corporation
(NYSE:LNC) and its affiliates. With headquarters in Philadelphia, Lincoln
Financial Group has consolidated assets of over $103 billion and annual
consolidated revenues of $6.8 billion. Through its wealth accumulation and
protection businesses, the company provides annuities, life insurance, 401(k)
plans, life-health reinsurance, mutual funds, institutional investment
management and financial planning and advisory services.
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.
B-7
<PAGE>
LIPPER VARIABLE INSURANCE PRODUCTS PERFORMANCE ANALYSIS SERVICE is a publisher
of statistical data covering the investment company industry in the United
States and overseas. Lipper is recognized as the leading source of data on
open-end and closed-end funds. Lipper currently tracks the performance of over
5,000 investment companies and publishes numerous specialized reports,
including reports on performance and portfolio analysis, fee and expense
analysis.
MOODY'S insurance financial strength rating is an opinion of an insurance
company's financial strength, 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 3,000 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 3,000 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, publicly 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 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.
B-8
<PAGE>
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.
B-9
<PAGE>
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 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.
Cross Reinvestment.
Cross Reinvestment is an option which, if elected by the contractowner,
transfers earnings exceeding a designated baseline amount (minimum $10,000.00)
from the Fixed account, or any one of the variable Subaccounts, to other
investment options within the Lincoln Choice Plus contract on a monthly,
quarterly, semi-annual, or annual basis. The transfer will occur on the 20th
of the month. If the stock market is closed on the 20th, the transfer will
occur on the following business day.
B-10
<PAGE>
This option is available on Individual contracts only, and is not available
for contracts that currently have one or more of the following services in
effect: Automatic Bank Drafts, Automatic Withdrawal, or Dollar Cost Averaging.
The baseline amount is increased by additional contributions to the contract.
You may elect this option by completing an election form available from us, or
by telephone if we have telephone authorization on file. Once elected, the
program will remain in effect until the earlier of: (1) the annuity
commencement date (2) 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. 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.
Lincoln Life's customers. More than 1.5 million individuals and 15,000
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, as of December 31, 1999 Lincoln Life had
statutory-basis admitted assets of over $79 billion.
FINANCIAL STATEMENTS
Financial statements of the VAA and the statutory-basis financial statements
of Lincoln Life appear on the following pages.
This SAI is not a Prospectus.
The date of this SAI is May 1, 2000
B-11
<PAGE>
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
www.LincolnLife.com
This prospectus describes the individual flexible premium deferred variable an-
nuity contract that is issued by Lincoln National Life Insurance Company (Lin-
coln 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. Gen-
erally, 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 ben-
efit.
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 Lin-
coln 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 in-
come. 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. Al-
so, 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:
AIM V.I. Capital Appreciation Fund
AIM V.I Growth Fund
AIM V.I. International Equity Fund
AIM V.I. Value Equity Fund
Alliance Variable Products Series Fund (Class B):
Alliance Premier Growth Portfolio
Alliance Growth and Income Portfolio
Alliance Growth Portfolio
Alliance Technology Portfolio
American Funds Insurance Series (AFIS) also known as American Variable Insur-
ance Series (AVIS) (Class 2):
AFIS Global Small Capitalization Fund
AFIS Growth Fund
AFIS International Fund
AFIS Growth-Income Fund
Deutsche Asset Management VIT Funds (formerly BT Insurance Funds Trust):
Deutsche VIT Equity 500 Index Fund
Delaware Group Premium Fund (Standard Class):
Delaware Premium Growth & Income Series
Delaware Premium High Yield Series (formerly Delchester)
Delaware Premium Emerging Markets Series
Delaware Premium Select Growth Series
Delaware Premium REIT Series
Delaware Premium Small Cap Value Series
Delaware Premium Social Awareness Series
Delaware Premium Trend Series
Variable Insurance Products Fund (Initial Class):
Fidelity VIP Equity-Income Portfolio
Fidelity VIP Growth Portfolio
Fidelity VIP Overseas Portfolio
Variable Insurance Products Fund III (Initial Class):
Fidelity VIP III Growth Opportunities Portfolio
Franklin Templeton Variable Insurance Products Trust (Class 2):
Franklin Small Cap Securities Fund
Franklin Mutual Shares Securities Fund
1
<PAGE>
Templeton Growth Securities Fund (formerly Global Growth)
Templeton International Securities Fund
Liberty Variable Investment Trust:
Newport Tiger Fund
Lincoln National:
Bond Fund
Money Market Fund
MFS(R) Variable Insurance Trust:
MFS Emerging Growth Series
MFS Research Series
MFS Total Return Series
MFS Utilities Series
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 pro-
spectuses 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), dated the same date
as this Prospectus about the contracts that has more information. Its terms are
made part of this Prospectus. For a free copy, write: Lincoln National Life In-
surance 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 con-
tents for the SAI on the last page of this Prospectus.
May 1, 2000
2
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
- -------------------------------------------------
<S> <C>
Special terms 3
- -------------------------------------------------
Expense tables 4
- -------------------------------------------------
Summary 9
- -------------------------------------------------
Condensed financial information for the VAA 10
- -------------------------------------------------
Investment results 12
- -------------------------------------------------
Financial statements 12
- -------------------------------------------------
Lincoln National Life Insurance Company 12
- -------------------------------------------------
Variable annuity account (VAA) 12
- -------------------------------------------------
Investments of the variable annuity account 12
- -------------------------------------------------
Charges and other deductions 15
- -------------------------------------------------
The contracts 17
- -------------------------------------------------
Annuity options 21
- -------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Page
- -------------------------------------------------
<S> <C>
Fixed side of the contract 22
- -------------------------------------------------
Federal tax matters 24
- -------------------------------------------------
Voting rights 27
- -------------------------------------------------
Distribution of the contracts 28
- -------------------------------------------------
Return privilege 28
- -------------------------------------------------
State regulation 28
- -------------------------------------------------
Records and reports 28
- -------------------------------------------------
Other information 28
- -------------------------------------------------
Statement of additional information
Table of contents for Lincoln Life Variable
Annuity Account N Lincoln ChoicePlus 29
- -------------------------------------------------
</TABLE>
Special terms
(We have italicized the terms that have special meaning throughout the Pro-
spectus).
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 may be 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.
Free amount--The amount that can be withdrawn each contract year without in-
curring a surrender charge. The free amount is equal to 15% of the total Pur-
chase Payments.
Lincoln Life (we, us, our)--The 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 trad-
ing.
Valuation period--The period starting at the close of trading (currently, nor-
mally, 4:00 p.m. New York time) on each day that the NYSE is open for trading
(valuation date) and ending at the close of such trading on the next valuation
date.
3
<PAGE>
Expense tables
Summary of contractowner expenses:
The maximum surrender charge (contingent deferred sales charge) as a per-
centage of purchase payments surrendered/withdrawn: 7%
Account fee: $35
Transfer fee: $10
The surrender charge percentage is reduced over time. The later the redemption
occurs, the lower the surrender charge with respect to that surrender or with-
drawal. 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 con-
tract year. We reserve the right to charge a $10 fee for the 13th and each ad-
ditional transfer during any contract year. Automatic dollar cost averaging and
automatic rebalancing transfers are not included in these first twelve trans-
fers.
- --------------------------------------------------------------------------------
Account N annual expenses for Lincoln ChoicePlus subaccounts:
(as a percentage of average daily net assets)
<TABLE>
<S> <C>
Mortality and expense risk charge 1.25%
Administrative charge .15%
-----
Total annual charge for each Lincoln ChoicePlus subaccount 1.40%
</TABLE>
Fund Annual expenses of the funds for the year ended December 31, 1999:
(as a percentage of each fund's average net assets):
<TABLE>
<CAPTION>
Management Other Total
Fees (after any Expenses (after Expenses (after
waivers/ + 12b-1 any waivers/ any waivers/
reimbursements) Fees + reimbursements) = reimbursements)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 0.62% N/A 0.11% 0.73%
- --------------------------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 0.63 N/A 0.10 0.73
- --------------------------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 0.75 N/A 0.22 0.97
- --------------------------------------------------------------------------------------------------------------
AIM V.I. Value Fund 0.61 N/A 0.15 0.76
- --------------------------------------------------------------------------------------------------------------
Alliance Growth Portfolio (class B) 0.75 0.25 0.12 1.12
- --------------------------------------------------------------------------------------------------------------
Alliance Growth and Income Portfolio (class B) 0.63 0.25 0.09 0.97
- --------------------------------------------------------------------------------------------------------------
Alliance Premier Growth Portfolio (class B) 1.00 0.25 0.04 1.29
- --------------------------------------------------------------------------------------------------------------
Alliance Technology Portfolio (class B) 0.71 0.25 0.24 1.20
- --------------------------------------------------------------------------------------------------------------
AFIS Global Small Capitalization Fund (class 2) 0.78 0.25 0.03 1.06
- --------------------------------------------------------------------------------------------------------------
AFIS Growth Fund (class 2) 0.38 0.25 0.01 0.64
- --------------------------------------------------------------------------------------------------------------
AFIS International Fund (class 2) 0.55 0.25 0.05 0.85
- --------------------------------------------------------------------------------------------------------------
AFIS Growth-Income Fund (class 2) 0.34 0.25 0.01 0.60
- --------------------------------------------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund/1/ 0.14 N/A 0.16 0.30
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Growth and Income Series
(Standard class)/2/ 0.60 N/A 0.11 0.71
- --------------------------------------------------------------------------------------------------------------
Delaware Premium High Yield Series (formerly
Delchester) (Standard class)/2/ 0.65 N/A 0.07 0.72
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Emerging Markets Series
(Standard class)/2/ 1.19 N/A 0.28 1.47
- --------------------------------------------------------------------------------------------------------------
Delaware Premium REIT Series (Standard 0.64 N/A 0.21 0.85
class)/2/
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Select Growth Series (Standard 0.75 N/A 0.06 0.81
class)/2/
- --------------------------------------------------------------------------------------------------------------
Delaware Premium Small Cap Value Series
(Standard class)/2/ 0.75 N/A 0.10 0.85
- --------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Management Other Total
Fees (after any Expenses (after Expenses (after
waivers/ 12b-1 any waivers/ any waivers/
reimbursements) + Fees reimbursements) = reimbursements)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Delaware Premium Social Awareness Series 0.70% N/A 0.15 0.85
(Standard class)/2/
- ------------------------------------------------------------------------------------------------------------
Delaware Premium Trend Series (Standard 0.75 N/A 0.07 0.82
class)/2/
- ------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio (Initial 0.48 N/A 0.09 0.57
class)/3/
- ------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio (Initial 0.58 N/A 0.08% 0.66%
class)/3/
- ------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio (Initial 0.73 N/A 0.18 0.91
class)/3/
- ------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 0.58 N/A 0.11 0.69
(Initial class)/3/
- ------------------------------------------------------------------------------------------------------------
Franklin Small Cap Securities Fund (class 0.55 0.25 0.27 1.07
2)/4/,/9/
- ------------------------------------------------------------------------------------------------------------
Franklin Mutual Shares Securities Fund (class 0.60 0.25 0.19 1.04
2)/5/,/9/
- ------------------------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (formerly 0.83 0.25 0.05 1.13
Global Growth) (class 2)/7/,/8/,/9/
- ------------------------------------------------------------------------------------------------------------
Templeton International Securities Fund (class 0.69 0.25 0.19 1.13
2)/6/,/9/
- ------------------------------------------------------------------------------------------------------------
Liberty Variable Trust Newport Tiger Fund 0.49 N/A 0.31 1.21
- ------------------------------------------------------------------------------------------------------------
Lincoln National Bond Fund 0.45 N/A 0.08 0.53
- ------------------------------------------------------------------------------------------------------------
Lincoln National Money Market Fund 0.48 N/A 0.11 0.59
- ------------------------------------------------------------------------------------------------------------
MFS Variable Trust Emerging Growth Series/10/ 0.75 N/A .09 0.84
- ------------------------------------------------------------------------------------------------------------
MFS Variable Trust Research Series/10/ 0.75 N/A 0.11 0.86
- ------------------------------------------------------------------------------------------------------------
MFS Variable Trust Total Return Series/10/ 0.75 N/A 0.15 0.90
- ------------------------------------------------------------------------------------------------------------
MFS Variable Trust Utilities Series/10/ 0.75 N/A 0.16 0.91
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(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 Equity 500 Index 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 that the
fund's total operating expenses will not exceed 0.30% of average daily net
assets. Without the reimbursement to the Funds for the year ended 12/31/99
total expenses would have been 0.43% for the Equity 500 Index Fund.
(2) Effective May 1, 2000 through October 31, 2000, Delaware Management Compa-
ny, "DMC" has voluntarily agreed to waive its management fee and reimburse
the Series for expenses to the extent that total expenses will not exceed
0.80% for High Yield and Growth and Income; 0.85% for REIT, Select Growth,
Small Cap Value, Social Awareness and Trend; 1.50% for Emerging Markets.
Without such an arrangement, the total operating expenses would have been
0.96% for REIT, 0.90% for Social Awareness, and 1.53% for Emerging Markets.
DMC voluntarily elected to cap its management fee for the Growth and Income
Series at 0.60% indefinitely.
(3) A portion of the brokerage commissions that certain funds pay was used to
reduce fund expenses. In addition, through arrangements with certain
funds', or Fidelity Management & Research on behalf of certain funds' cus-
todian, credits realized as a result of uninvested cash balances were used
to reduce a portion of each applicable fund's expenses. The total operating
expenses, after reimbursement would have been: Equity-Income 0.56%; Growth
0.65%; Growth Opportunities 0.68%.
(4) On 2/8/00, a merger and reorganization was approved that combined the as-
sets of the fund with a similar fund of the Templeton Variable Products Se-
ries Fund, effective 5/01/00. On 2/8/00, fund shareholders approved new
management fees, which apply to the combined fund effective 5/1/00. The ta-
ble shows restated total expenses based on the new fees and assets of the
fund as of 12/31/99, and not the assets of the combined fund. However, if
the table reflected both the new fees and the combined assets, the fund's
expenses after 5/1/00 would be estimated as: Management Fees 0.55%, Distri-
bution and Service Fees 0.25%, Other Expenses 0.27% and Total Fund Operat-
ing Expenses 1.07%.
(5) On 2/8/00, a merger and reorganization was approved that combined the as-
sets of the fund with a similar fund of the Templeton Variable Products Se-
ries Fund, effective 5/01/00. The table shows restated total expenses based
on the new fees and assets of the fund as of 12/31/99, and not the assets
of the combined fund. However, if the table reflected both the new fees and
the combined assets, the fund's expenses after 5/1/00 would be estimated
as: Management Fees 0.60%, Distribution and Service Fees 0.25%, Other Ex-
penses 0.19% and Total Fund Operating Expenses 1.04%.
(6) On 2/8/00, a merger and reorganization was approved that combined the as-
sets of the fund with a similar fund of the Templeton International Equity
Fund, effective 5/01/00. The shareholders of that fund approved new manage-
ment fees, which apply to the combined fund effective 5/1/00. The table
shows restated total expenses based on the new fees and assets of the fund
as of 12/31/99, and not the assets of the combined fund. However, if the
table reflected both the new fees and the combined assets, the fund's ex-
penses after 5/1/00 would be estimated as: Management Fees 0.65%, Distribu-
tion and Service Fees 0.25%, Other Expenses 0.20% and Total Fund Operating
Expenses 1.10%.
(7) On 2/8/00, a merger and reorganization was approved that combined the as-
sets of the fund with a similar fund of the Templeton Variable Products Se-
ries Fund, effective 5/01/00. The table shows restated total expenses based
on the new fees
5
<PAGE>
and assets of the fund as of 12/31/99, and not the assets of the combined
fund. However, if the table reflected both the new fees and the combined as-
sets, the fund's expenses after 5/1/00 would be estimated as: Management
Fees 0.80%, Distribution and Service Fees 0.25%, Other Expenses 0.05% and
Total Fund Operating Expenses 1.10%.
(8) The Fund administration fee is paid indirectly through the management fee.
(9) The fund's class 2 distribution plan or "rule 12b-1 plan" is described in
the fund's prospectus. While the maximum amount payable under the fund's
class 2 rule 12b-1 plan is 0.35% per year of the fund's average daily net
assets, the Board of Trustees of Franklin Templeton Variable Insurance
Products Trust has set the current rate at 0.25% per year.
(10) Each series has an expense offset arrangement which reduces the series'
custodian fee based on the amount of cash maintained by the series with
its custodian and dividend disbursing agent. Each series may enter into
other such arrangement and directed brokerage arrangements, which would
also have the effect of reducing the series' expenses. "Other Expenses"
do not take into account these expense reductions, and are therefore
higher than the actual expenses of the series. Had the fee reductions
been taken into account, "Net Expenses" would be lower for certain series
and would equal: 0.83% for Emerging Growth Series; 0.85% for Research Se-
ries; 0.89% for Total Return Series; 0.90% for Utilities Series.
6
<PAGE>
EXAMPLES
(expenses of the subaccounts and the funds)
If you surrender your contract at the end of the time period shown, you would
pay the following expenses on a $1,000 investment, assuming a 5% annual return:
<TABLE>
<CAPTION>
1 year 3 years 5 years 10 years
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund $92 $115 $140 $223
- ------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 92 117 144 246
- ------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 94 122 151 243
- ------------------------------------------------------------------------------------------
AIM V.I. Value Fund 92 116 141 226
- ------------------------------------------------------------------------------------------
Alliance Premier Growth Portfolio 97 131 165 267
- ------------------------------------------------------------------------------------------
Alliance Growth and Income Portfolio 94 122 151 243
- ------------------------------------------------------------------------------------------
Alliance Growth Portfolio 96 126 157 254
- ------------------------------------------------------------------------------------------
Alliance Technology Portfolio 96 129 161 260
- ------------------------------------------------------------------------------------------
AFIS Global Small Capitalization Fund 95 125 155 250
- ------------------------------------------------------------------------------------------
AFIS Growth Fund 91 113 135 215
- ------------------------------------------------------------------------------------------
AFIS International Fund 93 119 145 233
- ------------------------------------------------------------------------------------------
AFIS Growth-Income Fund 90 111 133 212
- ------------------------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund 87 103 119 186
- ------------------------------------------------------------------------------------------
Delaware Premium Growth and Income Series 91 115 139 221
- ------------------------------------------------------------------------------------------
Delaware Premium High Yield Series (formerly Delchester) 92 115 139 222
- ------------------------------------------------------------------------------------------
Delaware Premium Emerging Markets Series 99 136 173 280
- ------------------------------------------------------------------------------------------
Delaware Premium REIT Series 93 119 145 233
- ------------------------------------------------------------------------------------------
Delaware Premium Select Growth Series 92 118 143 230
- ------------------------------------------------------------------------------------------
Delaware Premium Small Cap Value Series 93 119 145 233
- ------------------------------------------------------------------------------------------
Delaware Premium Social Awareness Series 93 119 145 233
- ------------------------------------------------------------------------------------------
Delaware Premium Trend Series 93 118 144 231
- ------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 90 111 132 210
- ------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 91 113 136 217
- ------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 93 120 148 238
- ------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 91 114 138 220
- ------------------------------------------------------------------------------------------
Franklin Small Cap Securities Fund 95 125 155 250
- ------------------------------------------------------------------------------------------
Franklin Mutual Shares Securities Fund 95 124 154 248
- ------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (formerly Global Growth) 96 127 158 255
- ------------------------------------------------------------------------------------------
Templeton International Securities Fund 96 127 158 255
- ------------------------------------------------------------------------------------------
Liberty Variable Trust Newport Tiger Fund 96 129 161 261
- ------------------------------------------------------------------------------------------
Lincoln National Bond Fund 90 109 130 206
- ------------------------------------------------------------------------------------------
Lincoln National Money Market Fund 90 111 133 211
- ------------------------------------------------------------------------------------------
MFS Variable Trust Emerging Growth Series 93 118 145 232
- ------------------------------------------------------------------------------------------
MFS Variable Trust Research Series 93 119 146 234
- ------------------------------------------------------------------------------------------
MFS Variable Trust Total Return Series 93 120 147 237
- ------------------------------------------------------------------------------------------
MFS Variable Trust Utilities Series 93 120 148 238
- ------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
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>
AIM V.I. Capital Appreciation Fund $22 $65 $110 $223
- ------------------------------------------------------------------------------------------
AIM V.I. Growth Fund 22 67 114 246
- ------------------------------------------------------------------------------------------
AIM V.I. International Equity Fund 24 72 121 243
- ------------------------------------------------------------------------------------------
AIM V.I. Value Fund 22 66 111 226
- ------------------------------------------------------------------------------------------
Alliance Premier Growth Portfolio 27 81 135 267
- ------------------------------------------------------------------------------------------
Alliance Growth and Income Portfolio 24 72 121 243
- ------------------------------------------------------------------------------------------
Alliance Growth Portfolio 26 76 127 254
- ------------------------------------------------------------------------------------------
Alliance Technology Portfolio 26 79 131 260
- ------------------------------------------------------------------------------------------
AFIS Global Small Capitalization Fund 25 75 125 250
- ------------------------------------------------------------------------------------------
AFIS Growth Fund 21 63 105 215
- ------------------------------------------------------------------------------------------
AFIS International Fund 23 69 115 233
- ------------------------------------------------------------------------------------------
AFIS Growth-Income Fund 20 61 103 212
- ------------------------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund 17 53 89 186
- ------------------------------------------------------------------------------------------
Delaware Premium Growth and Income Series 21 65 109 221
- ------------------------------------------------------------------------------------------
Delaware Premium High Yield Series (formerly Delchester) 22 65 109 222
- ------------------------------------------------------------------------------------------
Delaware Premium Emerging Markets Series 29 86 143 280
- ------------------------------------------------------------------------------------------
Delaware Premium REIT Series 23 69 115 233
- ------------------------------------------------------------------------------------------
Delaware Premium Select Growth Series 22 68 113 230
- ------------------------------------------------------------------------------------------
Delaware Premium Small Cap Value Series 23 69 115 233
- ------------------------------------------------------------------------------------------
Delaware Premium Social Awareness Series 23 69 115 233
- ------------------------------------------------------------------------------------------
Delaware Premium Trend Series 23 68 114 231
- ------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 20 61 102 210
- ------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 21 63 106 217
- ------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 23 70 118 238
- ------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 21 64 108 220
- ------------------------------------------------------------------------------------------
Franklin Small Cap Securities Fund 25 75 125 250
- ------------------------------------------------------------------------------------------
Franklin Mutual Shares Securities Fund 25 74 124 248
- ------------------------------------------------------------------------------------------
Templeton Growth Securities Fund (formerly Global Growth) 26 77 128 255
- ------------------------------------------------------------------------------------------
Templeton International Securities Fund 26 77 128 255
- ------------------------------------------------------------------------------------------
Liberty Variable Trust Newport Tiger Fund 26 79 131 261
- ------------------------------------------------------------------------------------------
Lincoln National Bond Fund 20 59 100 206
- ------------------------------------------------------------------------------------------
Lincoln National Money Market Fund 20 61 103 211
- ------------------------------------------------------------------------------------------
MFS Variable Trust Emerging Growth Series 23 68 115 232
- ------------------------------------------------------------------------------------------
MFS Variable Trust Research Series 23 69 116 234
- ------------------------------------------------------------------------------------------
MFS Variable Trust Total Return Series 23 70 117 237
- ------------------------------------------------------------------------------------------
MFS Variable Trust Utilities Series 23 70 118 238
- ------------------------------------------------------------------------------------------
</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 repre-
sentation of past or future expenses. Actual expenses may be more or less than
those shown.
8
<PAGE>
Summary
What kind of contract am I buying? It is an individual annuity contract be-
tween you and Lincoln Life. It may provide for a fixed annuity and/or a vari-
able 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 estab-
lished under Indiana insurance law, and registered with the SEC as a unit in-
vestment trust. VAA assets are allocated to one or more subaccounts, according
to your investment choices. VAA assets are not chargeable with liabilities
arising out of any other business which Lincoln Life may conduct. See 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: See
Investments of the variable annuity account--Description of Funds.
Who invests purchase payments? Several different investment advisors manage
the investment options. See Investments of the variable annuity account--In-
vestment 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 pay-
ments, 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 deduc-
tions--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% of the
surrendered or withdrawn Purchase Payments, 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 the 13th and each additional
transfer 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.
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 (minus withdrawals), contract value or the
highest contract value as of the most recent contract year occurring on or be-
fore your 80th birthday. Your beneficiary has options as to how the death ben-
efit 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 con-
tracts--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 59 1/2, a 10% Inter-
nal 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 allo-
cate to the variable side of the contract. See Return privilege.
9
<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 Lincoln ChoicePlus subaccounts for the following pe-
riods ended December 31, 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 1999
- ------------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. Growth Fund Accumulation unit value
. Beginning of period......................................... $10.000 $11.112
. End of period............................................... 11.112 14.816
Number of accumulation units
. End of period (000s omitted)................................ 25 1,650
- ------------------------------------------------------------------------------
AIM V.I. International Equity Fund Accumulation unit value
Beginning of period........................................... $10.000 $10.278
. End of period............................................... 10.278 15.710
Number of accumulation units
. End of period (000s omitted)................................ 7 686
- ------------------------------------------------------------------------------
AIM V.I. Value Equity Fund Accumulation unit value
. Beginning of period......................................... $10.000 $10.937
. End of period............................................... 10.937 14.003
Number of accumulation units
. End of period (000s omitted)................................ 37 3,157
- ------------------------------------------------------------------------------
Deutsche VIT Equity 500 Index Fund Accumulation unit value
. Beginning of period......................................... $10.000 $10.353
. End of period............................................... 10.353 12.299
Number of accumulation units
. End of period (000s omitted)................................ 91 3,772
- ------------------------------------------------------------------------------
Delaware Premium Growth and Income Series
Accumulation unit value
. Beginning of period......................................... $10.000 $10.021
. End of period............................................... 10.021 9.580
Number of accumulation units
. End of period (000s omitted)................................ 23 806
- ------------------------------------------------------------------------------
Delaware Premium High Yield Series (formerly Delchester)
Accumulation unit value
. Beginning of period......................................... $10.000 $ 9.970
. End of period............................................... 9.970 9.575
Number of accumulation units
. End of period (000s omitted)................................ 41 637
- ------------------------------------------------------------------------------
Delaware Premium Emerging Markets Series Accumulation unit
value
. Beginning of period......................................... $10.000 $ 9.268
. End of period............................................... 9.268 13.551
Number of accumulation units
. End of period (000s omitted)................................ 2 99
- ------------------------------------------------------------------------------
Delaware Premium REIT Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.119
. End of period............................................... 10.119 9.718
Number of accumulation units
. End of period (000s omitted)................................ 9 73
- ------------------------------------------------------------------------------
Delaware Premium Small Cap Value Series Accumulation unit
value
. Beginning of period......................................... $10.000 $10.489
. End of period............................................... 10.489 9.841
Number of accumulation units
. End of period (000s omitted)................................ 17 319
- ------------------------------------------------------------------------------
Delaware Premium Social Awareness Series Accumulation unit
value
. Beginning of period......................................... $10.000 $10.659
. End of period............................................... 10.659 11.870
Number of accumulation units
. End of period (000s omitted)................................ 55 611
- ------------------------------------------------------------------------------
Delaware Premium Trend Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.854
. End of period............................................... 10.854 18.244
Number of accumulation units
. End of period (000s omitted)................................ 7 878
- ------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
*1998 1999
- -------------------------------------------------------------------------------
<S> <C> <C>
Fidelity VIP Equity-Income Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $10.101
. End of period............................................... 10.101 10.588
Number of accumulation units
. End of period (000s omitted)................................ 37 1,473
- -------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $10.605
. End of period............................................... 10.605 14.360
Number of accumulation units
. End of period (000s omitted)................................ 43 2,654
- -------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio Accumulation unit value
. Beginning of period......................................... $10.000 $10.106
. End of period............................................... 10.106 14.210
Number of accumulation units
. End of period (000s omitted)................................ 13 628
- -------------------------------------------------------------------------------
Fidelity VIP Growth Opportunities Portfolio Accumulation unit
value
. Beginning of period......................................... $10.000 $10.389
. End of period............................................... 10.389 10.677
Number of accumulation units
. End of period (000s omitted)................................ 64 1,770
- -------------------------------------------------------------------------------
Lincoln National Bond Fund Accumulation unit value
. Beginning of period......................................... $10.000 $10.095
. End of period............................................... 10.095 9.631
Number of accumulation units
. End of period (000s omitted)................................ 46 1,260
- -------------------------------------------------------------------------------
Lincoln National Money Market Fund Accumulation unit value
. Beginning of period......................................... $10.000 $10.034
. End of period............................................... 10.034 10.364
Number of accumulation units
. End of period (000s omitted)................................ 348 1,721
- -------------------------------------------------------------------------------
Liberty Variable Trust Newport Tiger Fund Accumulation unit
value
. Beginning of period......................................... $10.000 $ 9.923
. End of period............................................... 9.923 16.441
Number of accumulation units
. End of period (000s omitted)................................ 2 186
- -------------------------------------------------------------------------------
MFS Variable Trust Emerging Growth Series Accumulation unit
value
. Beginning of period......................................... $10.000 $11.242
. End of period............................................... 11.242 19.557
Number of accumulation units
. End of period (000s omitted)................................ 6 1,212
- -------------------------------------------------------------------------------
MFS Variable Trust Research Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.586
. End of period............................................... 10.586 12.928
Number of accumulation units
. End of period (000s omitted)................................ 8 631
- -------------------------------------------------------------------------------
MFS Variable Trust Total Return Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.136
. End of period............................................... 10.136 10.303
Number of accumulation units
. End of period (000s omitted)................................ 51 1,271
- -------------------------------------------------------------------------------
MFS Variable Trust Utilities Series Accumulation unit value
. Beginning of period......................................... $10.000 $10.244
. End of period............................................... 10.244 13.213
Number of accumulation units
. End of period (000s omitted)................................ 67 1,277
- -------------------------------------------------------------------------------
</TABLE>
*These values do not reflect a full year's experience because they are calcu-
lated for the period from the beginning of investment activity of the
subaccounts (November 20) through December 31.
Because the new subaccounts AIM V.I. Capital Appreciation, Alliance Premier
Growth Portfolio, Alliance Growth and Income Portfolio, Alliance Growth Portfo-
lio, Alliance Technology Portfolio, AFIS Global Small Capitalization, AFIS
Growth, AFIS International, AFIS Growth-Income, Delaware Premium Select Growth
Series, Franklin Small Cap Securities, Franklin Mutual Share Securities, Tem-
pleton Growth Securities, and Templeton International Securities which are
available under the Contracts did not begin operation prior to December 31,
1999, financial information for the subaccounts is not included in this pro-
spectus or the SAI.
11
<PAGE>
Investment results
At times, the VAA may compare its investment results to various unmanaged in-
dices or other variable annuities in reports to shareholders, sales literature
and advertisements. The results will be calculated on a total return basis for
various periods, with or without contingent deferred sales charges. Results
calculated without contingent deferred sales charges will be higher. Total re-
turns include the reinvestment of all distributions, which are reflected in
changes in unit value. The Money Market subaccount's yield is based upon in-
vestment performance over a 7-day period, which is then annualized.
The money market yield figure and annual performance of the subaccounts are
based on past performance and do not indicate or represent future performance.
See the SAI for further information.
Financial statements
The financial statements of the VAA and the statutory-basis financial state-
ments 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 servic-
es.
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 liabili-
ties 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 ac-
cordance 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 con-
tracts 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 ("AIM V.I. Funds"), managed by AIM Advisors,
Inc.
Alliance Variable Products Series Fund is managed by Alliance Capital Manage-
ment, L.P.
American Funds Insurance Series is managed by Capital Research and Management
Company.
Deutsche Asset Management VIT Funds (formerly the "BT Insurance Trust") man-
aged by Bankers Trust Company.
Delaware Group Premium Fund ("Delaware Group"), managed by Delaware Management
Company. The Social Awareness Series is sub-advised by Vantage Investment Ad-
visors. The REIT Series is sub-advised by Lincoln Investment Management. The
Emerging Markets Series is managed by Delaware International Advisers Ltd.
Variable Insurance Products Fund ("Fidelity VIP") and Variable Insurance Prod-
ucts Fund III ("Fidelity VIP III") managed by Fidelity Management & Research
Company.
Franklin Templeton Variable Insurance Products Trust--Franklin Small Cap is
managed by Franklin Advisers, Inc.; Mutual Shares Securities is managed by
Franklin Mutual Advisers, LLC; Templeton Growth Securities is managed by Tem-
pleton Global Advisors Limited; Templeton International Securities is managed
by Templeton Investment Counsel, Inc.
Liberty Variable Investment Trust ("Liberty Variable Trust") managed by Lib-
erty Advisory Series Corp., and sub-advised by Newport Fund Management, Inc.
Lincoln National Bond Fund, Inc., and Lincoln National Money Market Fund,
Inc., managed by Lincoln Investment Management, Inc.
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<PAGE>
Lincoln Investment Management has informed the funds to which it provides ad-
visory services that it intends to merge into a newly created series of its
affiliate, Delaware Management Business Trust, during the second or third
quarter of 2000. Lincoln Investment Management does not expect the merger to
result in any change in the level of advisory services that it currently pro-
vides to these funds, although there may be some changes in, and additions to,
personnel. See the prospectuses for these funds for more information.
MFS--Variable Insurance Trust ("MFS Variable Trust") managed by Massachusetts
Financial Services Company.
As compensation for their services to the fund, the investment advisors re-
ceive 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 Re-
demption of Shares, in the Prospectus for the fund.
With respect to a fund, the advisor and/or distributor, or an affiliate there-
of, may compensate Lincoln Life (or an affiliate) for administrative, distri-
bution, or other services. Some funds may compensate us more than other funds.
It is anticipated that such compensation will be based on assets of the par-
ticular Fund attributable to the contracts along with certain other variable
contracts issued or administered by Lincoln Life (or an affiliate). As of the
date of this Prospectus, we were receiving compensation from each fund company
except Delaware.
The funds' shares are issued and redeemed only in connection with variable an-
nuity 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 ac-
counts 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 subaccounts of the VAA is invested solely in shares of one of the
funds available under the contract. Each fund is registered as a diversified,
open-end management investment company under the 1940 Act, except for the Del-
aware Premium REIT Series and Delaware Premium 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. Man-
agement investment company is the legal term for a mutual fund. These defini-
tions are very general. The precise legal definitions for these terms are con-
tained in the 1940 Act.
Certain funds offered as part of this contract have similar investment objec-
tives and policies to other portfolios managed by the advisor. The investment
results of the funds, however, may be higher or lower than the other portfo-
lios that are managed by the advisor or sub-advisor. There can be no assur-
ance, 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 man-
aged 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 as-
surance that any of the funds will achieve their stated objectives.
AIM V.I. Capital Appreciation Fund: Seeks growth of capital through investment
in common stocks, with emphasis on medium- and small-sized growth companies.
The investment advisor will be particularly interested in companies that are
likely to benefit from new or innovative products, services or processes as
well as those that have experienced above average, long-term growth in earn-
ings and have excellent prospects for future growth.
AIM V.I. Growth Fund: Seeks growth of capital primarily by investing in sea-
soned and better capitalized companies considered to have strong earnings mo-
mentum.
AIM V.I. International Equity Fund: Seeks to provide long-term growth of capi-
tal by investing in a diversified portfolio of international equities whose
issuers are considered to have strong earnings momentum.
AIM V.I. Value Fund: Seeks to achieve long-term growth of capital by investing
primarily in equity securities judged by its investment advisor to be under-
valued relative to the investment advisor's appraisal of the current or pro-
jected earnings of the companies issuing the securities, or relative to the
current market values of assets owned by the companies issuing the securities
or relative to the equity market generally. Income is a secondary objective.
Alliance Premier Growth Portfolio: Seeks long-term growth of capital by pursu-
ing aggressive investment policies. The portfolio invests predominantly in the
equity securities of a limited number of large, carefully selected, high-qual-
ity U.S. companies that are judged likely to achieve superior earnings growth.
Alliance Growth and Income Portfolio: Seeks reasonable current income and rea-
sonable appreciation through investments primarily in dividend-paying common
stocks of good quality. The portfolio also may in-
13
<PAGE>
vest in fixed-income securities and convertible securities.
Alliance Growth Portfolio: Seeks to provide long-term growth of capital. Cur-
rent income is only an incidental consideration. The portfolio invests primar-
ily in equity securities of companies with favorable earnings outlooks, which
have long-term growth rates that are expected to exceed that of the U.S. econ-
omy over time.
Alliance Technology Portfolio: Seeks to emphasizes growth of capital and in-
vests for capital appreciation. Current income is only an incidental consider-
ation. The portfolio may seek income by writing listed call options. The port-
folio invests primarily in securities of companies expected to benefit from
technological advances and improvements (i.e., companies that use technology
extensively in the development of new or improved products or processes).
AFIS Global Small Capitalization Fund: Seeks to make your investment grow over
time by investing primarily in stocks of smaller companies located around the
world that typically have market capitalizations of $50 million to $1.5 bil-
lion. The fund is designed for investors seeking capital appreciation through
stocks. Investors in the fund should have a long-term perspective and be able
to tolerate potentially wide price fluctuations.
AFIS Growth Fund: Seeks to make your investment grow by investing primarily in
common stocks of companies that appear to offer superior opportunities for
growth of capital. The fund is designed for investors seeking capital appreci-
ation through stocks. Investors in the fund should have a long-term perspec-
tive and be able to tolerate potentially wide price fluctuations.
AFIS International Fund: Seeks to make your investment grow over time by in-
vesting primarily in common stocks of companies located outside the United
States. The fund is designed for investors seeking capital appreciation
through stocks. Investors in the fund should have a long-term perspective and
be able to tolerate potentially wide price fluctuations.
AFIS Growth-Income Fund: Seeks to make your investment grow and provide you
with income over time by investing primarily in common stocks or other securi-
ties which demonstrate the potential for appreciation and/or dividends. The
fund is designed for investors seeking both capital appreciation and income.
Deutsche VIT Equity 500 Index Fund: Seeks to match the performance of the
stock market as represented by Standard & Poor's 500 Index, before fund ex-
penses.
Delaware Premium Growth and Income Series: Seeks the highest possible total
return by investing in stocks that exhibit the potential for growth while pro-
viding higher than average dividend income.
Delaware Premium High Yield Series (formerly Delchester): Seeks total return
and, as a secondary objective, high current income. The series invests in
rated and unrated corporate bonds (including high-risk, high-yield bonds com-
monly known as junk bonds), foreign bonds, U.S. government securities and com-
mercial paper. An investment in this series may involve greater risks than an
investment in a portfolio comprised primarily of investment-grade bonds.
Delaware Premium Emerging Markets Series: Seeks long-term growth by investing
primarily in stocks of companies located or operating in emerging or develop-
ing countries.
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.
Delaware Premium Select Growth Series: Seeks long-term capital appreciation by
primarily investing in common stocks of companies that have the potential for
high earnings growth. Companies of any size are considered, as long as they
are larger than $300 million in market capitalization.
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.
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.
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.
Fidelity VIP Equity-Income Portfolio: Seeks reasonable income by investing
primarily in income-producing equity securities, with some potential for capi-
tal appreciation, seeking a yield that exceeds the composite yield on the se-
curities comprising the Standard and Poor's 500 Index (S&P 500).
Fidelity VIP Growth Portfolio: Seeks long-term capital appreciation. The port-
folio normally purchases common stocks.
Fidelity VIP Overseas Portfolio: Seeks long-term growth of capital by invest-
ing primarily in foreign securities.
Fidelity VIP III Growth Opportunities Portfolio: Seeks capital growth by in-
vesting primarily in common stocks.
Franklin Small Cap Securities Fund: Seeks long-term capital growth. It invests
primarily in equity securities of U.S. small cap growth companies. Small cap
companies are generally those with market cap values of less than $1.5 billion
at time of purchase.
Franklin Mutual Shares Securities Fund: Seeks capital appreciation with income
as a secondary goal. It invests primarily in equity securities of companies
that the manager believes are available at market prices less
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<PAGE>
than their actual value based on certain recognized or objective criteria.
Templeton Growth Securities Fund: Seeks long-term capital growth. It invests
primarily in equity securities of companies in various nations throughout the
world, including the U.S. and emerging markets.
Templeton International Securities Fund: Seeks long-term capital growth. It in-
vests primarily in equity securities of companies outside the United States,
including emerging markets.
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, Indone-
sia, the Philippines, South Korea and Taiwan.
Lincoln National Bond Fund: Seeks maximum current income consistent with pru-
dent investment strategy. The fund invests primarily in medium- and long-term
corporate and government bonds.
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.
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.
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 growth. A committee of investment research analysts se-
lects the securities for the fund, with individual analysts responsible for
choosing securities within an assigned industry.
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.
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 do-
mestic and foreign companies in the utilities industry.
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 ap-
propriate funds to pay annuity payouts, death benefits, surrender/withdrawal
proceeds or for other purposes described in the contract. If you want to trans-
fer all or part of your investment from one subaccount to another, we may re-
deem shares held in the first and purchase shares of the other. Redeemed shares
are retired, but they may be reissued later.
When a fund sells any of its shares both to variable annuity and to variable
life insurance separate accounts, it is said to engage in mixed funding. When a
fund sells any of its shares to separate accounts of unaffiliated life insur-
ance companies, it is said to engage in shared funding.
The funds currently engage in mixed and shared funding. Therefore, due to dif-
ferences in redemption rates or tax treatment, or other considerations, the in-
terest of various contractowners participating in a fund could conflict. Each
of the fund's Board of Directors will monitor for the existence of any material
conflicts, and determine what action, if any, should be taken. See the Prospec-
tuses for the funds.
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 re-
invested in shares of the distributing funds at their net asset value on the
date of distribution. Dividends are not paid out to contractowners as addi-
tional units, but are reflected as changes in unit values.
Addition, deletion or substitution of investments
We reserve the right, within the law, to add, delete and substitute series
and/or funds within the VAA. We may also add, delete, or substitute series or
funds only for certain classes of contractowners. New or substitute funds may
have different fees and expenses, and may only be offered to certain classes of
contractowners. This substitution might occur if shares of a fund should no
longer be available, or if investment in any fund's shares should become inap-
propriate, in the judgment of our management, for the purposes of the 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
15
<PAGE>
expenses for the distribution and administration of the contracts and for pro-
viding 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 con-
tract confirmations, providing toll-free inquiry services and furnishing tele-
phone fund transfer services. The risks we assume include: the risk that
annuitants receiving annuity payouts under contract live longer than we as-
sumed 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 corre-
spond to the costs associated with providing the services or benefits indi-
cated by the description of the charge. For example, the surrender charge col-
lected may not fully cover all of the sales and distribution expenses actually
incurred by us.
Deductions from the VAA for 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.
Surrender charge
A surrender charge applies (except as described below) to surrenders and with-
drawals 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
One year At Least
Surrender charge as a percentage of the 7% 1 2 3 4 5 6 7+
surrendered or withdrawn purchase payments 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
at least 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 the free amount which is equal to 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 re-
sult of 180 days of continuous confinement of the contractowner in an ac-
credited 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,
joint owner or annuitant.
7. A surrender of a contract or withdrawal of contract value of a contract is-
sued to employees and registered representatives of any member of the sell-
ing group and their spouses and minor children, or to officers, directors,
trustees or bona-fide full-time employees of Lincoln Financial Group, AIM,
Alliance Capital, The Capital Group, Bankers Trust, Fidelity Management and
Research Company, Franklin Advisors, Inc., Franklin Mutual Advisors, LLC,
Templeton Global Advisors Limited, Templeton Investment Counsel, Inc., Lib-
erty Advisory Services Corp. and MFS Investment Management or any of their
affiliated or managed companies (based upon contractowner's status at the
time the contract was purchased.).
For purposes of calculating the surrender charge on withdrawals on contracts
where the contractowner is not a Charitable Remainder Trust, Lincoln Life as-
sumes that:
a. the free amount will be withdrawn from purchase payments on a "first in-
first out (FIFO)" basis.
b. Prior to the seventh anniversary of the contract, any amount withdrawn
above the free amount during a contract year will be withdrawn in the fol-
lowing order:
1. from purchase payments (on a FIFO basis) until exhausted; then
2. from earnings.
c. On or after the seventh anniversary of the contract, any amount withdrawn
above the free amount during a contract year will be withdrawn in the fol-
lowing order:
1. from purchase payments (on a FIFO basis) to which a surrender charge no
longer applies until exhausted; then
2. from earnings until exhausted; then
3. from purchase payments (on a FIFO basis) to which a surrender charge
still applies.
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<PAGE>
In some states paragraph c does not apply and paragraph b continues to apply
after the seventh anniversary of the contract.
For purposes of calculating the surrender charge on withdrawals on contracts
where the contractowner is a Charitable Remainder Trust, Lincoln Life assumes
that:
a. the free amount will be withdrawn from purchase payments on a FIFO basis.
b. Any amount withdrawn above the free amount during a contract year will be
withdrawn in the following order:
1. from purchase payments (on a FIFO basis) to which a surrender charge no
longer applies until exhausted; then
2. from earnings until exhausted; then
3. from purchase payments (on a FIFO basis) to which a surrender charge
still applies.
The surrender charge is calculated separately for each contract year's purchase
payments to which a charge applies. The surrender charges associated with sur-
render or withdrawal are paid to us to compensate us for the loss we experience
on contract distribution costs when contractowners surrender or withdraw before
distribution costs have been recovered.
If the contractowner is a corporation or other non-individual (non-natural per-
son), the annuitant or joint annuitant will be considered the contractowner or
joint owner for purposes of determining when a surrender charge does not apply.
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 pro-
vided 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 the 13th and each additional
transfer during any contract year. Automatic dollar cost averaging and auto-
matic 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 gener-
ally depend upon the law of your state of residence. The tax ranges from 0% to
5%.
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 previ-
ously may be reduced or eliminated for any particular contract. However, these
charges will be reduced only to the extent that we anticipate lower distribu-
tion and/or administrative expenses, or that we perform fewer sales or adminis-
trative 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 rep-
resentative 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 con-
tract 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 com-
pleted within those five days, you will be informed of the reasons, and the
purchase payment will be returned immediately. Once the application is com-
plete, 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 con-
tracts 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
17
<PAGE>
minimum initial purchase payment is $10,000 for nonqualified contracts and
Section 403(b) transfers/rollovers to IRAs; and $2,000 for qualified con-
tracts. The minimum annual amount for additional purchase payments for non-
qualified and qualified contracts is $100. There is no set maximum for addi-
tional 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-forfei-
ture 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 cancel-
lation of the contract.
Valuation date
Accumulation and annuity units will be valued once daily at the close of trad-
ing (currently, normally, 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 vari-
able 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 num-
ber of accumulation units credited is determined by dividing the amount allo-
cated 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 ac-
cumulation unit value computed on the next valuation date. The number of accu-
mulation 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 accumu-
lation 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 es-
tablished 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
(2) The liabilities of the subaccount at the end of the valuation period;
these liabilities include daily charges imposed on the subaccount, and may in-
clude 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 Tele-
phone Exchange Authorization form (available from us) is on file with us, by a
toll-free telephone call or by the Lincoln Life internet site. 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 in-
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structions. We may also assign the contractowner a Personal Identification Num-
ber (PIN) to serve as identification. We will not be liable for following tele-
phone 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 proc-
essed 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 in-
herent 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 pro-
fessional 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 practic-
es, 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 ac-
count to the various subaccount(s) except that 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.
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 an-
other subaccount in the VAA or to the fixed side of the contract. Those trans-
fers 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
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 that you send
us the contract for endorsement of a change of beneficiary.
If the contractowner, joint owner or annuitant dies before the annuity com-
mencement date, the death benefit will be equal to the greatest of: the con-
tract value for the valuation period during which the death benefit election
becomes effective; the sum of all purchase payments less the sum of all with-
drawals; or the highest contract value as of any contract anniversary occurring
on or before the 80th birthday of the deceased person upon whose death the
death benefit is payable; increased by the sum of purchase payments made since
such contract anniversary and decreased by the sum of all partial withdrawals,
partial annuitizations, and premium tax deductions made since such contract an-
niversary.
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, joint owner or annuitant; (2) written election
of a method of settlement; and (3) any other required claim forms, fully com-
pleted.
Notwithstanding any provision of this contract to the contrary, the payment of
death benefits provided under this contract must be made in compliance with
Code Section 72(s) or 401(a)(9) as applicable, as amended from time to time.
Death benefits may be taxable. See Federal tax matters.
Upon the death of the contractowner, a death benefit will be paid to the bene-
ficiary. Upon the death of a joint owner, the death benefit will be paid to the
surviving joint owner. Upon the death of an annuitant who is not the
contractowner or joint owner, a death benefit may be paid to the contractowner
(and joint owner, if applicable, in equal shares). If the contractowner is a
corporation or other non-individual (non-natural person), the death of the an-
nuitant will be treated as death of the contractowner.
If there are joint owners, upon the death of the first contractowner, Lincoln
Life will pay a death benefit to the
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surviving joint owner. The surviving joint owner will be treated as the prima-
ry, designated beneficiary. Any other beneficiary designation on record at the
time of death will be treated as a contingent beneficiary. If the surviving
joint owner is the spouse of the deceased joint owner he/she may continue the
contract as a sole contractowner. Upon the death of the spouse who continues
the contract, Lincoln Life will pay a death benefit to the designated benefi-
ciary.
If the beneficiary is the spouse of the contractowner, then the spouse may
elect to continue the contract as contractowner.
Upon the death of a contractowner, joint owner or annuitant, if the surviving
spouse continues the contract, any portion of the death benefit that would
have been payable (if the contract had not been continued) that exceeds the
current contract value will be credited to the contract. This provision ap-
plies only one time for each contract.
If an annuitant who is not the contract owner or a joint owner dies, then the
contingent annuitant, if named, becomes the annuitant and no death benefit is
payable on the death of the annuitant. If no contingent annuitant is named,
the contractowner (or younger of joint owners) becomes the annuitant. Alterna-
tively, a death benefit may be paid to the contractowner and joint owner, if
applicable in equal shares, provided the annuitant named on this contract has
not been changed (except within the first 30 days after the contract is issued
or upon the death of a prior annuitant). Notification of the election of this
death benefit must be received by Lincoln Life within 75 days of the death of
the annuitant. If no contractowner is living on the date of death of the annu-
itant, the death benefit will be paid to the beneficiary. The contract termi-
nates when any death benefit is paid due to the death of the annuitant. A
death benefit payable on the death of the annuitant will not be paid if the
annuitant has been changed later than 30 days subsequent to the effective date
of this contract, unless the change occurred because of the death of a prior
annuitant.
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; and/or
2. If no beneficiary survives the contractowner, the proceeds will be paid
to the contractowner's estate.
Unless the contractowner has already selected a settlement option, the benefi-
ciary may choose the method of payment of the death benefit. 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 or an annuity for a designated period not extending beyond the
beneficiary's life expectancy.
The death benefit payable on the death of the annuitant will be distributed in
either a lump sum or under an annuity payout. The annuity payout must be se-
lected within 60 days after Lincoln Life has approved the death claim.
If a lump sum settlement is requested, the proceeds will be mailed within
seven days of receipt of satisfactory claim documentation as discussed previ-
ously, subject to the laws and regulations governing payment of death bene-
fits. This payment may be postponed as permitted by the Investment Company Act
of 1940.
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 guaranteed
payouts, the number of payouts which remain unpaid at the annuitant's death
(or surviving annuitant's death in the case of a joint life annuity) will be
paid to the beneficiary as payouts become due.
Surrenders and withdrawals
Before the annuity commencement date, we will allow the surrender of the con-
tract 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 applica-
ble 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 other-
wise, 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. The maximum amount which can be withdrawn without
incurring any surrender charges is explained under charges and other deduc-
tions. 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.
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.
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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 that portion of the
surrender/withdrawal charges attributable to the amount returned. This elec-
tion 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 representa-
tion must be made that the proceeds being used to make the purchase have re-
tained 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 re-
investment 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 7.0% of each purchase pay-
ment. 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 associ-
ated with the marketing of the contracts. These commissions are not deducted
from purchase payments or contract value, they are paid by us.
Ownership
The Owner on the date of issue will be the person designated in the contract
specifications. If no owner is designated, the annuitant(s) will be the owner.
The owner may name a Joint Owner. Joint owner(s) shall be treated as having
equal, undivided interests in the contract, including rights of survivorship.
Either joint owner, independently of the other, may exercise any ownership
rights in the contract.
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 collater-
ally assigned. We assume no responsibility for the validity or effect of any
assignment, an assignment affects the death benefit calculated under our con-
tract. 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 date
permitted by law which is usually on or before the contractowner's 90th birth-
day. (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 op-
tions), some of which are payable on a variable basis, fixed basis or a combi-
nation 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. Fol-
lowing 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 beneficia-
ries. However, there 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.
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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 annu-
itant. 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 fur-
ther 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 guaran-
tee that upon death, should (a) the number of annuity units purchased, as de-
termined 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 mul-
tiplied 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 annu-
ity 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 pay-
ments 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 applica-
ble. 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 mor-
tality 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 op-
tion 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, vari-
able or combination fixed and variable basis, in proportion to the account al-
location at the time of annuitization) except when a joint life payout is re-
quired 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;
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.
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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 de-
pend 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 expe-
rience of the VAA. The general account is subject to regulation and supervi-
sion 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 com-
pany under the 1940 Act. Accordingly, neither the general account nor any in-
terests 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 dis-
closures which are included in this Prospectus which relate to our general ac-
count 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 Pro-
spectus is generally intended to serve as a disclosure document only for as-
pects of the contract involving the VAA, and therefore contains only selected
information regarding the fixed side of the contract. Complete details regard-
ing 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 av-
eraging. 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 ac-
count. 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 annual effective 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 guaran-
teed period will be subject to the MVA. Each guaranteed period purchase pay-
ment amount will be treated separately for purposes of determining any appli-
cable 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 guaran-
teed period will begin automatically at the end of the previous guaranteed pe-
riod, 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 expi-
ration of the applicable guaranteed period are not subject to the limitation
of twelve transfers per contract year or the additional fixed account transfer
restrictions.
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 sub-
ject 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 ac-
count fees and before any applicable surrender or transfer charges. In gener-
al, 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 peri-
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od. 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 appli-
cation 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 pub-
lished by the Federal Reserve Board.
The MVA is calculated by multiplying the transaction amount by:
(1+A)n
-1 ----
(1+B)n
where:
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 trans-
fer, 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 adjusted to "B" will be made, unless
required by state law. This adjustment builds into the formula a factor repre-
senting 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 antic-
ipated that a substantial portion of applicable general account portfolio as-
sets will be in relatively illiquid securities. Thus, in addition to direct
transaction costs, if such securities must be sold (e.g., because of surren-
ders), the market price may be lower. Accordingly, even if interest rates de-
cline, 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, there will be no MVA.
N = The number of years remaining in the guaranteed period (e.g., 1 year and
73 days = 1 X (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 indi-
rect costs Lincoln Life can incur due to the liquidation of general account
assets in order to satisfy surrender requests.
Federal tax matters
Introduction
The Federal income tax treatment of the contract is complex and sometimes un-
certain. The Federal income tax rules may vary with your particular circum-
stances. This discussion does not include all the Federal income tax rules
that may affect 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 ap-
plicable 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 con-
tract value until you receive a contract distribution. However, for this gen-
eral rule to apply, certain requirements 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.
. 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 pur-
poses. 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 earn-
ings are contracts issued to a corporation or a trust. Exceptions to this rule
exist. For example, the tax code treats a contract as owned by an individual
if the named owner is a trust or other entity that holds the contract as an
agent for an individual. However, this exception does not apply in the case of
any employer that owns a contract to provide deferred compensation for its em-
ployees.
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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 di-
versified. 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 op-
tions 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 exist-
ing 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 the 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 pos-
sible 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 ex-
cess 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 ordi-
nary income than on capital gains. You will pay tax on a surrender to the ex-
tent the amount you receive exceeds your purchase payments. In certain circum-
stances, your purchase payments are reduced by amounts received from your con-
tract that were not included in income.
Taxation of annuity payouts
The tax code imposes tax on a portion of each annuity payout (at ordinary in-
come tax rates) and treats a portion as a nontaxable return of 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 op-
tion, they are taxed in the same manner as annuity payouts.
. If the beneficiary does not receive death benefits under an annuity pay-
out 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 your con-
tract which you must include in your gross income. The 10% penalty tax does not
apply if one of several exceptions exists. These exceptions include withdraw-
als, surrenders or annuity payouts that:
. You receive on or after you reach age 59 1/2,
25
<PAGE>
. 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 your
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 an-
nuity 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 insur-
ance 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 con-
tract could affect the amount of a surrender, a withdrawal or an annuity pay-
out 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 re-
ceived 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 pay-
ments not previously received, the new owner's purchase payments in the con-
tract 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 indi-
vidual, or if a contract is held for the benefit of an entity, the entity will
lose a portion of its deduction for otherwise deductible interest expenses.
This disallowance does not apply if you pay tax on the annual increase in the
contract value. Entities that are considering purchasing a contract, or enti-
ties that will benefit from someone else's ownership of a contract, should
consult a tax advisor.
Qualified retirement plans
We have also designed the contracts for use in connection with certain types
of retirement plans that receive favorable treatment under the tax code. Con-
tracts 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 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 quali-
fied 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 fu-
ture.
We will amend contracts to be used with a qualified plan as generally neces-
sary to conform to tax law requirements for the type of plan. However, the
rights of a person to any qualified plan benefits may be subject to the plan's
terms and conditions, regardless of the contract's terms and conditions. In
addition, we are not bound by the terms and conditions of qualified plans to
the extent such terms and conditions contradict the contract, unless we con-
sent.
Tax treatment of qualified contracts
The Federal income tax rules applicable to qualified plans and qualified con-
tracts vary with the type of plan and contract. For example,
. Federal tax rules limit the amount of purchase payments that can be made and
the tax deduction or exclusion that may be allowed for the purchase pay-
ments. These limits vary depending on the type of qualified plan and the
plan participant's specific circumstances, e.g., the participant's compensa-
tion.
. Under most qualified plans, e.g., 403(b) plans and Traditional IRAs, the an-
nuitant must begin receiving
26
<PAGE>
payments from the contract in certain minimum amounts by a certain age, typi-
cally 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 dura-
tion, and the manner of repayment. Your contract or plan may not permit
loans.
Tax treatment of payments
Federal income tax rules generally include distributions from a qualified con-
tract in the recipient's income as ordinary income. These taxable distribu-
tions will include purchase payments that were deductible or excludible from
income. Thus, under many qualified contracts the total amount received is in-
cluded in income since a deduction or exclusion from income was taken for pur-
chase 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 min-
imum 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 im-
pose 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 ap-
ply to taxable distributions from other qualified plans. However, the specific
requirements of the exception may vary.
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 al-
ways be consulted before you move or attempt to move funds between any quali-
fied 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 re-
cipient with a notice explaining these requirements and how the 20% withhold-
ing 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 in-
vestment income and realized capital gains of the VAA. Lincoln Life does not
expect that it will incur any Federal income tax liability on the income and
gains earned by the VAA. We, therefore, do not impose a charge for Federal in-
come taxes. If Federal income tax law changes and we must pay tax on some or
all of the income and gains earned by the VAA, we may impose a charge against
the VAA to pay the taxes.
Changes in the law
The above discussion is based on the tax code, IRS regulations, and interpre-
tations 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.
27
<PAGE>
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 interpre-
tations 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 ap-
plying 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 inter-
est in a subaccount will receive proxy voting material, reports and other ma-
terials 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 func-
tions in support of the selling group. The contracts will be sold by our prop-
erly 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. Included among these broker-deal-
ers is Lincoln Financial Advisors (LFA). LFA is affiliated with us and in ad-
dition to selling our contracts, may also act as a principal underwriter for
certain other contracts issued by 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 con-
tract 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 con-
tract 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 pur-
chaser who participates in the VAA 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 pur-
chase 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 re-
sponsible for maintaining all records and accounts relating to the VAA. We
have entered into an agreement with the Delaware Management Company, 2005 Mar-
ket Street, Philadelphia, PA 19203, to provide accounting services to the VAA.
We will mail to you, at your last known address of record at the home office,
at least semiannually after the first contract year, reports containing infor-
mation required by 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 informa-
tion about the VAA, Lincoln Life and the contracts offered. Statements in this
Prospectus about the content of contracts and other legal instruments are sum-
maries. For the complete text of those contracts and instruments, please refer
to those documents as filed 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 ad-
vertisements. 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.
28
<PAGE>
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 several lawsuits in which Plaintiffs seek
to represent national classes of policyholders in connection with alleged
fraud, breach of contract and other claims relating to the sale of interest-
sensitive universal and participating whole life 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 sub-
stantial, the cases are in the preliminary stages of litigation, and it is pre-
mature to make assessments about potential loss, if any. Management is defend-
ing these suits vigorously. The amount of liability, if any, which may ulti-
mately arise as a result of these suits cannot be reasonably determined at this
time.
Statement of Additional
Information
Table of contents for Lincoln Life Variable Annuity
Account N
(Lincoln ChoicePlus)
<TABLE>
<CAPTION>
Item
- ---------------------------------------------------------------------
<S> <C>
General information and history of Lincoln Life B-1
- ---------------------------------------------------------------------
Special terms B-1
- ---------------------------------------------------------------------
Services B-1
- ---------------------------------------------------------------------
Principal underwriter B-2
- ---------------------------------------------------------------------
For a free copy of the SAI please see page one of this booklet.
<CAPTION>
Item
- ---------------------------------------------------------------------
<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-10
</TABLE>
29
<PAGE>
................................................................................
Please send me a free copy of the current Statement of Additional Information
for Lincoln Life Variable Annuity Account N (ChoicePlus).
(Please Print)
Name: _________________________ Social Security No.: __________________________
Address: _______________________________________________________________________
City State Zip
Mail to Lincoln National Life Insurance Company, P.O. Box 2340, Fort Wayne, In-
diana 46801
30
<PAGE>
(This page has been left blank intentionally.)
31
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of assets and liability
December 31, 1999
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. International AIM V.I.
Growth Equity Value
Combined Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments at Market--
Affiliated (Cost
$82,346,295) $ 84,769,470 $ -- $ -- $ --
Investments at Market--
Unaffiliated (Cost
$273,154,463) 307,782,922 24,440,659 10,773,504 44,211,097
------------ ----------- ----------- -----------
Total Investments 392,552,392 24,440,659 10,773,504 44,211,097
Dividend Receivable 19,912 -- -- --
Total Assets 392,572,304 24,440,659 10,773,504 44,211,097
Liability--Payable to
The Lincoln National
Life Insurance Company 15,012 937 411 1,684
------------ ----------- ----------- -----------
NET ASSETS $392,557,292 $24,439,722 $10,773,093 $44,209,413
============ =========== =========== ===========
Percent of net assets 100.00% 6.23% 2.74% 11.26%
============ =========== =========== ===========
Net assets are
represented by:
. Units in accumulation
period 1,642,369 685,744 3,157,111
- -----------------------
. Annuity reserve units 7,233 -- --
- -----------------------
. Unit value $ 14.816 $ 15.710 $ 14.003
- -----------------------
. Value in accumulation
period 24,332,560 10,773,093 44,209,413
- -----------------------
. Annuity reserves 107,162 -- --
- ----------------------- ----------- ----------- -----------
NET ASSETS $24,439,722 $10,773,093 $44,209,413
=========== =========== ===========
</TABLE>
See accompanying notes.
N-2
<PAGE>
<TABLE>
<CAPTION>
Liberty Delaware Delaware Delaware
Bankers Liberty Colonial Premium Delaware Delaware Premium Premium
Trust Equity Colonial NewPort Growth Premium Premium Emerging International
500 Index US Stock Tiger and Income Delchester Devon Markets Equity
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
$ -- $ -- $ -- $7,717,650 $6,075,240 $8,911,265 $1,345,552 $3,630,230
46,396,762 4,440,325 3,055,654 -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
46,396,762 4,440,325 3,055,654 7,717,650 6,075,240 8,911,265 1,345,552 3,630,230
-- -- -- -- 19,912 -- -- --
46,396,762 4,440,325 3,055,654 7,717,650 6,095,152 8,911,265 1,345,552 3,630,230
1,775 171 117 297 233 346 51 143
----------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$46,394,987 $4,440,154 $3,055,537 $7,717,353 $6,094,919 $8,910,919 $1,345,501 $3,630,087
=========== ========== ========== ========== ========== ========== ========== ==========
11.82% 1.13% 0.78% 1.97% 1.55% 2.27% 0.34% 0.92%
=========== ========== ========== ========== ========== ========== ========== ==========
3,760,973 388,245 185,849 800,420 636,545 974,029 99,293 313,631
11,164 -- -- 5,142 -- 1,099 -- --
$ 12.299 $ 11.436 $ 16.441 $ 9.580 $ 9.575 $ 9.138 $ 13.551 $ 11.574
46,257,680 4,440,154 3,055,537 7,668,097 6,094,919 8,900,879 1,345,501 3,630,087
137,307 -- -- 49,256 -- 10,040 -- --
----------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$46,394,987 $4,440,154 $3,055,537 $7,717,353 $6,094,919 $8,910,919 $1,345,501 $3,630,087
=========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
N-3
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of assets and liability (continued)
December 31, 1999
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Premium Premium Premium Delaware
Real Small Cap Social Premium
Estate Value Awareness Trend
Subaccount Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments at Market--
Affiliated (Cost $82,346,295) $710,962 $3,137,177 $7,254,574 $16,014,847
Investments at Market--
Unaffiliated (Cost
$273,154,463) -- -- -- --
-------- ---------- ---------- -----------
Total Investments 710,962 3,137,177 7,254,574 16,014,847
Dividend Receivable -- -- -- --
Total Assets 710,962 3,137,177 7,254,574 16,014,847
Liability--Payable to The
Lincoln National Life
Insurance Company 27 119 277 603
-------- ---------- ---------- -----------
NET ASSETS $710,935 $3,137,058 $7,254,297 $16,014,244
======== ========== ========== ===========
Percent of net assets 0.18% 0.80% 1.85% 4.08%
======== ========== ========== ===========
Net assets are represented by:
. Units in accumulation period 73,159 318,790 611,167 877,800
- ------------------------------
. Annuity reserve units -- -- -- --
- ------------------------------
. Unit value $ 9.718 $ 9.841 $ 11.870 $ 18.244
- ------------------------------
. Value in accumulation period 710,936 3,137,058 7,254,297 16,014,244
- ------------------------------
. Annuity reserves -- -- -- --
- ------------------------------ -------- ---------- ---------- -----------
NET ASSETS $710,936 $3,137,058 $7,254,297 $16,014,244
======== ========== ========== ===========
</TABLE>
See accompanying notes.
N-4
<PAGE>
<TABLE>
<CAPTION>
Fidelity Fidelity Lincoln
VIP Fidelity Fidelity VIP III Kemper Kemper National
Dreyfus Equity VIP VIP Growth Small Cap Government Money
Small Cap Income Growth Overseas Opportunities Growth Securities Market
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- ----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
$ -- $ -- $ -- $ -- $ -- $ -- $ -- $17,841,217
3,850,015 15,591,893 38,112,319 8,924,980 18,902,615 5,918,750 12,138,816 --
---------- ----------- ----------- ---------- ----------- ---------- ----------- -----------
3,850,015 15,591,893 38,112,319 8,924,980 18,902,615 5,918,750 12,138,816 17,841,217
-- -- -- -- -- -- -- --
3,850,015 15,591,893 38,112,319 8,924,980 18,902,615 5,918,750 12,138,816 17,841,217
145 598 1,453 342 731 223 466 683
---------- ----------- ----------- ---------- ----------- ---------- ----------- -----------
$3,849,870 $15,591,295 $38,110,866 $8,924,638 $18,901,884 $5,918,527 $12,138,350 $17,840,534
========== =========== =========== ========== =========== ========== =========== ===========
0.98% 3.97% 9.71% 2.27% 4.82% 1.51% 3.09% 4.54%
========== =========== =========== ========== =========== ========== =========== ===========
295,868 1,463,500 2,642,177 628,052 1,770,295 405,316 1,218,517 1,721,360
-- 9,081 11,862 -- -- -- -- --
$ 13.012 $ 10.588 $ 14.360 $ 14.210 $ 10.677 $ 14.602 $ 9.962 $ 10.364
3,849,870 15,495,149 37,940,538 8,924,638 18,901,884 5,918,527 12,138,350 17,840,534
-- 96,146 170,328 -- -- -- -- --
---------- ----------- ----------- ---------- ----------- ---------- ----------- -----------
$3,849,870 $15,591,295 $38,110,866 $8,924,638 $18,901,884 $5,918,527 $12,138,350 $17,840,534
========== =========== =========== ========== =========== ========== =========== ===========
</TABLE>
N-5
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of assets and liability (continued)
December 31, 1999
<TABLE>
<CAPTION>
Lincoln MFS
National Emerging MFS total
Bond Growth Return
Subaccount Subaccount Subaccount
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets
Investments at Market--Affiliated
(Cost $82,346,295) $12,130,756 $ -- $ --
Investments at Market--
Unaffiliated (Cost $273,154,463) -- 23,707,760 13,097,966
----------- ----------- -----------
Total Investments 12,130,756 23,707,760 13,097,966
Dividend Receivable -- -- --
Total Assets 12,130,756 23,707,760 13,097,966
Liability--Payable to The Lincoln
National Life Insurance Company 466 894 506
----------- ----------- -----------
NET ASSETS $12,130,290 $23,706,866 $13,097,460
=========== =========== ===========
Percent of net assets 3.09% 6.04% 3.34%
=========== =========== ===========
Net assets are represented by:
. Units in accumulation period 1,259,559 1,212,170 1,271,214
--------------------------------
. Annuity reserve units -- -- --
--------------------------------
. Unit value $ 9.631 $ 19.557 $ 10.303
--------------------------------
. Value accumulation period 12,130,290 23,706,866 13,097,460
--------------------------------
. Annuity reserves -- -- --
-------------------------------- ----------- ----------- -----------
NET ASSETS $12,130,290 $23,706,866 $13,097,460
=========== =========== ===========
</TABLE>
See accompanying notes.
N-6
<PAGE>
<TABLE>
<CAPTION>
OCC
Accumulation OCC
MFS MFS Global Accumulation
Utilities Research Equity Managed
Subaccount Subaccount Subaccount Subaccount
- -------------------------------------------------------
<C> <C> <C> <C> <S>
$ -- $ -- $ -- $ --
16,877,359 8,152,328 3,693,596 5,496,524
----------- ---------- ---------- ----------
16,877,359 8,152,328 3,693,596 5,496,524
-- -- -- --
16,877,359 8,152,328 3,693,596 5,496,524
646 312 143 213
----------- ---------- ---------- ----------
$16,876,713 $8,152,016 $3,693,453 $5,496,311
=========== ========== ========== ==========
4.30% 2.08% 0.94% 1.40%
=========== ========== ========== ==========
1,273,358 630,578 294,211 536,721
3,927 -- -- 4,147
$ 13.213 $ 12.928 $ 12.554 $ 10.162
16,824,825 8,152,016 3,693,453 5,454,168
51,888 -- -- 42,143
----------- ---------- ---------- ----------
$16,876,713 $8,152,016 $3,693,453 $5,496,311
=========== ========== ========== ==========
</TABLE>
N-7
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of operations
Year Ended December 31, 1999
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. International
Growth Equity
Combined Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Investment Income (Loss):
. Dividends from investment income $ 2,584,493 $ 45,712 $ 67,998
- ---------------------------------------
. Dividends from net realized gains on
investments 3,257,711 801,307 285,352
- ---------------------------------------
Mortality and expense guarantees (2,289,189) (122,442) (45,924)
----------- ---------- ----------
Net Investment Income (Loss) 3,553,015 724,577 307,426
Net Realized and Unrealized Gain (Loss)
on Investments:
. Net realized gain (loss) on
investments 2,717,979 61,437 646,152
- ---------------------------------------
. Net change in unrealized appreciation
or depreciation on investments 36,814,991 3,164,157 1,915,792
- --------------------------------------- ----------- ---------- ----------
Net Realized and Unrealized Gain (Loss)
on Investments 39,532,970 3,225,594 2,561,944
----------- ---------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $43,085,985 $3,950,171 $2,869,370
- --------------------------------------- =========== ========== ==========
</TABLE>
See accompanying notes.
N-8
<PAGE>
<TABLE>
<CAPTION>
Bankers Liberty Delaware Delaware
Trust Liberty Colonial Premium Delaware Delaware Premium
AIM V.I. Equity 500 Colonial NewPort Growth and Premium Premium Emerging
Value Index US Stock Tiger Income Delchester Devon Markets
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <S>
$ 114,307 $ 294,359 $ 22,377 $ 16,547 $ 106,334 $ 374,019 $ 14,831 $ 1,151
597,748 138,424 203,260 -- 81,959 -- 28,673 --
(237,428) (286,852) (24,198) (12,104) (56,690) (51,250) (83,545) (6,100)
---------- ---------- -------- -------- --------- --------- --------- --------
474,627 145,931 201,439 4,443 131,603 322,769 (40,041) (4,949)
27,847 27,121 (65) 36,913 (41,512) (91,607) (87,211) 18,715
4,929,350 3,978,680 35,006 557,362 (486,668) (446,001) (473,024) 217,354
---------- ---------- -------- -------- --------- --------- --------- --------
4,957,197 4,005,801 34,941 594,275 (528,180) (537,608) (560,235) 236,069
---------- ---------- -------- -------- --------- --------- --------- --------
$5,431,824 $4,151,732 $236,380 $598,718 $(396,577) $(214,839) $(600,276) $231,120
========== ========== ======== ======== ========= ========= ========= ========
</TABLE>
N-9
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of operations (continued)
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Delaware Delaware Delaware Delaware
Premium Premium Premium Premium
International Real Small Cap Social
Equity Estate Value Awareness
Subaccount Subaccount Subaccount Subaccount
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Investment Income (Loss):
. Dividends from investment
income $ 5,420 $ 2,773 $ 6,315 $ 6,284
- ------------------------------
. Dividends from net realized
gains on investments 396 -- 2,591 --
- ------------------------------
Mortality and expense
guarantees (16,076) (4,637) (20,889) (54,088)
-------- -------- -------- --------
Net Investment Income (Loss) (10,260) (1,864) (11,983) (47,804)
Net Realized and Unrealized
Gain (Loss) on Investments:
. Net realized gain (loss) on
investments 151,449 (14,359) (4,116) 15,441
- ------------------------------
. Net change in unrealized
appreciation or depreciation
on investments 159,885 (5,062) (56,317) 697,762
- ------------------------------ -------- -------- -------- --------
Net Realized and Unrealized
Gain (Loss) on Investments 311,334 (19,421) (60,433) 713,203
-------- -------- -------- --------
Net Increase (Decrease) in Net
Assets Resulting from
Operations $301,074 $(21,285) $(72,416) $665,399
======== ======== ======== ========
</TABLE>
See accompanying notes.
N-10
<PAGE>
<TABLE>
<CAPTION>
Fidelity Fidelity
Delaware VIP Fidelity Fidelity VIP III Kemper Kemper
Premium Dreyfus Equity VIP VIP Growth Small Cap Government
Trend Small Cap Income Growth Overseas Opportunities Growth Securities
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 34 $ 373 $ 18,297 $ 1,460 $ 4,516 $ 23,068 $ -- $120,036
-- -- 40,446 91,781 7,284 43,128 -- --
(48,447) (21,163) (101,983) (187,107) (47,462) (137,343) (30,630) (70,809)
- ---------- -------- --------- ---------- ---------- --------- ---------- --------
(48,413) (20,790) (43,240) (93,866) (35,662) (71,147) (30,630) 49,227
56,040 9,870 2,348 29,798 1,798,129 15,981 17,423 (7,808)
3,490,733 501,638 (92,622) 5,913,522 1,027,670 390,823 1,428,512 (79,830)
- ---------- -------- --------- ---------- ---------- --------- ---------- --------
3,546,773 511,508 (90,274) 5,943,320 2,825,799 406,804 1,445,935 (87,638)
- ---------- -------- --------- ---------- ---------- --------- ---------- --------
$3,498,360 $490,718 $(133,514) $5,849,454 $2,790,137 $ 335,657 $1,415,305 $(38,411)
========== ======== ========= ========== ========== ========= ========== ========
</TABLE>
N-11
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of operations (continued)
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Lincoln
National Lincoln MFS
Money National Emerging
Market Bond Growth
Subaccount Subaccount Subaccount
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Net Investment Income (Loss):
. Dividends from investment income $ 527,238 $ 627,973 $ --
- ------------------------------------------
. Dividends from net realized gains on
investments -- -- --
- ------------------------------------------
Mortality and expense guarantees (156,983) (82,828) (89,179)
--------- --------- ----------
Net Investment Income (Loss) 370,255 545,145 (89,179)
Net Realized and Unrealized Gain (Loss) on
Investments:
. Net realized gain (loss) on investments -- (21,107) 11,337
- ------------------------------------------
. Net change in unrealized appreciation or
depreciation on investments -- (743,442) 7,351,580
- ------------------------------------------ --------- --------- ----------
Net Realized and Unrealized Gain (Loss) on
Investments -- (764,549) 7,362,917
--------- --------- ----------
Net Increase (Decrease) in Net Assets
Resulting from Operations $ 370,255 $(219,404) $7,273,738
========= ========= ==========
</TABLE>
See accompanying notes.
N-12
<PAGE>
<TABLE>
<CAPTION>
OCC
Accumulation OCC
MFS Total MFS MFS Global Accumulation
Return Utilities Research Equity Managed
Subaccount Subaccount Subaccount Subaccount Subaccount
- -----------------------------------------------------------------
<C> <C> <C> <C> <C> <S>
$ 72,777 $ 50,478 $ 3,908 $ 48,989 $ 6,919
134,957 253,805 20,650 510,423 15,527
(92,471) (97,333) (48,150) (20,158) (34,920)
--------- ---------- ---------- --------- --------
115,263 206,950 (23,592) 539,254 (12,474)
(5,716) 34,684 16,494 12,556 1,745
(104,598) 2,510,113 1,162,825 (176,948) 46,739
--------- ---------- ---------- --------- --------
(110,314) 2,544,797 1,179,319 (164,392) 48,484
--------- ---------- ---------- --------- --------
$ 4,949 $2,751,747 $1,155,727 $ 374,862 $ 36,010
========= ========== ========== ========= ========
</TABLE>
N-13
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of changes in net assets
Period from November 24, 1998 to December 31, 1998 and the Year Ended
December 31, 1999
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. International AIM V.I.
Growth Equity Value
Combined Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Changes From Operations:
. Net investment income
(loss) $ 37,847 $ 11,123 $ 287 $ 11,483
-----------------------
. Net realized gain
(loss) on investments 46 -- -- 1
-----------------------
. Net change in
unrealized
appreciation or
depreciation on
investments 236,643 8,483 2,328 10,765
- ------------------------ ------------- ----------- ----------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations 274,536 19,606 2,615 22,249
Change From Unit
Transactions:
Accumulation Units:
. Contract purchases 11,651,639 258,564 74,145 382,502
----------------------
. Terminated contracts
and transfers to
annuity reserves (67,297) -- -- --
- ------------------------ ------------- ----------- ----------- -----------
11,584,342 258,564 74,145 382,502
Net Increase in Net
Assets Resulting from
Unit Transactions 11,584,342 258,564 74,145 382,502
- ------------------------ ------------- ----------- ----------- -----------
Total Increase in Net
Assets 11,858,878 278,170 76,760 404,751
- ------------------------ ------------- ----------- ----------- -----------
Net Assets at December
31, 1998 11,858,878 278,170 76,760 404,751
- ------------------------
Changes From Operations:
. Net investment income
(loss) 3,553,015 724,577 307,426 474,627
-----------------------
. Net realized gain
(loss) on investments 2,717,979 61,437 646,152 27,847
-----------------------
. Net change in
unrealized
appreciation or
depreciation on
investments 36,814,991 3,164,157 1,915,792 4,929,350
- ------------------------ ------------- ----------- ----------- -----------
Net Increase (Decrease)
in Net Assets Resulting
from Operations 43,085,985 3,950,171 2,869,370 5,431,824
Change From Unit
Transactions:
Accumulation Units:
. Contract purchases 670,494,798 21,455,422 16,257,693 41,495,564
----------------------
. Terminated contracts
and transfers to
annuity reserves (333,494,545) (1,336,014) (8,430,730) (3,113,531)
---------------------- ------------- ----------- ----------- -----------
337,000,253 20,119,408 7,826,963 38,382,033
Annuity Reserves:
. Transfer from
accumulation units
and between accounts 648,678 96,307 -- (7,138)
----------------------
. Annuity Payments (27,650) (1,979) -- (2,057)
----------------------
. Receipt
(reimbursement) of
mortality guarantee
adjustments (8,852) (2,355) -- --
- ------------------------ ------------- ----------- ----------- -----------
612,176 91,973 -- (9,195)
Net Increase in Net
Assets Resulting from
Unit Transactions 337,612,429 20,211,381 7,826,963 38,372,838
- ------------------------ ------------- ----------- ----------- -----------
Total Increase in Net
Assets 380,698,414 24,161,552 10,696,333 43,804,662
- ------------------------ ------------- ----------- ----------- -----------
Net Assets at December
31, 1999 $ 392,557,292 $24,439,722 $10,773,093 $44,209,413
- ------------------------ ============= =========== =========== ===========
</TABLE>
See accompanying notes.
N-14
<PAGE>
<TABLE>
<CAPTION>
Bankers Liberty Delaware Delaware Delaware
Trust Liberty Colonial Premium Delaware Delaware Premium Premium
Equity Colonial NewPort Growth and Premium Premium Emerging International
500 Index US Stock Tiger Income Delchester Devon Markets Equity
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- -----------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
$ 3,989 $ 749 $ 304 $ (129) $ 2,426 $ (331) $ (10) $ (7)
1 -- -- 1 (1) -- -- --
28,725 250 (512) 3,753 (3,741) 18,543 80 102
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
32,715 999 (208) 3,625 (1,316) 18,212 70 95
915,708 18,120 17,001 227,487 414,557 437,808 14,632 18,130
(2,886) -- -- -- -- -- -- --
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
912,822 18,120 17,001 227,487 414,557 437,808 14,632 18,130
912,822 18,120 17,001 227,487 414,557 437,808 14,632 18,130
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
945,537 19,119 16,793 231,112 413,241 456,020 14,702 18,225
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
945,537 19,119 16,793 231,112 413,241 456,020 14,702 18,225
145,931 201,439 4,443 131,603 322,769 (40,041) (4,949) (10,260)
27,121 (65) 36,913 (41,512) (91,607) (87,211) 18,715 151,449
3,978,680 35,006 557,362 (486,668) (446,001) (473,024) 217,354 159,885
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
4,151,732 236,380 598,718 (396,577) (214,839) (600,276) 231,120 301,074
43,792,048 4,453,154 2,857,126 8,948,171 7,883,137 10,892,783 1,328,042 22,564,199
(2,628,346) (268,499) (417,100) (1,118,560) (1,986,620) (1,847,328) (228,363) (19,253,411)
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
41,163,702 4,184,655 2,440,026 7,829,611 5,896,517 9,045,455 1,099,679 3,310,788
137,629 -- -- 55,484 -- 9,782 -- --
(542) -- -- (2,087) -- (62) -- --
(3,071) -- -- (190) -- -- -- --
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
134,016 -- -- 53,207 -- 9,720 -- --
41,297,718 4,184,655 2,440,026 7,882,818 5,896,517 9,055,175 1,099,679 3,310,788
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
45,449,450 4,421,035 3,038,744 7,486,241 5,681,678 8,454,899 1,330,799 3,611,862
----------- ---------- ---------- ----------- ----------- ----------- ---------- ------------
$46,394,987 $4,440,154 $3,055,537 $ 7,717,353 $ 6,094,919 $ 8,910,919 $1,345,501 $ 3,630,087
=========== ========== ========== =========== =========== =========== ========== ============
</TABLE>
N-15
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of changes in net assets (continued)
Period from November 24, 1998 to December 31, 1998 and the Year Ended
December 31, 1999
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Premium Premium Premium Delaware
Real Small Cap Social Premium
Estate Value Awareness Trend
Subaccount Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Changes From Operations:
. Net investment income
(loss) $ (76) $ (150) $ (288) $ (43)
---------------------------
. Net realized gain (loss)
on investments -- 1 1 --
---------------------------
. Net change in unrealized
appreciation or
depreciation on
investments 1,802 9,528 33,401 4,330
- ----------------------------- --------- ---------- ---------- -----------
Net Increase (Decrease) in
Net Assets Resulting from
Operations 1,726 9,379 33,114 4,287
Change From Unit
Transactions:
Accumulation Units:
. Contract purchases 94,050 169,957 551,993 69,109
-------------------------
. Terminated contracts
and transfers to
annuity reserves -- -- (2,866) --
- ----------------------------- --------- ---------- ---------- -----------
94,050 169,957 549,127 69,109
Net Increase in Net Assets
Resulting from Unit
Transactions 94,050 169,957 549,127 69,109
- ----------------------------- --------- ---------- ---------- -----------
Total Increase in Net Assets 95,776 179,336 582,241 73,396
- ----------------------------- --------- ---------- ---------- -----------
Net Assets at December 31,
1998 95,776 179,336 582,241 73,396
- -----------------------------
Changes From Operations:
. Net investment income
(loss) (1,864) (11,983) (47,804) (48,413)
---------------------------
. Net realized gain (loss)
on investments (14,359) (4,116) 15,441 56,040
---------------------------
. Net change in unrealized
appreciation or
depreciation on
investments (5,062) (56,317) 697,762 3,490,733
- ----------------------------- --------- ---------- ---------- -----------
Net Increase (Decrease) in
Net Assets Resulting from
Operations (21,285) (72,416) 665,399 3,498,360
Change From Unit
Transactions:
Accumulation Units:
. Contract purchases 935,293 3,343,131 6,648,953 13,315,433
-------------------------
. Terminated contracts
and transfers to
annuity reserves (298,849) (312,993) (642,296) (872,945)
------------------------- --------- ---------- ---------- -----------
636,444 3,030,138 6,006,657 12,442,488
Annuity Reserves:
. Transfer from
accumulation units and
between accounts -- -- -- --
-------------------------
. Annuity Payments -- -- -- --
-------------------------
. Receipt (reimbursement)
of mortality guarantee
adjustments -- -- -- --
- ----------------------------- --------- ---------- ---------- -----------
-- -- -- --
Net Increase in Net Assets
Resulting from Unit
Transactions 636,444 3,030,138 6,006,657 12,442,488
- ----------------------------- --------- ---------- ---------- -----------
Total Increase in Net Assets 615,159 2,957,722 6,672,056 15,940,848
- ----------------------------- --------- ---------- ---------- -----------
Net Assets at December 31,
1999 $ 710,935 $3,137,058 $7,254,297 $16,014,244
- ----------------------------- ========= ========== ========== ===========
</TABLE>
See accompanying notes.
N-16
<PAGE>
<TABLE>
<CAPTION>
Fidelity Fidelity Lincoln
VIP Fidelity Fidelity VIP III Kemper Kemper National
Dreyfus Equity VIP VIP Growth Small Cap Government Money
Small Cap Income Growth Overseas Opportunities Growth Securities Market
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- ---------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <S>
$ (96) $ (209) $ (347) $ (88) $ (370) $ (23) $ (365) $ 5,451
-- 2 6 -- 3 -- -- --
10,278 14,833 27,814 3,051 23,185 3,603 1,207 --
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
10,182 14,626 27,473 2,963 22,818 3,580 842 5,451
125,342 363,261 424,157 132,461 645,222 45,784 772,499 3,541,676
-- -- -- -- (2,863) -- -- (55,850)
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
125,342 363,261 424,157 132,461 642,359 45,784 772,499 3,485,826
125,342 363,261 424,157 132,461 642,359 45,784 772,499 3,485,826
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
135,524 377,887 451,630 135,424 665,177 49,364 773,341 3,491,277
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
135,524 377,887 451,630 135,424 665,177 49,364 773,341 3,491,277
(20,790) (43,240) (93,866) (35,662) (71,147) (30,630) 49,227 370,255
9,870 2,348 29,798 1,798,129 15,981 17,423 (7,808) --
501,638 (92,622) 5,913,522 1,027,670 390,823 1,428,512 (79,830) --
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
490,718 (133,514) 5,849,454 2,790,137 335,657 1,415,305 (38,411) 370,255
3,444,710 16,232,359 33,766,701 124,051,106 19,894,319 4,698,037 12,710,322 173,967,280
(221,082) (983,739) (2,112,197) (118,052,029) (1,993,269) (244,179) (1,306,902) (159,988,278)
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
3,223,628 15,248,620 31,654,504 5,999,077 17,901,050 4,453,858 11,403,420 13,979,002
-- 107,541 160,535 -- -- -- -- --
-- (9,039) (2,668) -- -- -- -- --
-- (200) (2,589) -- -- -- -- --
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
-- 98,302 155,278 -- -- -- -- --
3,223,628 15,346,922 31,809,782 5,999,077 17,901,050 4,453,858 11,403,420 13,979,002
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
3,714,346 15,213,408 37,659,236 8,789,214 18,236,707 5,869,163 11,365,009 14,349,257
---------- ----------- ----------- ------------- ----------- ---------- ----------- -------------
$3,849,870 $15,591,295 $38,110,866 $ 8,924,638 $18,901,884 $5,918,527 $12,138,350 $ 17,840,534
========== =========== =========== ============= =========== ========== =========== =============
</TABLE>
N-17
<PAGE>
Lincoln Life Variable Annuity Account N
Statement of changes in net assets (continued)
Period from November 24, 1998 to December 31, 1998 and the Year Ended
December 31, 1999
<TABLE>
<CAPTION>
Lincoln MFS
National Emerging MFS Total
Bond Growth Return
Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Changes From Operations:
. Net investment income (loss) $ (229) $ (44) $ (270)
--------------------------------------
. Net realized gain (loss) on
investments -- 1 2
--------------------------------------
. Net change in unrealized
appreciation or depreciation on
investments 157 5,891 9,731
- ---------------------------------------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations (72) 5,848 9,463
Change From Unit Transactions:
Accumulation Units:
. Contract purchases 465,808 58,984 506,443
------------------------------------
. Terminated contracts and transfers
to annuity reserves -- -- --
- ---------------------------------------- ----------- ----------- -----------
465,808 58,984 506,443
Net Increase in Net Assets Resulting
from Unit Transactions 465,808 58,984 506,443
- ---------------------------------------- ----------- ----------- -----------
Total Increase in Net Assets 465,736 64,832 515,906
- ---------------------------------------- ----------- ----------- -----------
Net Assets at December 31, 1998 465,736 64,832 515,906
- ----------------------------------------
Changes From Operations:
. Net investment income (loss) 545,145 (89,179) 115,263
--------------------------------------
. Net realized gain (loss) on
investments (21,107) 11,337 (5,716)
--------------------------------------
. Net change in unrealized
appreciation or depreciation on
investments (743,442) 7,351,580 (104,598)
- ---------------------------------------- ----------- ----------- -----------
Net Increase (Decrease) in Net Assets
Resulting from Operations (219,404) 7,273,738 4,949
Change From Unit Transactions:
Accumulation Units:
. Contract purchases 13,178,516 17,118,654 13,987,800
------------------------------------
. Terminated contracts and transfers
to annuity reserves (1,294,558) (750,358) (1,413,417)
------------------------------------ ----------- ----------- -----------
11,883,958 16,368,296 12,574,383
Annuity Reserves:
. Transfer from accumulation units
and between accounts -- -- 4,656
------------------------------------
. Annuity Payments -- -- (2,434)
------------------------------------
. Receipt (reimbursement) of
mortality guarantee adjustments -- -- --
- ---------------------------------------- ----------- ----------- -----------
-- -- 2,222
Net Increase in Net Assets Resulting
from Unit Transactions 11,883,958 16,368,296 12,576,605
- ---------------------------------------- ----------- ----------- -----------
Total Increase in Net Assets 11,664,554 23,642,034 12,581,554
- ---------------------------------------- ----------- ----------- -----------
Net Assets at December 31, 1999 $12,130,290 $23,706,866 $13,097,460
- ---------------------------------------- =========== =========== ===========
</TABLE>
See accompanying notes.
N-18
<PAGE>
<TABLE>
<CAPTION>
OCC
Accumulation OCC
MFS MFS Global Accumulation
Utilities Research Equity Managed
Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------
<C> <C> <C> <C> <S>
$ (290) $ (62) $ 5,503 $ (41)
26 1 1 --
15,394 5,147 (1,722) 237
----------- ---------- ---------- ----------
15,130 5,086 3,782 196
675,517 82,339 110,158 38,225
(2,832) -- -- --
----------- ---------- ---------- ----------
672,685 82,339 110,158 38,225
672,685 82,339 110,158 38,225
----------- ---------- ---------- ----------
687,815 87,425 113,940 38,421
----------- ---------- ---------- ----------
687,815 87,425 113,940 38,421
206,950 (23,592) 539,254 (12,474)
34,684 16,494 12,556 1,745
2,510,113 1,162,825 (176,948) 46,739
----------- ---------- ---------- ----------
2,751,747 1,155,727 374,862 36,010
14,460,042 7,300,548 3,469,829 6,044,426
(1,055,770) (391,684) (265,178) (666,320)
----------- ---------- ---------- ----------
13,404,272 6,908,864 3,204,651 5,378,106
37,836 -- -- 46,046
(4,716) -- -- (2,066)
(241) -- -- (206)
----------- ---------- ---------- ----------
32,879 -- -- 43,774
13,437,151 6,908,864 3,204,651 5,421,880
----------- ---------- ---------- ----------
16,188,898 8,064,591 3,579,513 5,457,890
----------- ---------- ---------- ----------
$16,876,713 $8,152,016 $3,693,453 $5,496,311
=========== ========== ========== ==========
</TABLE>
N-19
<PAGE>
Lincoln Life Variable Annuity Account N
Notes to financial statements
1. Accounting policies and account information
The Variable Account: Lincoln Life Variable Annuity Account N (Variable Ac-
count) is a segregated investment account of The Lincoln National Life Insur-
ance Company (the Company) and is registered with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, as a unit in-
vestment trust. The operations of the Variable Account, which commenced on No-
vember 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 from any other business of the Company.
Basis of Presentation: The accompanying financial statements have been pre-
pared in accordance with accounting principles generally accepted in the
United States for unit investment trusts.
Investments: The assets of the Variable Account are divided into variable sub-
accounts each of which is invested in shares of 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
Bankers Trust Insurance Fund Trust:
Bankers 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 Growth and Income 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, 1999, which approximates fair value. The difference between
cost and fair value is reflected as unrealized appreciation and depreciation
of investments.
Investment transactions are accounted for on a trade date basis. The cost of
investments sold is determined by the average cost method.
Dividends: Dividends paid to the Variable Account are automatically reinvested
in shares of the Funds on the payable date. 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.
Annuity Reserves: Reserves on contracts not involving life contingencies are
calculated using an assumed investment rate of 4%. Reserves on contracts in-
volving life contingencies are calculated using a modification of the 1971 In-
dividual Annuitant Mortality Table and an assumed investment rate of 4%.
2. Mortality and expense guarantees and other transactions with affiliate
Amounts are paid to the Company for mortality and expense guarantees at an ef-
fective annual rate of 1.40% of each portfolio's average daily net assets
within the Variable Account. In addition, amounts retained by the
N-20
<PAGE>
Lincoln Life Variable Annuity Account N
Notes to financial statements (continued)
2. Mortality and expense guarantees and other transactions with affiliate
(continued)
Company for processing sales of annuity contracts for contract charges and sur-
render charges were as follows during 1999.
<TABLE>
<S> <C>
AIM V.I. Growth Fund $ 15,463
AIM V.I. International Equity Fund 72
AIM V.I. Value Fund 8,597
Bankers Trust Equity 500 Index Fund 7,631
Liberty Colonial US Stock Fund 2,426
Liberty Colonial Newport Tiger Fund 10,652
Delaware Premium Growth and Income Series 5,943
Delaware Premium Delchester Series 333
Delaware Premium Devon Series 10,079
Delaware Premium Emerging Market Series 10,034
Delaware Premium International Equity Series 5,598
Delaware Premium Real Estate Series 13
Delaware Premium Small Cap Value Series 454
Delaware Premium Social Awareness Series 1,116
Delaware Premium Trend Series 21,323
Dreyfus Small Cap Portfolio 763
Fidelity VIP Equity Income Portfolio 6,320
Fidelity VIP Growth Portfolio 11,380
Fidelity VIP Overseas Portfolio 3,078
Fidelity VIP III Growth Opportunities Portfolio 15,701
Kemper Small Cap Growth Portfolio 40
Kemper Government Securities Portfolio 20
Lincoln National Money Market Fund 2,001
Lincoln National Bond Fund 205
MFS Emerging Growth Series 7,440
MFS Total Return Series 10,751
MFS Utilities Series 7,405
MFS Research Series 2,637
OCC Accumulation Global Equity Portfolio 2,650
OCC Accumulation Managed Portfolio 6,316
- ----------------------------------------------- --------
$176,441
========
</TABLE>
Accordingly, the Company is responsible for all sales, general and administra-
tive expenses applicable to the Variable Account.
N-21
<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, 1999.
<TABLE>
<CAPTION>
AIM V.I.
AIM V.I. International AIM V.I.
Growth Equity Value
Combined Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit Transactions:
. Accumulation units $348,584,595 $20,377,972 $ 7,901,108 $38,764,535
-------------------------
. Annuity Reserves: 612,176 91,973 -- (9,195)
------------------------- ------------ ----------- ----------- -----------
349,196,771 20,469,945 7,901,108 38,755,340
Accumulated net investment
income (loss) 3,590,862 735,700 307,713 486,110
- --------------------------
Accumulated net realized
gain (loss) on
investments 2,718,025 61,437 646,152 27,848
- --------------------------
Net unrealized
appreciation or
depreciation on
investments 37,051,634 3,172,640 1,918,120 4,940,115
- -------------------------- ------------ ----------- ----------- -----------
$392,557,292 $24,439,722 $10,773,093 $44,209,413
============ =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Delaware Delaware Delaware
Premium Premium Premium Delaware
Real Small Cap Social Premium
Estate Value Awareness Trend
Subaccount Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit Transactions:
. Accumulation units $730,494 $3,200,095 $6,555,784 $12,511,597
-----------------------------
. Annuity Reserves: -- -- -- --
----------------------------- -------- ---------- ---------- -----------
730,494 3,200,095 6,555,784 12,511,597
Accumulated net investment
income (loss) (1,940) (12,133) (48,092) (48,456)
- ------------------------------
Accumulated net realized gain
(loss) on investments (14,359) (4,115) 15,442 56,040
- ------------------------------
Net unrealized appreciation or
depreciation on investments (3,260) (46,789) 731,163 3,495,063
- ------------------------------ -------- ---------- ---------- -----------
$710,935 $3,137,058 $7,254,297 $16,014,244
======== ========== ========== ===========
</TABLE>
N-22
<PAGE>
<TABLE>
<CAPTION>
Liberty Delaware Delaware Delaware
Bankers Liberty Colonial Premium Delaware Delaware Premium Premium
Trust Equity Colonial NewPort Growth Premium Premium Emerging International
500 Index US Stock Tiger and Income Delchester Devon Markets Equity
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$42,076,524 $4,202,775 $2,457,027 $8,057,098 $6,311,074 $9,483,263 $1,114,311 $3,328,918
134,016 -- -- 53,207 -- 9,720 -- --
- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
42,210,540 4,202,775 2,457,027 8,110,305 6,311,074 9,492,983 1,114,311 3,328,918
149,920 202,188 4,747 131,474 325,195 (40,372) (4,959) (10,267)
27,122 (65) 36,913 (41,511) (91,608) (87,211) 18,715 151,449
4,007,405 35,256 556,850 (482,915) (449,742) (454,481) 217,434 159,987
- ----------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
$46,394,987 $4,440,154 $3,055,537 $7,717,353 $6,094,919 $8,910,919 $1,345,501 $3,630,087
=========== ========== ========== ========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Lincoln
Fidelity Fidelity Fidelity VIP Kemper Kemper National
Dreyfus VIP Equity Fidelity VIP III Growth Small Cap Government Money
Small Cap Income VIP Growth Overseas Opportunities Growth Securities Market
Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount Subaccount
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
$3,348,970 $15,611,881 $32,078,661 $6,131,538 $18,543,409 $4,499,642 $12,175,919 $17,464,828
-- 98,302 155,278 -- -- -- -- --
- ---------- ----------- ----------- ---------- ----------- ---------- ----------- -----------
3,348,970 15,710,183 32,233,939 6,131,538 18,543,409 4,499,642 12,175,919 17,464,828
(20,886) (43,449) (94,213) (35,750) (71,517) (30,653) 48,862 375,706
9,870 2,350 29,804 1,798,129 15,984 17,423 (7,808) --
511,916 (77,789) 5,941,336 1,030,721 414,008 1,432,115 (78,623) --
- ---------- ----------- ----------- ---------- ----------- ---------- ----------- -----------
$3,849,870 $15,591,295 $38,110,866 $8,924,638 $18,901,884 $5,918,527 $12,138,350 $17,840,534
========== =========== =========== ========== =========== ========== =========== ===========
</TABLE>
N-23
<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, 1999.
<TABLE>
<CAPTION>
Lincoln MFS
National Emerging MFS Total MFS
Bond Growth Return Utilities
Subaccount Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit Transactions:
. Accumulation units $12,349,766 $16,427,280 $13,080,826 $14,076,957
------------------------------------------------------------
. Annuity Reserves: -- -- 2,222 32,879
------------------------ ----------- ----------- ----------- -----------
12,349,766 16,427,280 13,083,048 14,109,836
Accumulated net
investment income (loss) 544,916 (89,223) 114,993 206,660
- ---------------------------------------------------------------
Accumulated net realized
gain (loss) on
investments (21,107) 11,338 (5,714) 34,710
- ---------------------------------------------------------------
Net unrealized
appreciation or
depreciation on
investments (743,285) 7,357,471 (94,867) 2,525,507
- ------------------------- ----------- ----------- ----------- -----------
$12,130,290 $23,706,866 $13,097,460 $16,876,713
=========== =========== =========== ===========
<CAPTION>
OCC
Accumulation OCC
MFS Global Accumulation
Research Equity Managed
Subaccount Subaccount Subaccount
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unit Transactions:
. Accumulation units $ 6,991,203 $ 3,314,809 $ 5,416,331
------------------------------------------------------------
. Annuity Reserves: -- -- 43,774
------------------------ ----------- ----------- -----------
6,991,203 3,314,809 5,460,105
Accumulated net
investment income (loss) (23,654) 544,757 (12,515)
- ---------------------------------------------------------------
Accumulated net realized
gain (loss) on
investments 16,495 12,557 1,745
- ---------------------------------------------------------------
Net unrealized
appreciation or
depreciation on
investments 1,167,972 (178,670) 46,976
- ------------------------- ----------- ----------- -----------
$ 8,152,016 $ 3,693,453 $ 5,496,311
=========== =========== ===========
</TABLE>
N-24
<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 in-
vestments sold were as follows for 1999.
<TABLE>
<CAPTION>
Aggregate Aggregate
Cost of Proceeds
Purchases from Sales
- --------------------------------------------------------------------------
<S> <C> <C>
AIM V.I. Growth Fund $ 21,738,721 $ 801,836
- -----------------------------------------------
AIM V.I. International Equity Fund 16,072,630 7,937,833
- -----------------------------------------------
AIM V.I. Value Fund 39,412,211 563,076
- -----------------------------------------------
Bankers Trust Equity 500 Index Fund 43,072,412 1,627,024
- -----------------------------------------------
Liberty Colonial US Stock Fund 4,627,123 240,859
- -----------------------------------------------
Liberty Colonial Newport Tiger Fund 2,954,805 510,219
- -----------------------------------------------
Delaware Premium Growth and Income Series 8,941,768 927,059
- -----------------------------------------------
Delaware Premium Delchester Series 7,819,027 1,618,417
- -----------------------------------------------
Delaware Premium Devon Series 10,587,237 1,571,774
- -----------------------------------------------
Delaware Premium Emerging Market Series 1,493,795 399,014
- -----------------------------------------------
Delaware Premium International Equity Series 22,465,347 19,164,677
- -----------------------------------------------
Delaware Premium Real Estate Series 928,426 293,823
- -----------------------------------------------
Delaware Premium Small Cap Value Series 3,279,409 261,142
- -----------------------------------------------
Delaware Premium Social Awareness Series 6,407,467 448,358
- -----------------------------------------------
Delaware Premium Trend Series 12,826,043 431,368
- -----------------------------------------------
Dreyfus Small Cap Portfolio 3,396,869 193,891
- -----------------------------------------------
Fidelity VIP Equity Income Portfolio 15,959,243 654,978
- -----------------------------------------------
Fidelity VIP Growth Portfolio 32,402,501 685,149
- -----------------------------------------------
Fidelity VIP Overseas Portfolio 123,690,645 117,726,893
- -----------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 19,435,722 1,605,111
- -----------------------------------------------
Kemper Small Cap Growth Portfolio 4,629,842 206,392
- -----------------------------------------------
Kemper Government Securities Portfolio 12,272,988 819,905
- -----------------------------------------------
Lincoln National Money Market Fund 167,251,052 152,901,243
- -----------------------------------------------
Lincoln National Bond Fund 13,384,302 954,751
- -----------------------------------------------
MFS Emerging Growth Series 16,642,282 362,274
- -----------------------------------------------
MFS Total Return Series 13,927,832 1,235,478
- -----------------------------------------------
MFS Utilities Series 14,338,237 693,515
- -----------------------------------------------
MFS Research Series 7,168,208 282,627
- -----------------------------------------------
OCC Accumulation Global Equity Portfolio 3,927,521 183,478
- -----------------------------------------------
OCC Accumulation Managed Portfolio 5,789,329 379,711
- ----------------------------------------------- ------------ ------------
$656,842,994 $315,681,875
============ ============
</TABLE>
N-25
<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, 1999.
<TABLE>
<CAPTION>
Net
Shares Asset Value of Cost of
Outstanding Value Shares Shares
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund 757,850 $32.25 $ 24,440,659 $ 21,268,019
- ---------------------------------
AIM V.I. International Equity
Fund 367,822 29.29 10,773,504 8,855,384
- ---------------------------------
AIM V.I. Value Fund 1,319,734 33.50 44,211,097 39,270,982
- ---------------------------------
Bankers Trust Equity 500 Index
Fund 3,056,440 15.18 46,396,762 42,389,357
- ---------------------------------
Liberty Colonial US Stock Fund 223,694 19.85 4,440,325 4,405,069
- ---------------------------------
Liberty Colonial Newport Tiger
Fund 1,166,280 2.62 3,055,654 2,498,804
- ---------------------------------
Delaware Premium Growth and
Income Series 453,446 17.02 7,717,650 8,200,565
- ---------------------------------
Delaware Premium Delchester
Series 818,766 7.42 6,075,240 6,524,982
- ---------------------------------
Delaware Premium Devon Series 654,278 13.62 8,911,265 9,365,746
- ---------------------------------
Delaware Premium Emerging Market
Series 160,185 8.40 1,345,552 1,128,118
- ---------------------------------
Delaware Premium International
Equity Series 194,859 18.63 3,630,230 3,470,243
- ---------------------------------
Delaware Premium Real Estate
Series 82,003 8.67 710,962 714,222
- ---------------------------------
Delaware Premium Small Cap Value
Series 204,243 15.36 3,137,177 3,183,966
- ---------------------------------
Delaware Premium Social Awareness
Series 443,434 16.36 7,254,574 6,523,411
- ---------------------------------
Delaware Premium Trend Series 475,783 33.66 16,014,847 12,519,784
- ---------------------------------
Dreyfus Small Cap Portfolio 58,035 66.34 3,850,015 3,338,099
- ---------------------------------
Fidelity VIP Equity Income
Portfolio 606,452 25.71 15,591,893 15,669,682
- ---------------------------------
Fidelity VIP Growth Portfolio 693,834 54.93 38,112,319 32,170,983
- ---------------------------------
Fidelity VIP Overseas Portfolio 325,254 27.44 8,924,980 7,894,259
- ---------------------------------
Fidelity VIP III Growth
Opportunities Portfolio 816,528 23.15 18,902,615 18,488,607
- ---------------------------------
Kemper Small Cap Growth Portfolio 2,230,167 2.65 5,918,750 4,486,635
- ---------------------------------
Kemper Government Securities
Portfolio 10,495,531 1.16 12,138,816 12,217,439
- ---------------------------------
Lincoln National Money Market
Fund 1,784,122 10.00 17,841,217 17,841,217
- ---------------------------------
Lincoln National Bond Fund 1,060,789 11.44 12,130,756 12,874,041
- ---------------------------------
MFS Emerging Growth Series 624,875 37.94 23,707,760 16,350,289
- ---------------------------------
MFS Total Return Series 737,914 17.75 13,097,966 13,192,833
- ---------------------------------
MFS Utilities Series 698,566 24.16 16,877,359 14,351,852
- ---------------------------------
MFS Research Series 349,286 23.34 8,152,328 6,984,356
- ---------------------------------
OCC Accumulation Global Equity
Portfolio 223,043 16.56 3,693,596 3,872,266
- ---------------------------------
OCC Accumulation Managed
Portfolio 125,923 43.65 5,496,524 5,449,548
- --------------------------------- ------------ ------------
$392,552,392 $355,500,758
============ ============
</TABLE>
6. Fund name change
During 1999, the Delaware Decatur Total Return Series changed its name to the
Delaware Growth and Income Series.
N-26
<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 Colonial NewPort Tiger, Dela-
ware Premium Growth and Income, Delaware Premium Delchester, Delaware Premium
Devon, Delaware Premium Emerging Markets, Delaware Premium International Equi-
ty, 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, 1999, and the related
statement of operations for the year then ended and the statements of changes
in net assets for the year ended December 31, 1999 and for the period from No-
vember 24, 1998 to December 31, 1998. These financial statements are the re-
sponsibility of the Variable Account's management. Our responsibility is to ex-
press an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the au-
dit 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,
1999, 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 Decem-
ber 31, 1999, the results of their operations for the year then ended, and
changes in their net assets for the year ended December 31, 1999 and for the
period from November 24, 1998 to December 31, 1998, in conformity with account-
ing principles generally accepted in the United States.
Fort Wayne, Indiana
March 24, 2000
N-27
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
BALANCE SHEETS -- STATUTORY BASIS
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
--------- ---------
(IN MILLIONS)
---------------------
<S> <C> <C>
ADMITTED ASSETS
CASH AND INVESTMENTS:
Bonds $22,985.0 $23,830.9
- ------------------------------------------------------------
Preferred stocks 253.8 236.0
- ------------------------------------------------------------
Unaffiliated common stocks 166.9 259.3
- ------------------------------------------------------------
Affiliated common stocks 604.7 322.1
- ------------------------------------------------------------
Mortgage loans on real estate 4,211.5 3,932.9
- ------------------------------------------------------------
Real estate 254.0 473.8
- ------------------------------------------------------------
Policy loans 1,652.9 1,606.0
- ------------------------------------------------------------
Other investments 426.6 434.4
- ------------------------------------------------------------
Cash and short-term investments 1,409.2 1,725.4
- ------------------------------------------------------------ --------- ---------
Total cash and investments 31,964.6 32,820.8
- ------------------------------------------------------------
Premiums and fees in course of collection 115.8 33.3
- ------------------------------------------------------------
Accrued investment income 435.3 432.8
- ------------------------------------------------------------
Reinsurance recoverable 199.0 171.6
- ------------------------------------------------------------
Funds withheld by ceding companies 73.5 53.7
- ------------------------------------------------------------
Federal income taxes recoverable from parent company 61.6 64.7
- ------------------------------------------------------------
Goodwill 43.1 49.5
- ------------------------------------------------------------
Other admitted assets 66.7 89.3
- ------------------------------------------------------------
Separate account assets 46,105.1 36,907.0
- ------------------------------------------------------------ --------- ---------
Total admitted assets $79,064.7 $70,622.7
- ------------------------------------------------------------ ========= =========
LIABILITIES AND CAPITAL AND SURPLUS
LIABILITIES:
Future policy benefits and claims $12,184.0 $12,310.6
- ------------------------------------------------------------
Other policyholder funds 16,589.5 16,647.5
- ------------------------------------------------------------
Amounts withheld or retained by Company as agent or trustee 364.0 897.6
- ------------------------------------------------------------
Funds held under reinsurance treaties 796.9 795.8
- ------------------------------------------------------------
Asset valuation reserve 490.9 484.5
- ------------------------------------------------------------
Interest maintenance reserve 72.3 159.7
- ------------------------------------------------------------
Other liabilities 627.0 504.5
- ------------------------------------------------------------
Short-term loan payable to parent company 205.0 140.0
- ------------------------------------------------------------
Net transfers due from separate accounts (896.5) (789.0)
- ------------------------------------------------------------
Separate account liabilities 46,105.1 36,907.0
- ------------------------------------------------------------ --------- ---------
Total liabilities 76,538.2 68,058.2
- ------------------------------------------------------------
CAPITAL AND SURPLUS:
Common stock, $2.50 par value:
Authorized, issued and outstanding shares -- 10 million
(owned by Lincoln National Corporation) 25.0 25.0
- ------------------------------------------------------------
Surplus notes due to Lincoln National Corporation 1,250.0 1,250.0
- ------------------------------------------------------------
Paid-in surplus 1,942.6 1,930.1
- ------------------------------------------------------------
Unassigned surplus -- deficit (691.1) (640.6)
- ------------------------------------------------------------ --------- ---------
Total capital and surplus 2,526.5 2,564.5
- ------------------------------------------------------------ --------- ---------
Total liabilities and capital and surplus $79,064.7 $70,622.7
- ------------------------------------------------------------ ========= =========
</TABLE>
See accompanying notes. S-1
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
STATEMENTS OF OPERATIONS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------- --------- --------
(IN MILLIONS)
--------------------------------
<S> <C> <C> <C>
PREMIUMS AND OTHER REVENUES:
Premiums and deposits $ 7,273.6 $12,737.6 $5,589.0
- ------------------------------------------------------------
Net investment income 2,203.2 2,107.2 1,847.1
- ------------------------------------------------------------
Amortization of interest maintenance reserve 29.1 26.4 41.5
- ------------------------------------------------------------
Commissions and expense allowances on reinsurance ceded 472.3 179.9 99.7
- ------------------------------------------------------------
Expense charges on deposit funds 146.5 134.6 119.3
- ------------------------------------------------------------
Separate account investment management and administration
service fees 473.9 396.3 325.5
- ------------------------------------------------------------
Other income 88.8 31.3 21.3
- ------------------------------------------------------------ --------- --------- --------
Total revenues 10,687.4 15,613.3 8,043.4
- ------------------------------------------------------------
BENEFITS AND EXPENSES:
Benefits and settlement expenses 8,504.9 13,964.1 4,522.1
- ------------------------------------------------------------
Underwriting, acquisition, insurance and other expenses 1,618.3 2,919.4 3,053.9
- ------------------------------------------------------------ --------- --------- --------
Total benefits and expenses 10,123.2 16,883.5 7,576.0
- ------------------------------------------------------------ --------- --------- --------
Gain (loss) from operations before dividends to
policyholders, income taxes and net realized gain on
investments 564.2 (1,270.2) 467.4
- ------------------------------------------------------------
Dividends to policyholders 80.3 67.9 27.5
- ------------------------------------------------------------ --------- --------- --------
Gain (loss) from operations before federal income taxes and
net realized gain on investments 483.9 (1,338.1) 439.9
- ------------------------------------------------------------
Federal income taxes (credit) 85.4 (141.0) 78.3
- ------------------------------------------------------------ --------- --------- --------
Gain (loss) from operations before net realized gain on
investments 398.5 (1,197.1) 361.6
- ------------------------------------------------------------
Net realized gain on investments, net of income tax expense
and excluding net transfers to the interest maintenance
reserve 114.4 46.8 31.3
- ------------------------------------------------------------ --------- --------- --------
Net income (loss) $ 512.9 $(1,150.3) $ 392.9
- ------------------------------------------------------------ ========= ========= ========
</TABLE>
See accompanying notes.
S-2
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
STATEMENTS OF CHANGES IN CAPITAL AND SURPLUS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-------- -------- --------
(IN MILLIONS)
------------------------------
<S> <C> <C> <C>
Capital and surplus at beginning of year $2,564.5 $2,968.4 $1,868.0
- ------------------------------------------------------------
CAPITAL AND SURPLUS INCREASE (DECREASE):
Net income (loss) 512.9 (1,150.3) 392.9
- ------------------------------------------------------------
Difference in cost and admitted investment amounts (101.9) (304.8) (36.2)
- ------------------------------------------------------------
Nonadmitted assets (22.9) (17.1) (0.4)
- ------------------------------------------------------------
Regulatory liability for reinsurance 26.0 (35.2) (3.9)
- ------------------------------------------------------------
Gain on reinsurance of disability income business 71.8 -- --
- ------------------------------------------------------------
Life policy reserve valuation basis -- (0.4) (0.9)
- ------------------------------------------------------------
Asset valuation reserve (6.4) (34.5) (36.9)
- ------------------------------------------------------------
Proceeds from surplus notes from shareholder -- 1,250.0 --
- ------------------------------------------------------------
Paid-in surplus, including contribution of common stock of
affiliated company in 1997 12.5 108.4 938.4
- ------------------------------------------------------------
Separate account receivable due to change in valuation -- -- (2.6)
- ------------------------------------------------------------
Dividends to shareholder (530.0) (220.0) (150.0)
- ------------------------------------------------------------ -------- -------- --------
Capital and surplus at end of year $2,526.5 $2,564.5 $2,968.4
- ------------------------------------------------------------ ======== ======== ========
</TABLE>
See accompanying notes. S-3
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
STATEMENTS OF CASH FLOWS -- STATUTORY BASIS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------- ---------- ---------
(IN MILLIONS)
----------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Premiums, policy proceeds and other considerations received $ 7,671.1 $ 13,495.2 $ 6,364.3
- ------------------------------------------------------------
Allowances and reserve adjustments paid on reinsurance ceded (19.9) (632.4) (649.2)
- ------------------------------------------------------------
Investment income received 2,168.6 2,003.9 1,798.8
- ------------------------------------------------------------
Separate account investment management and administration
service fees 470.6 396.3 325.5
- ------------------------------------------------------------
Benefits paid (8,699.4) (7,395.8) (5,345.2)
- ------------------------------------------------------------
Insurance expenses paid (1,734.5) (2,909.7) (3,193.0)
- ------------------------------------------------------------
Proceeds related to sale of disability income business 71.8 -- --
- ------------------------------------------------------------
Federal income taxes recovered (paid) (81.2) 84.2 (87.0)
- ------------------------------------------------------------
Dividends to policyholders (82.8) (12.9) (28.4)
- ------------------------------------------------------------
Other income received and expenses paid, net 252.1 207.0 (8.7)
- ------------------------------------------------------------ --------- ---------- ---------
Net cash provided by (used in) operating activities 16.4 5,235.8 (822.9)
- ------------------------------------------------------------
INVESTING ACTIVITIES
Sale, maturity or repayment of investments 6,557.7 10,926.5 12,142.6
- ------------------------------------------------------------
Purchase of investments (5,940.8) (16,950.0) (10,345.0)
- ------------------------------------------------------------
Other sources (uses) including reinsured policy loans (497.0) (778.3) 529.1
- ------------------------------------------------------------ --------- ---------- ---------
Net cash provided by (used in) investing activities 119.9 (6,801.8) 2,326.7
- ------------------------------------------------------------
FINANCING ACTIVITIES
Surplus paid-in 12.5 108.4 --
- ------------------------------------------------------------
Proceeds from surplus notes from shareholder -- 1,250.0 --
- ------------------------------------------------------------
Proceeds from borrowings from shareholder 205.0 140.0 120.0
- ------------------------------------------------------------
Repayment of borrowings from shareholder (140.0) (120.0) (100.0)
- ------------------------------------------------------------
Dividends paid to shareholder (530.0) (220.0) (150.0)
- ------------------------------------------------------------ --------- ---------- ---------
Net cash provided by (used in) financing activities (452.5) 1,158.4 (130.0)
- ------------------------------------------------------------ --------- ---------- ---------
Net increase (decrease) in cash and short-term investments (316.2) (407.6) 1,373.8
- ------------------------------------------------------------
Cash and short-term investments at beginning of year 1,725.4 2,133.0 759.2
- ------------------------------------------------------------ --------- ---------- ---------
Cash and short-term investments at end of year $ 1,409.2 $ 1,725.4 $ 2,133.0
- ------------------------------------------------------------ ========= ========== =========
</TABLE>
See accompanying notes.
S-4
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
ORGANIZATION AND OPERATIONS
The Lincoln National Life Insurance Company (the "Company") is a wholly
owned subsidiary of Lincoln National Corporation ("LNC") and is domiciled in
Indiana. As of December 31, 1999, the Company owned 100% of the outstanding
common stock of four insurance company subsidiaries and four non-insurance
subsidiaries. The Company also owned 85% of the common stock of an Internet
distributor of variable annuities.
The Company's principal businesses consist of underwriting annuities,
deposit-type contracts and life and health insurance through multiple
distribution channels and the reinsurance of individual and group life and
health business. The Company is licensed and sells its products in 49
states, Canada and several U.S. territories.
USE OF ESTIMATES
The nature of the insurance and investment management businesses requires
management to make estimates and assumptions that affect the amounts
reported in the statutory-basis financial statements and accompanying notes.
Actual results could differ from those estimates.
BASIS OF PRESENTATION
The accompanying financial statements have been prepared in conformity with
accounting practices prescribed or permitted by the Indiana Department of
Insurance ("Insurance Department"), which practices differ from accounting
principles generally accepted in the United States ("GAAP"). The more
significant variances from GAAP are as follows:
INVESTMENTS
Bonds and preferred stocks are reported at cost or amortized cost or fair
value based on their National Association of Insurance Commissioners
("NAIC") rating. For GAAP, the Company's bonds and preferred stocks are
classified as available-for-sale and, accordingly, are reported at fair
value with changes in the fair values reported directly in shareholder's
equity after adjustments for related amortization of deferred acquisition
costs, additional policyholder commitments and deferred income taxes.
Investments in real estate are reported net of related obligations rather
than on a gross basis. Real estate owned and occupied by the Company is
classified as a real estate investment rather than reported as an operating
asset, and investment income and operating expenses include rent for the
Company's occupancy of those properties. Changes between cost and admitted
asset investment amounts are credited or charged directly to unassigned
surplus rather than to a separate surplus account.
Under a formula prescribed by the NAIC, the Company defers the portion of
realized capital gains and losses on sales of fixed income investments,
principally bonds and mortgage loans, attributable to changes in the general
level of interest rates and amortizes those deferrals over the remaining
period to maturity of the individual security sold. The net deferral is
reported as the interest maintenance reserve ("IMR") in the accompanying
balance sheets. Realized capital gains and losses are reported in income net
of federal income tax and transfers to the IMR. The asset valuation reserve
("AVR") is determined by a NAIC prescribed formula and is reported as a
liability rather than unassigned surplus. Under GAAP, realized capital gains
and losses are reported in the income statement on a pre-tax basis in the
period in which the asset giving rise to the gain or loss is sold and
writedowns are provided when there has been a decline in value deemed other
than temporary, in which case, the provision for such declines are charged
to income.
SUBSIDIARIES
The accounts and operations of the Company's subsidiaries are not
consolidated with the accounts and operations of the Company as would be
required by GAAP. Under statutory accounting principles, the Company's
insurance subsidiaries are carried at their statutory-basis net equity and
the non-insurance subsidiaries are carried at their GAAP-basis net equity,
adjusted for certain items which would be non-admitted under statutory
accounting principles. Both insurance subsidiaries and non-insurance
subsidiaries are presented in the balance sheet as investments in affiliated
common stocks.
S-5
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
POLICY ACQUISITION COSTS
The costs of acquiring and renewing business are expensed when incurred.
Under GAAP, acquisition costs related to traditional life insurance, to the
extent recoverable from future policy revenues, are deferred and amortized
over the premium-paying period of the related policies using assumptions
consistent with those used in computing policy benefit reserves. For
universal life insurance, annuity and other investment-type products,
deferred policy acquisition costs, to the extent recoverable from future
gross profits, are amortized generally in proportion to the present value of
expected gross profits from surrender charges and investment, mortality and
expense margins.
NONADMITTED ASSETS
Certain assets designated as "nonadmitted," principally furniture and
equipment and certain receivables, are excluded from the accompanying
balance sheets and are charged directly to unassigned surplus.
PREMIUMS
Revenues for universal life policies consist of the entire premium received.
Under GAAP, premiums received in excess of policy charges are not recognized
as premium revenue.
Premiums and deposits with respect to annuity and other investment-type
contracts are reported as premium revenues; whereas, under GAAP, such
premiums and deposits are treated as liabilities and policy charges
represent revenues.
BENEFIT RESERVES
Certain policy reserves are calculated based on statutorily required
interest and mortality assumptions rather than on estimated expected
experience or actual account balances as would be required under GAAP.
Death benefits paid, policy and contract withdrawals, and the change in
policy reserves on universal life policies, annuity and other
investment-type contracts are reported as benefits and settlement expenses
in the accompanying statements of income; whereas, under GAAP, withdrawals
are treated as a reduction of the policy or contract liabilities and
benefits represent the excess of benefits paid over the policy account value
and interest credited to the account values.
REINSURANCE
Premiums, claims and policy benefits and contract liabilities are reported
in the accompanying financial statements net of reinsurance amounts. For
GAAP, all assets and liabilities related to reinsurance ceded contracts are
reported on a gross basis.
A liability for reinsurance balances has been provided for unsecured policy
and contract liabilities and unearned premiums ceded to reinsurers not
authorized by the Insurance Department to assume such business. Changes to
those amounts are credited or charged directly to unassigned surplus. Under
GAAP, an allowance for amounts deemed uncollectible is established through a
charge to income.
Commissions on business ceded are reported as income when received rather
than deferred and amortized with deferred policy acquisition costs. Business
assumed under 100% indemnity reinsurance agreements is accounted for as a
purchase for GAAP reporting purposes and the ceding commission represents
the purchase price. Under purchase accounting, assets acquired and
liabilities assumed are reported at fair value at the date of the
transaction and the excess of the purchase price over the sum of the amounts
assigned to assets acquired less liabilities assumed is recorded as
goodwill. On a statutory-basis, the ceding commission is expensed when paid
and reinsurance premiums and benefits are accounted for on bases consistent
with those used in accounting for the original policies issued and the terms
of the reinsurance contracts.
Certain reinsurance contracts meeting risk transfer requirements under
statutory-basis accounting practices have been accounted for using
traditional reinsurance accounting; whereas, such contracts are accounted
for using deposit accounting under GAAP.
S-6
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
INCOME TAXES
Deferred income taxes are not provided for differences between financial
statement amounts and tax bases of assets and liabilities.
POLICYHOLDER DIVIDENDS
Policyholder dividends are recognized when declared rather than over the
term of the related policies.
SURPLUS NOTES DUE TO LNC
Surplus notes due to LNC are reported as surplus rather than as liabilities.
On a statutory-basis, interest on surplus notes is not accrued until
approval is received from the Indiana Insurance Commissioner; whereas, under
GAAP, interest would be accrued periodically based on the outstanding
principal and the interest rate.
STATEMENTS OF CASH FLOWS
Cash and short-term investments in the statements of cash flows represent
cash balances and investments with initial maturities of one year or less.
Under GAAP, the corresponding captions of cash and cash equivalents include
cash balances and investments with initial maturities of three months or
less.
A reconciliation of the Company's net income (loss) and capital and surplus
determined on a statutory-basis with amounts determined in accordance with
GAAP is as follows:
<TABLE>
<CAPTION>
CAPITAL AND SURPLUS NET INCOME (LOSS)
----------------------------------------------------------------------
DECEMBER 31 YEAR ENDED DECEMBER 31
1999 1998 1999 1998 1997
----------------------------------------------------------------------
(IN MILLIONS)
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amounts reported on a statutory-basis $ 2,526.5 $ 2,564.5 $ 512.9 $(1,150.3) $392.9
-----------------------------------------
GAAP adjustments:
Deferred policy acquisition costs,
present value of future profits and
non-admitted goodwill 3,628.2 3,085.2 135.0 48.5 (98.9)
--------------------------------------
Policy and contract reserves (1,943.1) (2,299.9) (97.9) 1,743.4 (48.6)
--------------------------------------
Interest maintenance reserve 72.3 159.7 (86.6) 24.4 58.7
--------------------------------------
Deferred income taxes 244.5 181.6 (117.4) (218.6) 70.3
--------------------------------------
Policyholders' share of earnings and
surplus on participating business (122.7) (132.8) (1.8) 3.2 5.3
--------------------------------------
Asset valuation reserve 490.9 484.5 -- -- --
--------------------------------------
Net realized gain (loss) on investments (186.4) (174.1) (32.4) (116.7) (20.4)
--------------------------------------
Unrealized gain (loss) on investments (555.2) 1,335.1 -- -- --
--------------------------------------
Nonadmitted assets, including
nonadmitted investments 139.6 119.1 -- -- --
--------------------------------------
Investments in subsidiary companies 460.9 490.4 39.1 41.3 (80.5)
--------------------------------------
Surplus notes and related interest (1,250.0) (1,251.5) 1.5 (1.5) --
--------------------------------------
Other, net (61.0) (120.1) 129.8 103.6 (35.0)
-------------------------------------- --------- --------- --------- --------- ------
Net increase (decrease) 918.0 1,877.2 (30.7) 1,627.6 (149.1)
----------------------------------------- --------- --------- --------- --------- ------
Amounts on a GAAP basis $ 3,444.5 $ 4,441.7 $ 482.2 $ 477.3 $243.8
----------------------------------------- ========= ========= ========= ========= ======
</TABLE>
S-7
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
Other significant accounting practices are as follows:
INVESTMENTS
Bonds not backed by loans are principally stated at amortized cost and the
discount or premium is amortized using the interest method.
Mortgage-backed bonds are valued at amortized cost and income is recognized
using a constant effective yield based on anticipated prepayments and the
estimated economic life of the securities. When actual prepayments differ
significantly from anticipated prepayments, the effective yield is
recalculated to reflect actual payments to date and anticipated future
payments. The net investment in the securities is adjusted to the amount
that would have existed had the new effective yield been applied since the
acquisition of the securities.
Short-term investments include investments with maturities of less than one
year at the date of acquisition. The carrying amounts for these investments
approximate their fair values.
Preferred stocks are reported at cost or amortized cost.
Unaffiliated common stocks are reported at fair value as determined by the
Securities Valuation Office of the NAIC and the related unrealized gains
(losses) are reported in unassigned surplus without adjustment for federal
income taxes.
Policy loans are reported at unpaid balances.
The Company uses various derivative instruments as part of its overall
liability-asset management program for certain investments and life
insurance and annuity products. The Company values all derivative
instruments on a basis consistent with that of the hedged item. Upon
termination, gains and losses on those instruments are included in the
carrying values of the underlying hedged items or deferred in IMR, where
applicable, and are amortized over the remaining lives of the hedged items
as adjustments to investment income. Any unamortized gains or losses are
recognized when the underlying hedged items are sold. The premiums paid for
interest rate caps and swaptions are deferred and amortized to net
investment income on a straight-line basis over the term of the respective
derivative.
Hedge accounting is applied as indicated above after the Company determines
that the items to be hedged expose the Company to interest rate
fluctuations, the widening of bond yield spreads over comparable maturity
U.S. government obligations and foreign exchange risk. Moreover, the
derivatives used are designated as a hedge and reduce the indicated risk by
having a high correlation between changes in the value of the derivatives
and the items being hedged at both the inception of the hedge and throughout
the hedge period. Should such criteria not be met or if the hedged items are
sold, terminated or matured, the change in value of the derivatives is
included in net income.
Mortgage loans on real estate are reported at unpaid balances, less
allowances for impairments. Real estate is reported at depreciated cost.
Realized investment gains and losses on investments sold are determined
using the specific identification method. Changes in admitted asset carrying
amounts of bonds, mortgage loans and common and preferred stocks are
credited or charged directly in unassigned surplus.
LOANED SECURITIES
Securities loaned are treated as collateralized financing transactions and a
liability is recorded equal to the cash collateral received which is
typically greater than the market value of the related securities loaned. In
other instances, the Company will hold as collateral securities with a
market value at least equal to the securities loaned. Securities held as
collateral are not recorded in the Company's balance sheet in accordance
with accounting guidance for secured borrowings and collateral. The
Company's agreements with third parties generally contain contractual
provisions to allow for additional collateral to be obtained when necessary.
The Company values collateral daily and obtains additional collateral when
deemed appropriate.
GOODWILL
Goodwill, which represents the excess, subject to certain limitations, of
the ceding commission over statutory-basis net assets of business purchased
S-8
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
under an assumption reinsurance agreement, is amortized on a straight-line
basis over ten years.
PREMIUMS
Life insurance and annuity premiums are recognized as revenue when due.
Accident and health premiums are earned pro rata over the contract term of
the policies.
BENEFITS
Life, annuity and accident and health benefit reserves are developed by
actuarial methods and are determined based on published tables using
statutorily specified interest rates and valuation methods that will
provide, in the aggregate, reserves that are greater than or equal to the
minimum or guaranteed policy cash values or the amounts required by the
Insurance Department. The Company waives deduction of deferred fractional
premiums on the death of life and annuity policy insureds and returns any
premium beyond the date of death, except for policies issued prior to March
1977. Surrender values on policies do not exceed the corresponding benefit
reserves. Additional reserves are established when the results of cash flow
testing under various interest rate scenerios indicate the need for such
reserves. If net premiums exceed the gross premiums on any insurance
in-force, additional reserves are established. Benefit reserves for policies
underwritten on a substandard basis are determined using the multiple table
reserve method.
The tabular interest, tabular less actual reserves released and tabular cost
have been determined by formula or from the basic data for such items.
Tabular interest funds not involving life contingencies were determined
using the actual interest credited to the funds plus the change in accrued
interest.
Liabilities related to guaranteed investment contracts and policyholder
funds left on deposit with the Company generally are equal to fund balances
less applicable surrender charges.
CLAIMS AND CLAIM ADJUSTMENT EXPENSES
Unpaid claims and claim adjustment expenses on accident and health policies
represent the estimated ultimate net cost of all reported and unreported
claims incurred during the year. The Company does not discount claims and
claim adjustment expense reserves. The reserves for unpaid claims and claim
adjustment expenses are estimated using individual case-basis valuations and
statistical analyses. Those estimates are subject to the effects of trends
in claim severity and frequency. Although considerable variability is
inherent in such estimates, management believes that the reserves for claims
and claim adjustment expenses are adequate. The estimates are continually
reviewed and adjusted as necessary as experience develops or new information
becomes known; such adjustments are included in current operations.
REINSURANCE CEDED AND ASSUMED
Reinsurance premiums, benefits and claims and claim adjustment expenses are
accounted for on bases consistent with those used in accounting for the
original policies issued and the terms of the reinsurance contracts. Certain
business is transacted on a funds withheld basis and investment income on
investments managed by the Company are reported in net investment income.
PENSION BENEFITS
Costs associated with the Company's defined benefit pension plans are
systematically accrued during the expected period of active service of the
covered employees.
INCOME TAXES
The Company and eligible subsidiaries have elected to file consolidated
federal and state income tax returns with LNC and certain LNC subsidiaries.
Pursuant to an intercompany tax sharing agreement with LNC, the Company
provides for income taxes on a separate return filing basis. The tax sharing
agreement also provides that the Company will receive benefit for net
operating losses, capital losses and tax credits which are not usable on a
separate return basis to the extent such items may be utilized in the
consolidated income tax returns of LNC.
STOCK OPTIONS
The Company recognizes compensation expense for its stock option incentive
plans using the intrinsic value method of accounting. Under the terms of the
intrinsic value method, compensation cost is the excess, if any, of the
quoted market price of
S-9
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (CONTINUED)
LNC's common stock at the grant date, or other measurement date, over the
amount an employee or agent must pay to acquire the stock.
ASSETS HELD IN SEPARATE ACCOUNTS AND LIABILITIES RELATED TO SEPARATE
ACCOUNTS
Separate account assets and liabilities reported in the accompanying balance
sheets represent funds that are separately administered for variable life
and variable annuity contracts and for which the contractholder, rather than
the Company, bears the investment risk. Separate account assets are reported
at fair value. The operations of the separate accounts are not included in
the accompanying financial statements. Policy administration and investment
management fees charged on separate account policyholder deposits are
included in income from separate account investment management and
administration service fees. Mortality charges on variable universal life
contracts are included in income from expense charges on deposit funds. Fees
charged relative to variable annuity and variable universal life
administration agreements for separate account products sold by other
insurance companies and not recorded on the Company's financial statements
are included in income from separate account investment management and
administration service fees.
2. PERMITTED STATUTORY ACCOUNTING PRACTICES
The Company's statutory-basis financial statements are prepared in
accordance with accounting practices prescribed or permitted by the
Insurance Department. "Prescribed" statutory accounting practices are
interspersed throughout state insurance laws and regulations, the NAIC's
ACCOUNTING PRACTICES AND PROCEDURES MANUAL and a variety of other NAIC
publications. "Permitted" statutory accounting practices encompass all
accounting practices that are not prescribed; such practices may differ from
state to state, may differ from company to company within a state and may
change in the future.
In 1998, the NAIC adopted codified statutory accounting principles
("Codification") effective January 1, 2001. Codification will likely change,
to some extent, prescribed statutory accounting practices and may result in
changes to the accounting practices that the Company uses to prepare its
statutory-basis financial statements. Codification will require adoption by
the various states before it becomes the prescribed statutory-basis of
accounting for insurance companies domesticated within those states.
Accordingly, before Codification becomes effective for the Company, the
state of Indiana must adopt Codification as the prescribed basis of
accounting on which domestic insurers must report their statutory-basis
results to the Insurance Department. At this time, it is anticipated that
Indiana will adopt Codification, however, based on current guidance,
management believes that the impact of Codification will not be material to
the Company's statutory-basis financial statements.
S-10
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS
The major categories of net investment income are as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
--------------------------------------
(IN MILLIONS)
--------------------------------------
<S> <C> <C> <C>
Income:
Bonds $1,840.6 $1,714.3 $1,524.4
------------------------------------------------------------
Preferred stocks 20.3 19.7 23.5
------------------------------------------------------------
Unaffiliated common stocks 6.3 10.6 8.3
------------------------------------------------------------
Affiliated common stocks 7.8 5.2 15.0
------------------------------------------------------------
Mortgage loans on real estate 321.0 323.6 257.2
------------------------------------------------------------
Real estate 57.8 81.4 92.2
------------------------------------------------------------
Policy loans 101.7 86.5 37.5
------------------------------------------------------------
Other investments 50.6 26.5 28.2
------------------------------------------------------------
Cash and short-term investments 95.9 104.7 70.3
------------------------------------------------------------ -------- -------- --------
Total investment income 2,502.0 2,372.5 2,056.6
------------------------------------------------------------
Expenses:
Depreciation 14.4 19.3 21.0
------------------------------------------------------------
Other 284.4 246.0 188.5
------------------------------------------------------------ -------- -------- --------
Total investment expenses 298.8 265.3 209.5
------------------------------------------------------------ -------- -------- --------
Net investment income $2,203.2 $2,107.2 $1,847.1
------------------------------------------------------------ ======== ======== ========
</TABLE>
S-11
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
The cost or amortized cost, gross unrealized gains and
losses and the fair value of investments in bonds are
summarized as follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------------------------
(IN MILLIONS)
-----------------------------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1999:
Corporate $17,758.4 $ 229.6 $763.0 $17,225.0
------------------------------------------------
U.S. government 316.8 29.6 21.5 324.9
------------------------------------------------
Foreign government 984.5 49.8 39.9 994.4
------------------------------------------------
Mortgage-backed 3,913.7 46.2 139.0 3,820.9
------------------------------------------------
State and municipal 11.6 -- .5 11.1
------------------------------------------------ --------- -------- ------ ---------
$22,985.0 $ 355.2 $963.9 $22,376.3
========= ======== ====== =========
At December 31, 1998:
Corporate $17,658.4 $1,159.8 $148.2 $18,670.0
------------------------------------------------
U.S. government 900.7 88.8 3.4 986.1
------------------------------------------------
Foreign government 947.8 59.9 61.2 946.5
------------------------------------------------
Mortgage-backed 4,312.1 171.6 33.4 4,450.3
------------------------------------------------
State and municipal 11.9 .7 -- 12.6
------------------------------------------------ --------- -------- ------ ---------
$23,830.9 $1,480.8 $246.2 $25,065.5
========= ======== ====== =========
</TABLE>
The carrying amounts of bonds in the balance sheets at
December 31, 1999 and 1998 reflect adjustments of
$38,900,000 and $11,800,000, respectively, to decrease
amortized cost as a result of the Securities Valuation
Office of the NAIC ("SVO") designating certain investments
as in or near default.
A summary of the cost or amortized cost and fair value of
investments in bonds at December 31, 1999, by contractual
maturity, is as follows:
<TABLE>
<CAPTION>
COST OR
AMORTIZED FAIR
COST VALUE
-------------------------
(IN MILLIONS)
-------------------------
<S> <C> <C>
Maturity:
In 2000 $ 598.0 $ 599.2
------------------------------------------------------------
In 2001-2004 4,359.8 4,313.4
------------------------------------------------------------
In 2005-2009 6,636.0 6,392.9
------------------------------------------------------------
After 2009 7,477.5 7,249.9
------------------------------------------------------------
Mortgage-backed securities 3,913.7 3,820.9
------------------------------------------------------------ --------- ---------
Total $22,985.0 $22,376.3
------------------------------------------------------------ ========= =========
</TABLE>
S-12
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
The expected maturities may differ from the contractual
maturities in the foregoing table because certain borrowers
may have the right to call or prepay obligations with or
without call or prepayment penalties.
Proceeds from sales of investments in bonds during 1999,
1998 and 1997 were $5,351,400,000, $9,395,000,000 and
$9,715,000,000, respectively. Gross gains during 1999, 1998
and 1997 of $95,400,000, $186,300,000 and $218,100,000,
respectively, and gross losses of $195,500,000, $138,000,000
and $78,000,000, respectively, were realized on those sales.
At December 31, 1999 and 1998, investments in bonds, with an
admitted asset value of $116,500,000 and $97,800,000,
respectively, were on deposit with state insurance
departments to satisfy regulatory requirements.
Unrealized gains and losses on investments in unaffiliated
common stocks are reported directly in unassigned surplus
and are not reported in the statutory-basis Statements of
Operations. The cost or amortized cost, gross unrealized
gains and losses and the fair value of investments in
unaffiliated common stocks and preferred stocks are as
follows:
<TABLE>
<CAPTION>
COST OR GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-----------------------------------------
(IN MILLIONS)
-----------------------------------------
<S> <C> <C> <C> <C>
At December 31, 1999:
Preferred stocks $253.8 $ 1.3 $31.5 $223.6
----------------------------------------
Unaffiliated common stocks 150.4 34.2 17.7 166.9
----------------------------------------
At December 31, 1998:
Preferred stocks $236.0 $ 8.9 $ 2.4 $242.5
----------------------------------------
Unaffiliated common stocks 223.3 62.0 26.0 259.3
----------------------------------------
</TABLE>
The carrying amount of preferred stocks in the balance
sheets at December 31, 1999 and 1998 reflects adjustments of
$4,100,000 and $5,800,000, respectively, to decrease
amortized cost as a result of the SVO designating certain
investments as low or lower quality.
During 1999, the minimum and maximum lending rates for
mortgage loans were 6.5% and 11.5%, respectively. At the
issuance of a loan, the percentage of loan to value on any
one loan does not exceed 75%. All properties covered by
mortgage loans have fire insurance at least equal to the
excess of the loan over the maximum loan that would be
allowed on the land without the building.
S-13
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
3. INVESTMENTS (CONTINUED)
Components of the Company's investments in real estate are
summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------------
(IN MILLIONS)
-------------------
<S> <C> <C>
Occupied by the Company:
Land $ 2.5 $ 2.5
------------------------------------------------------------
Buildings 11.1 9.0
------------------------------------------------------------
Less accumulated depreciation (2.2) (1.7)
------------------------------------------------------------ ------ ------
Net real estate occupied by the Company 11.4 9.8
------------------------------------------------------------
Other:
Land 46.2 93.2
------------------------------------------------------------
Buildings 226.8 413.0
------------------------------------------------------------
Other 4.7 7.9
------------------------------------------------------------
Less accumulated depreciation (35.1) (50.1)
------------------------------------------------------------ ------ ------
Net other real estate 242.6 464.0
------------------------------------------------------------ ------ ------
Net real estate $254.0 $473.8
------------------------------------------------------------ ====== ======
</TABLE>
Net realized capital gains are reported net of federal
income taxes and amounts transferred to the IMR as follows:
<TABLE>
<CAPTION>
1999 1998 1997
--------------------------------
(IN MILLIONS)
--------------------------------
<S> <C> <C> <C>
Net realized capital gains $ 20.8 $179.7 $209.3
------------------------------------------------------------
Less amount transferred to IMR (net of related taxes
(credits) of ($31.4), $27.3 and $54.0 in 1999, 1998 and
1997, respectively) (58.3) 50.8 100.2
------------------------------------------------------------ ------ ------ ------
79.1 128.9 109.1
Less federal income taxes (credits) on realized gains (35.3) 82.1 77.8
------------------------------------------------------------ ------ ------ ------
Net realized capital gains after transfer to IMR and taxes
(credits) $114.4 $ 46.8 $ 31.3
------------------------------------------------------------ ====== ====== ======
</TABLE>
4. SUBSIDIARIES
The Company owns 100% of the outstanding common stock of
four insurance company subsidiaries: First Penn-Pacific Life
Insurance Company ("First Penn"), Lincoln National Health &
Casualty Insurance Company ("LNH&C"), Lincoln National
Reassurance Company ("LNRAC") and Lincoln Life & Annuity
Company of New York ("LNY"). The Company also owns 100% of
the outstanding common stock of four non-insurance company
subsidiaries: Lincoln National Insurance Associates
("LNIA"), Sagemark Consulting, Inc. ("Sagemark"), Wakefield
Tower Alpha Limited ("Wakefield"), and Lincoln Realty
Capital
S-14
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
4. SUBSIDIARIES (CONTINUED)
Corporation ("LRCC"). The Company also owns 85% of one
non-insurance company subsidiary, AnnuityNet, Inc.
(AnnuityNet). Statutory-basis financial information related
to the insurance subsidiaries is summarized as follows (in
millions):
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------------------
FIRST
PENN LNH&C LNRAC LNY
----------------------------------
<S> <C> <C> <C> <C>
Cash and invested assets $1,318.7 $434.6 $443.6 $1,888.6
---------------------------------------------------------
Other assets 40.6 55.5 492.6 403.1
--------------------------------------------------------- -------- ------ ------ --------
Total admitted assets $1,359.3 $490.1 $936.2 $2,291.7
--------------------------------------------------------- ======== ====== ====== ========
Insurance reserves $1,242.2 $394.4 $261.4 $1,802.4
---------------------------------------------------------
Other liabilities 44.3 27.9 614.4 25.6
---------------------------------------------------------
Liabilities related to separate accounts -- -- -- 328.8
---------------------------------------------------------
Capital and surplus 72.8 67.8 60.4 134.9
--------------------------------------------------------- -------- ------ ------ --------
Total liabilities and capital and surplus $1,359.3 $490.1 $936.2 $2,291.7
--------------------------------------------------------- ======== ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1999
-----------------------------------------------
FIRST
PENN LNH&C LNRAC LNY
-----------------------------------------------
<S> <C> <C> <C> <C>
Revenues $332.7 $263.3 $ 88.4 $ 313.3
-----------------------------------------------------------
Expenses 329.0 346.9 75.4 291.4
-----------------------------------------------------------
Net realized gains (losses) -- -- .2 (2.0)
----------------------------------------------------------- ------ ------ ------ --------
Net income (loss) $ 3.7 $(83.6) $ 13.2 $ 19.9
----------------------------------------------------------- ====== ====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
----------------------------------
FIRST
PENN LNH&C LNRAC LNY
----------------------------------
<S> <C> <C> <C> <C>
Cash and invested assets $1,221.1 $333.9 $403.6 $1,938.0
----------------------------------------------------------
Other assets 40.3 31.3 490.0 270.2
---------------------------------------------------------- -------- ------ ------ --------
Total admitted assets $1,261.4 $365.2 $893.6 $2,208.2
---------------------------------------------------------- ======== ====== ====== ========
Insurance reserves $1,149.8 $266.3 $281.8 $1,814.5
----------------------------------------------------------
Other liabilities 42.0 24.0 553.7 45.1
----------------------------------------------------------
Liabilities related to separate accounts -- -- -- 236.9
----------------------------------------------------------
Capital and surplus 69.6 74.9 58.1 111.7
---------------------------------------------------------- -------- ------ ------ --------
Total liabilities and capital and surplus $1,261.4 $365.2 $893.6 $2,208.2
---------------------------------------------------------- ======== ====== ====== ========
</TABLE>
S-15
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
4. SUBSIDIARIES (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
---------------------------------
FIRST
PENN LNH&C LNRAC LNY
---------------------------------
<S> <C> <C> <C> <C>
Revenues $310.4 $ 165.0 $150.3 $1,402.6
-----------------------------------------------------------
Expenses 310.6 164.4 139.5 1,656.1
-----------------------------------------------------------
Net realized gains (losses) (0.3) 0.9 (0.1) (0.7)
----------------------------------------------------------- ------ ------- ------ --------
Net income (loss) $ (0.5) $ 1.5 $10.7 $ (254.2)
----------------------------------------------------------- ====== ======= ====== ========
</TABLE>
AnnuityNet was formed in 1998 for the distribution of
variable annuities over the Internet and is valued on the
equity method (at 85% of GAAP equity) with an admitted asset
value of $2,400,000 at December 31, 1999. LNIA was purchased
in 1998 for $600,000 and is valued on the equity method with
an admitted asset value of $800,000 at December 31, 1999.
Sagemark is a broker dealer and was acquired in connection
with a reinsurance transaction completed in 1998. Sagemark
is valued on the equity method with an admitted asset value
of $6,400,000 at December 31, 1999. Wakefield was formed in
1999 to engage in the ownership and management of
investments and is valued on the equity method with an
admitted asset value of $248,300,000. Wakefield's assets as
of December 31, 1999 consist entirely of investments in
bonds. LRCC was formed in 1999 to engage in the management
of certain real estate investments. It was capitalized with
cash and three real estate investments of $12,700,000 and is
valued on the equity method with an admitted asset value of
$10,900,000.
The carrying value of all affiliated common stocks, was
$604,700,000 and $322,100,000 at December 31, 1999 and 1998,
respectively. The insurance affiliates are carried at
statutory-basis net equity while other affiliates are
recorded at GAAP-basis net equity, adjusted for certain
items which would be non-admitted under statutory accounting
principles. The cost basis of investments in subsidiaries as
of December 31, 1999 and 1998 was $970,700,000 and
$631,100,000, respectively.
During 1999, 1998 and 1997 the Company's insurance
subsidiaries paid dividends of $5,200,000, $5,200,000 and
$15,000,000, respectively.
5. FEDERAL INCOME TAXES
The effective federal income tax rate in the accompanying
Statements of Operations differs from the prevailing
statutory tax rate principally due to tax-exempt investment
income, dividends received tax deductions and differences
between statutory accounting and tax return recognition
relative to policy acquisition costs, policy and contract
liabilities and reinsurance ceding commissions.
In 1999, 1998 and 1997, federal income tax expense (benefit)
incurred totaled $85,400,000, ($141,000,000) and
$78,300,000, respectively. In 1999, capital losses of
$151,700,000 were incurred, and carried back to recover
taxes paid in prior years.
The Company paid $45,300,000, $2,300,000 and $164,500,000 to
LNC in 1999, 1998 and 1997, respectively, in federal income
taxes.
Under prior income tax law, one-half of the excess of a life
insurance company's income from operations over its taxable
investment income was not taxed, but was set aside in a
special tax account designated as "Policyholders' Surplus."
The Company has approximately $187,000,000 of untaxed
"Policyholders' Surplus" on which no payment of federal
S-16
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
5. FEDERAL INCOME TAXES (CONTINUED)
income taxes will be required unless it is distributed as a
dividend, or under other specified conditions. Barring the
passage of unfavorable legislation, the Company does not
believe that any significant portion of the account will be
taxed in the foreseeable future and no related tax liability
has been recognized. If the entire balance of the account
became taxable under the current federal income tax rate,
the tax would be approximately $65,500,000.
6. SUPPLEMENTAL FINANCIAL DATA
The balance sheet caption "Reinsurance recoverable" includes
amounts recoverable from other insurers for claims paid by
the Company. The balance sheet caption, "Future policy
benefits and claims," and the balance sheet caption "Other
policyholder funds" have been reduced for insurance ceded as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-----------------------
(IN MILLIONS)
-----------------------
<S> <C> <C>
Insurance ceded $5,340.0 $4,081.8
------------------------------------------------------------
Amounts recoverable from other insurers 81.2 79.9
------------------------------------------------------------
</TABLE>
Reinsurance transactions, excluding assumption reinsurance,
included in the income statement caption, "Premiums and
deposits," are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------------------
(IN MILLIONS)
------------------------------------
<S> <C> <C> <C>
Insurance assumed $2,606.5 $9,018.9 $727.2
------------------------------------------------------------
Insurance ceded 1,675.1 877.1 302.9
------------------------------------------------------------ -------- -------- ------
Net amount included in premiums $ 931.4 $8,141.8 $424.3
------------------------------------------------------------ ======== ======== ======
</TABLE>
The income statement caption, "Benefits and settlement
expenses," is net of reinsurance recoveries of
$2,609,000,000, $2,098,800,000 and $1,240,500,000 for 1999,
1998 and 1997, respectively.
Details underlying the balance sheet caption "Other
policyholder funds" are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-------------------------
(IN MILLIONS)
-------------------------
<S> <C> <C>
Premium deposit funds $16,208.3 $16,285.2
------------------------------------------------------------
Undistributed earnings on participating business 346.9 348.4
------------------------------------------------------------
Other 34.3 13.9
------------------------------------------------------------ --------- ---------
$16,589.5 $16,647.5
========= =========
</TABLE>
S-17
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
6. SUPPLEMENTAL FINANCIAL DATA (CONTINUED)
Deferred and uncollected life insurance premiums and annuity
considerations included in the balance sheet caption,
"Premiums and fees in course of collection," are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1999
---------------------------------
NET OF
GROSS LOADING LOADING
---------------------------------
(IN MILLIONS)
---------------------------------
<S> <C> <C> <C>
Ordinary new business $10.8 $ 7.3 $ 3.5
------------------------------------------------------------
Ordinary renewal 54.2 6.8 47.4
------------------------------------------------------------
Group life 13.7 .1 13.6
------------------------------------------------------------ ----- ----- -----
$78.7 $14.2 $64.5
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
---------------------------------
NET OF
GROSS LOADING LOADING
---------------------------------
(IN MILLIONS)
---------------------------------
<S> <C> <C> <C>
Ordinary new business $ 9.5 $ 3.4 $ 6.1
------------------------------------------------------------
Ordinary renewal (13.7) 11.3 (25.0)
------------------------------------------------------------
Group life 14.2 .2 14.0
------------------------------------------------------------ ----- ----- -----
$10.0 $14.9 $(4.9)
===== ===== =====
</TABLE>
7. ANNUITY RESERVES
At December 31, 1999, the Company's annuity reserves and
deposit fund liabilities, including separate accounts, that
are subject to discretionary withdrawal with adjustment,
subject to discretionary withdrawal without adjustment and
not subject to discretionary withdrawal provisions are
summarized as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENT
-----------------------
(IN MILLIONS)
-----------------------
<S> <C> <C>
Subject to discretionary withdrawal with adjustment:
With market value adjustment $ 2,427.7 4%
------------------------------------------------------------
At book value, less surrender charge 2,237.3 3
------------------------------------------------------------
At market value 44,076.2 68
------------------------------------------------------------ --------- ---
48,741.2 75
Subject to discretionary withdrawal without adjustment at
book value with minimal or no charge or adjustment 13,486.5 21
------------------------------------------------------------
Not subject to discretionary withdrawal 2,622.4 4
------------------------------------------------------------ --------- ---
Total annuity reserves and deposit fund 64,850.1 100%
------------------------------------------------------------ ===
Less reinsurance 1,548.0
------------------------------------------------------------ ---------
Net annuity reserves and deposit fund liabilities, including
separate accounts $63,302.1
------------------------------------------------------------ =========
</TABLE>
S-18
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
8. CAPITAL AND SURPLUS
In 1998, the Company issued two surplus notes to LNC in return for cash of
$1,250,000,000. The first note for $500,000,000 was issued to LNC in
connection with the CIGNA Corporation ("CIGNA")indemnity reinsurance
transaction on January 5, 1998. This note calls for the Company to pay the
principal amount of the notes on or before March 31, 2028 and interest to be
paid quarterly at an annual rate of 6.56%. Subject to approval by the
Indiana Insurance Commissioner, LNC also has a right to redeem the note for
immediate repayment in total or in part once per year on the anniversary
date of the note, but not before January 5, 2003. Any payment of interest or
repayment of principal may be paid only out of the Company's earnings, only
if the Company's surplus exceeds specified levels ($2,315,700,000 at
December 31, 1999), and subject to approval by the Indiana Insurance
Commissioner.
The second note for $750,000,000 was issued on December 18, 1998 to LNC in
connection with the Aetna, Inc. ("Aetna") indemnity reinsurance transaction.
This note calls for the Company to pay the principal amount of the notes on
or before December 31, 2028 and interest to be paid quarterly at an annual
rate of 6.03%. Subject to approval by the Indiana Insurance Commissioner,
LNC also has a right to redeem the note for immediate repayment in total or
in part once per year on the anniversary date of the note, but not before
December 18, 2003. Any payment of interest or repayment of principal may be
paid only out of the Company's earnings, only if the Company's surplus
exceeds specified levels ($2,379,600,000 at December 31, 1999), and subject
to approval by the Indiana Insurance Commissioner.
A summary of the terms of these surplus notes follows (in millions):
<TABLE>
<CAPTION>
PRINCIPAL INCEPTION ACCRUED
OUTSTANDING AT TO DATE INTEREST AT
PRINCIPAL DECEMBER 31, CURRENT YEAR INTEREST DECEMBER 31,
DATE ISSUED AMOUNT OF NOTE 1999 INTEREST PAID PAID 1999
----------- -------------- -------------- ------------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
January 5, 1998 $ 500.0 $ 500.0 $ 32.8 $ 65.1 $ --
-------------------------------
December 18, 1998 750.0 750.0 46.7 46.7 --
-------------------------------
</TABLE>
Life insurance companies are subject to certain Risk-Based Capital ("RBC")
requirements as specified by the NAIC. Under those requirements, the amount
of capital and surplus maintained by a life insurance company is to be
determined based on the various risk factors related to it. At December 31,
1999, the Company exceeds the RBC requirements.
The payment of dividends by the Company is limited and cannot be made except
from earned profits. The maximum amount of dividends that may be paid by
life insurance companies without prior approval of the Indiana Insurance
Commissioner is subject to restrictions relating to statutory surplus and
net gain from operations. In January 1998, the Company assumed a block of
individual life insurance and annuity business from CIGNA and in
October 1998, the Company assumed a block of individual life insurance
business from Aetna (SEE NOTE 10). The statutory accounting regulations do
not allow goodwill to be recognized on indemnity reinsurance transactions
and therefore, the related ceding commission was expensed in the
accompanying Statement of Operations and resulted in the reduction of
unassigned surplus. As a result of these transactions, the Company's
statutory-basis unassigned surplus is negative as of December 31, 1999 and
it will be necessary for the Company to obtain prior approval of the Indiana
Insurance Commissioner before paying any dividends to LNC until such time as
statutory-basis unassigned surplus is positive. The time frame for
unassigned surplus to return to a positive position is dependent upon future
statutory earnings and dividends paid to LNC. Although no assurance can be
given, management believes that the approvals for the payment of such
dividends in amounts consistent with those paid in the past can be obtained.
S-19
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
9. EMPLOYEE BENEFIT PLANS
LNC maintains defined benefit pension plans for its employees (including
Company employees) and a defined contribution plan for the Company's agents.
LNC also maintains 401(k) plans, deferred compensation plans and
postretirement medical and life insurance plans for its employees and agents
(including the Company's employees and agents). Effective July 1, 1999, the
agents' postretirement plan was changed to require agents retiring on or
after that date to pay the full premium costs. This change to the plan
resulted in a one-time curtailment gain of $1,400,000 in 1999. The aggregate
expenses and accumulated obligations for the Company's portion of these
plans are not material to the Company's statutory-basis financial Statements
of Operations or financial position for any of the periods shown.
LNC has various incentive plans for key employees, agents and directors of
LNC and its subsidiaries that provide for the issuance of stock options,
stock appreciation rights, restricted stock awards and stock incentive
awards. These plans are comprised primarily of stock option incentive plans.
Stock options granted under the stock option incentive plans are at the
market value at the date of grants and, subject to termination of
employment, expire ten years from the date of grant. Such options are
transferable only upon death and are exercisable one year from the date of
grant for options issued prior to 1992. Options issued subsequent to 1991
are exercisable in 25% increments on the option issuance anniversary in the
four years following issuance.
As of December 31, 1999, there were 2,072,087 and 1,397,005 shares of LNC
common stock subject to options granted to Company employees and agents,
respectively, under the stock option incentive plans of which 919,749 and
241,097, respectively, were exercisable on that date. The exercise prices of
the outstanding options range from $12.50 to $56.75. During 1999, 1998 and
1997, there were 318,421, 136,469 and 170,789 options exercised,
respectively, and 82,024, 18,288 and 1,846 options forfeited, respectively.
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES
DISABILITY INCOME CLAIMS
The liability for disability income claims net of the related asset for
amounts recoverable from reinsurers at December 31, 1999 and 1998 is
$221,600,000 and $670,100,000, respectively. This liability is based on the
assumption that the recent experience will continue in the future. If
incidence levels and/or claim termination rates fluctuate significantly from
the assumptions underlying reserves, adjustments to reserves could be
required in the future. Accordingly, this liability may prove to be
deficient or excessive. The Company reviews reserve levels on an ongoing
basis. However, it is management's opinion that such future development will
not materially affect the financial position of the Company.
During 1997, the Company conducted an in-depth review of loss experience on
its disability income business. As a result of this study, the reserve level
was deemed to be inadequate to meet future obligations if current incident
levels were to continue in the future. In order to address this situation,
the Company strengthened its disability income reserves by $80,000,000 in
1997.
PERSONAL ACCIDENT PROGRAMS
In the past, the Company and its wholly owned subsidiary, LNH&C, accepted
personal accident reinsurance programs from other insurance companies. Most
of these programs were presented by independent brokers who represented the
ceding companies. Certain excess-of-loss personal accident reinsurance
programs created in the London market during 1993 through 1996 have produced
and have potential to produce significant losses. The liabilities for these
programs, net of related assets recoverable from reinsurers, were
$174,700,000 and $177,400,000 at December 31, 1999 and 1998, respectively.
Settlement activities relating to the Company's participation in workers'
compensation carve-out (i.e., life and health risks associated with workers'
compensation coverage) programs managed by Unicover Managers, Inc. have
allowed the Company to evaluate the possibility of settlements and to
estimate its potential costs to settle Unicover-related exposures. As of
December 31, 1999, a liability of $62,200,000 has been established for the
S-20
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
settlement of the Company's exposure to the Unicover programs.
These amounts are based on various estimates that are subject to
considerable uncertainty. Accordingly, the liabilities may prove to be
deficient or excessive. However, it is management's opinion that future
developments in these programs will not materially affect the financial
position of the Company.
HMO EXCESS-OF-LOSS REINSURANCE PROGRAMS
In light of the continued volatility in the HMO excess-of-loss line of
business, LNH&C discontinued writing new HMO excess-of-loss reinsurance
programs in the third quarter of 1999. The liability for HMO claims, net of
the related assets for amounts recoverable from reinsurers, was $101,900,000
and $55,900,000 at December 31, 1999 and 1998, respectively. LNH&C reviews
reserve levels on an ongoing basis. The liability is based on the assumption
that recent experience will continue in the future. If claims and loss
ratios fluctuate significantly from the assumptions underlying the reserves,
adjustments to reserves could be required in the future. Accordingly, the
liability may prove to be deficient or excessive. However, it is
management's opinion that such future developments will not materially
affect the financial position of the Company.
MARKETING AND COMPLIANCE MATTERS
Regulators continue to focus on market conduct and compliance issues. Under
certain circumstances, companies operating in the insurance and financial
services markets have been held responsible for providing incomplete or
misleading sales materials and for replacing existing policies with policies
that were less advantageous to the policyholder. The Company's management
continues to monitor the Company's sales materials and compliance procedures
and is making an extensive effort to minimize any potential liability. Due
to the uncertainty surrounding such matters, it is not possible to provide a
meaningful estimate of the range of potential outcomes at this time;
however, it is management's opinion that such future development will not
materially affect the financial position of the Company.
GROUP PENSION ANNUITIES
The liabilities for guaranteed interest and group pension annuity contracts,
which are no longer being sold by the Company, are supported by a single
portfolio of assets that attempts to match the duration of these
liabilities. Due to the long-term nature of group pension annuities and the
resulting inability to exactly match cash flows, a risk exists that future
cash flows from investments will not be reinvested at rates as high as
currently earned by the portfolio. Accordingly, these liabilities may prove
to be deficient or excessive. However, it is management's opinion that such
future development will not materially affect the financial position of the
Company.
LEASES
The Company leases its home office properties through sale-leaseback
agreements. The agreements provide for a 25 year lease period with options
to renew for six additional terms of five years each. The agreements also
provide the Company with the right of first refusal to purchase the
properties during the term of the lease, including renewal periods, at a
price as defined in the agreements. The Company also has the option to
purchase the leased properties at fair market value as defined in the
agreements on the last day of the initial 25-year lease ending in 2009 or on
the last day of any of the renewal periods.
Total rental expense on operating leases in 1999, 1998 and 1997 was
$38,900,000, $34,000,000 and $29,300,000, respectively. Future minimum
rental commitments are as follows (in millions):
<TABLE>
<S> <C>
2000 $ 28.7
--------------------------------
2001 28.8
--------------------------------
2002 27.5
--------------------------------
2003 26.2
--------------------------------
2004 26.5
--------------------------------
Thereafter 123.5
-------------------------------- ------
$261.2
======
</TABLE>
INFORMATION TECHNOLOGY COMMITMENT
In February 1998, the Company signed a seven-year contract with IBM Global
Services for information technology services for the Fort Wayne
S-21
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
operations. Total costs incurred in 1999 and 1998 were $67,400,000 and
$54,800,000, respectively. Future minimum annual costs range from
$33,600,000 to $56,800,000, however future costs are dependent on usage and
could exceed these amounts.
INSURANCE CEDED AND ASSUMED
The Company cedes insurance to other companies, including certain
affiliates. The portion of risks exceeding the Company's retention limit is
reinsured with other insurers. The Company limits its maximum coverage that
it retains on an individual to $10,000,000. Portions of the Company's
deferred annuity business have also been coinsured with other companies to
limit its exposure to interest rate risks. At December 31, 1999, the
reserves associated with these reinsurance arrangements totaled
$1,422,800,000. To cover products other than life insurance, the Company
acquires other insurance coverages with retentions and limits that
management believes are appropriate for the circumstances. The Company
remains liable if its reinsurers are unable to meet their contractual
obligations under the applicable reinsurance agreements.
Proceeds from the sale of common stock of American States Financial
Corporation ("American States") and proceeds from the January 5, 1998
surplus note, were used to finance an indemnity reinsurance transaction
whereby the Company and LNY reinsured 100% of a block of individual life
insurance and annuity business from CIGNA. The Company paid $1,264,400,000
to CIGNA on January 2, 1998 under the terms of the reinsurance agreement and
recognized a ceding commission expense of $1,127,700,000 in 1998, which is
included in the Statement of Operations line item "Underwriting,
acquisition, insurance and other expenses." At the time of closing, this
block of business had statutory liabilities of $4,780,300,000 that became
the Company's obligation. The Company also received assets, measured on a
historical statutory-basis, equal to the liabilities.
In connection with the completion of the CIGNA reinsurance transaction, the
Company recorded a charge of $31,000,000 to cover certain costs of
integrating the existing operations with the new block of business.
In 1999, the Company and CIGNA reached an agreement through arbitration on
the final statutory-basis values of the assets and liabilities reinsured. As
a result, the Company's ceding commission for this transaction was reduced
by $58.6 million.
Subsequent to this transaction, the Company and LNY announced that they had
reached an agreement to sell the administration rights to a variable annuity
portfolio that had been acquired as part of the block of business assumed on
January 2, 1998. This sale closed on October 12, 1998 with an effective date
of September 1, 1998.
On October 1, 1998, the Company and LNY entered into an indemnity
reinsurance transaction whereby the Company and LNY reinsured 100% of a
block of individual life insurance business from Aetna. The Company paid
$856,300,000 to Aetna on October 1, 1998 under the terms of the reinsurance
agreement and recognized a ceding commission expense of $815,300,000 in
1998, which is included in the Statement of Operations line item
"Underwriting, acquisition, insurance and other expenses." At the time of
closing, this block of business had statutory liabilities of $2,813,800,000
that became the Company's obligation. The Company also received assets,
measured on a historical statutory-basis, equal to the liabilities. The
Company financed this reinsurance transaction with proceeds from short-term
debt borrowings from LNC until the December 18, 1998 surplus note was
approved by the Insurance Department. Subsequent to the Aetna transaction,
the Company and LNY announced that they had reached an agreement to
retrocede the sponsored life business assumed for $87,600,000. The
retrocession agreement closed on October 14, 1998 with an effective date of
October 1, 1998.
On November 1, 1999, the Company closed its previously announced agreement
to transfer a block of disability income business to MetLife. Under this
indemnity reinsurance agreement, the Company transferred $490,800,000 of
cash to MetLife representing the statutory reserves transferred on this
business less $17,800,000 of purchase price consideration. A gain on the
reinsurance transaction of $71,800,000 was recorded directly in unassigned
S-22
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
surplus and will be recognized in statutory earnings over the life of the
business.
The Company assumes insurance from other companies, including certain
affiliates. At December 31, 1999, the Company provided $270,000,000 of
statutory-basis surplus relief to other insurance companies under
reinsurance transactions. The Company retroceded 100% of this accepted
surplus relief to its off-shore reinsurance affiliates. Generally, such
amounts are offset by corresponding receivables from the ceding company,
which are secured by future profits on the reinsured business. However, the
Company is subject to the risk that the ceding company may become insolvent
and the right of offset would not be permitted.
The regulatory required liability for unsecured reserves ceded to
unauthorized reinsurers was $17,300,000 and $43,400,000 at December 31, 1999
and 1998, respectively.
VULNERABILITY FROM CONCENTRATIONS
At December 31, 1999, the Company did not have a material concentration of
financial instruments in a single investee or industry. The Company's
investments in mortgage loans principally involve commercial real estate. At
December 31, 1999, 29% of such mortgages ($1,212,700,000) involved
properties located in Texas and California. Such investments consist of
first mortgage liens on completed income-producing properties and the
mortgage outstanding on any individual property does not exceed $70,000,000.
At December 31, 1999, the Company did not have a concentration of:
1) business transactions with a particular customer, lender or distributor;
2) revenues from a particular product or service; 3) sources of supply of
labor or services used in the business; or 4) a market or geographic area in
which business is conducted that makes it vulnerable to an event that is at
least reasonably possible to occur in the near term and which could cause a
severe impact to the Company's financial condition.
OTHER CONTINGENCY MATTERS
The Company is involved in various pending or threatened legal proceedings
arising from the conduct of business. Most of these proceedings are routine
in the ordinary course of business. The Company maintains professional
liability insurance coverage for certain claims in excess of $5,000,000. The
degree of applicability of this coverage will depend on the specific facts
of each proceeding. In some instances, these proceedings include claims for
compensatory and punitive damages and similar types of relief in addition to
amounts for alleged contractual liability or requests for equitable relief.
After consultation with legal counsel and a review of available facts, it is
management's opinion that the ultimate liability, if any, under these
proceedings will not have a material adverse affect on the financial
position of the Company.
With the recent filing of a lawsuit alleging fraud in the sale of interest
sensitive universal and whole life insurance policies, the Company now has
several such actions pending. While each of these lawsuits seeks class
action status, the court has not certified a class in any of them. In each
of these lawsuits, plaintiffs seek unspecified damages and penalties for
themselves and on behalf of the putative class. While relief sought in these
lawsuits is substantial, they are in the discovery stages of litigation, and
it is premature to make assessments about potential loss, if any. Management
intends to defend these lawsuits vigorously. The amount of liability, if
any, which may arise as a result of these lawsuits cannot be reasonably
estimated at this time. In another lawsuit, a settlement has been
preliminarily approved by the court, and a class has been conditionally
certified for settlement purposes. Two other similar lawsuits previously
have been resolved and dismissed.
The number of insurance companies that are under regulatory supervision has
resulted, and is expected to continue to result, in assessments by state
guaranty funds to cover losses to policyholders of insolvent or
rehabilitated companies. Mandatory assessments may be partially recovered
through a reduction in future premium taxes in some states. The Company has
accrued for expected assessments net of estimated future premium tax
deductions.
GUARANTEES
The Company has guarantees with off-balance-sheet risks whose contractual
amounts represent
S-23
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
credit exposure. Outstanding guarantees with off-balance-sheet risks at
December 31, 1999 relate to mortgage loan pass-through certificates. The
Company has sold commercial mortgage loans through grantor trusts that
issued pass-through certificates. The Company has agreed to repurchase any
mortgage loans which remain delinquent for 90 days at a repurchase price
substantially equal to the outstanding principal balance plus accrued
interest thereon to the date of repurchase. The outstanding guarantees as of
December 31, 1999 and 1998 were $25,900,000 and $30,900,000, respectively.
It is management's opinion that the value of the properties underlying these
commitments is sufficient that in the event of default the impact would not
be material to the Company. Accordingly, both the carrying value and fair
value of these guarantees is zero at December 31, 1999 and 1998.
DERIVATIVES
The Company has derivatives with off-balance-sheet risks whose notional or
contract amounts exceed the credit exposure. The Company has entered into
derivative transactions to reduce its exposure to fluctuations in interest
rates, the widening of bond yield spreads over comparable maturity U.S.
government obligations, commodity risk, credit risk and foreign exchange
risks. In addition, the Company is subject to the risks associated with
changes in the value of its derivatives; however, such changes in value
generally are offset by changes in the value of the items being hedged by
such contracts.
Outstanding derivatives with off-balance-sheet risks, shown in notional or
contract amounts along with their carrying value and estimated fair values,
are as follows:
<TABLE>
<CAPTION>
ASSETS (LIABILITIES)
---------------------------------
NOTIONAL OR CARRYING FAIR CARRYING FAIR
CONTRACT AMOUNTS VALUE VALUE VALUE VALUE
-----------------------------------------------------
DECEMBER 31 DECEMBER 31 DECEMBER 31
1999 1998 1999 1999 1998 1998
-----------------------------------------------------
(IN MILLIONS)
-----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Interest rate derivatives:
Interest rate cap agreements $2,508.8 $4,108.8 $ 5.2 $ 3.2 $ 9.3 $ .9
---------------------------------
Swaptions 1,837.5 1,899.5 12.2 10.8 16.2 2.5
---------------------------------
Interest rate swaps 630.9 258.3 -- (19.5) -- 9.9
---------------------------------
Put options 21.3 21.3 -- 1.9 -- 2.2
--------------------------------- -------- -------- ----- ------ ----- -----
4,998.5 6,287.9 17.4 (3.6) 25.5 15.5
Foreign currency derivatives:
Forward contracts -- 1.5 -- -- -- --
---------------------------------
Foreign currency swaps 44.2 47.2 -- (.4) -- .3
--------------------------------- -------- -------- ----- ------ ----- -----
44.2 48.7 -- (.4) -- .3
Commodity derivatives:
Commodity swaps -- 8.1 -- -- -- 2.4
--------------------------------- -------- -------- ----- ------ ----- -----
$5,042.7 $6,344.7 $17.4 $ (4.0) $25.5 $18.2
======== ======== ===== ====== ===== =====
</TABLE>
S-24
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
A reconciliation of the notional or contract amounts for the significant
programs using derivative agreements and contracts at December 31 is as
follows:
<TABLE>
<CAPTION>
INTEREST RATE CAPS SWAPTIONS
-----------------------------------------------------
1999 1998 1999 1998
-----------------------------------------------------
(IN MILLIONS)
-----------------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of year $4,108.8 $4,900.0 $1,899.5 $1,752.0
-------------------------------------------------------
New contracts -- 708.8 -- 218.3
-------------------------------------------------------
Terminations and maturities (1,600.0) (1,500.0) (62.0) (70.8)
------------------------------------------------------- -------- -------- -------- --------
Balance at end of year $2,508.8 $4,108.8 $1,837.5 $1,899.5
------------------------------------------------------- ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
INTEREST RATE SWAPS
-----------------------
1999 1998
-----------------------
<S> <C> <C>
Balance at beginning of year $ 258.3 $ 10.0
------------------------------------------------------------
New contracts 482.4 2,226.6
------------------------------------------------------------
Terminations and maturities (109.8) (1,978.3)
------------------------------------------------------------ ------- ---------
Balance at end of year $ 630.9 $ 258.3
------------------------------------------------------------ ======= =========
</TABLE>
<TABLE>
<CAPTION>
COMMODITY
PUT OPTIONS SWAPS
----------------------------------------
1999 1998 1999 1998
----------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of year $21.3 $ -- $ 8.1 $ --
------------------------------------------------------------
New contracts -- 21.3 -- 8.1
------------------------------------------------------------
Terminations and maturities -- -- (8.1) --
------------------------------------------------------------ ----- ----- ----- ----
Balance at end of year $21.3 $21.3 $ -- $8.1
------------------------------------------------------------ ===== ===== ===== ====
</TABLE>
<TABLE>
<CAPTION>
FOREIGN CURRENCY DERIVATIVES
(FOREIGN INVESTMENTS)
-------------------------------------------
FOREIGN CURRENCY
SWAPS
FOREIGN EXCHANGE
-------------------------------------------
FORWARD CONTRACTS
1999 1998 1999 1998
-------------------------------------------
(IN MILLIONS)
-------------------------------------------
<S> <C> <C> <C> <C>
Balance at beginning of year $ 1.5 $ 163.1 $47.2 $15.0
------------------------------------------------------------
New contracts 2.7 419.8 -- 39.2
------------------------------------------------------------
Terminations and maturities (4.2) (581.4) (3.0) (7.0)
------------------------------------------------------------ ----- ------- ----- -----
Balance at end of year $ -- $ 1.5 $44.2 $47.2
------------------------------------------------------------ ===== ======= ===== =====
</TABLE>
INTEREST RATE CAP AGREEMENTS
The interest rate cap agreements, which expire in 2000 through 2006, entitle
the Company to receive quarterly payments from the counterparties on
specified future reset dates, contingent on future interest rates. For each
cap, the amount of such payments, if any, is determined by the excess of a
market interest rate over a specified cap rate multiplied by the notional
amount divided by four. The purpose of the Company's interest rate cap
agreement program is to protect its annuity line of business from the effect
of rising interest rates. The
S-25
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
premium paid for the interest rate caps is included in other investments
(amortized costs of $5.2 million as of December 31, 1999) and is being
amortized over the terms of the agreements. This amortization is included in
net investment income.
SWAPTIONS
Swaptions, which expire in 2000 through 2003, entitle the Company to receive
settlement payments from the counterparties on specified expiration dates,
contingent on future interest rates. For each swaption, the amount of such
settlement payments, if any, is determined by the present value of the
difference between the fixed rate on a market rate swap and the strike rate
multiplied by the notional amount. The purpose of the Company's swaption
program is to protect its annuity line of business from the effect of rising
interest rates. The premium paid for the swaptions is included in other
investments (amortized cost of $12.2 million as of December 31, 1999) and is
being amortized over the terms of the agreements. This amortization is
included in net investment income.
SPREAD LOCK AGREEMENTS
Spread-lock agreements provide for a lump sum payment to or by the Company,
depending on whether the spread between the swap rate and a specified
government security is larger or smaller than a contractually specified
spread. Cash payments are based on the product of the notional amount, the
spread between the swap rate and the yield of an equivalent maturity
government security and the price sensitivity of the swap at that time. The
purpose of the Company's spread-lock program is to protect a portion of its
fixed maturity securities against widening of spreads. While spreadlocks are
used periodically, there are no spreadlock agreements outstanding at
December 31, 1999.
INTEREST RATE SWAP AGREEMENTS
The Company uses interest rate swap agreements to hedge its exposure to
floating rate bond coupon payments, replicating a fixed rate bond. An
interest rate swap is a contractual agreement to exchange payments at one or
more times based on the actual or expected price, level, performance or
value of one or more underlying interest rates. The Company is required to
pay the counterparty to the agreement the stream of variable interest
payments based on the coupon payments hedged bonds, and in turn, receives a
fixed payment from the counterparty at a predetermined interest rate. The
net receipts/payments from interest rate swaps are recorded in net
investment income. The Company also uses interest rate swap agreements to
hedge its exposure to interest rate fluctuations related to the anticipated
purchase of assets to support newly acquired blocks of business or to extend
the duration of certain portfolios of assets. Once the assets are purchased
the gains (losses) resulting from the termination of the swap agreements
will be applied to the basis of the assets. The gains (losses) will be
recognized in earnings over the life of the assets. The anticipated purchase
of assets related to extending the duration of certain portfolios of assets
is expected to be completed in 2000.
PUT OPTIONS
The Company uses put options, combined with various perpetual fixed income
securities, and interest rate swaps to replicate fixed income, fixed
maturity investments. The risk being hedged is a drop in bond prices due to
credit concerns with international bond issuers. The put options allow the
Company to put the bonds back to the counterparties at original par.
FOREIGN CURRENCY DERIVATIVES
The Company uses a combination of foreign exchange forward contracts and
foreign currency swaps, which are traded over-the-counter, to hedge some of
the foreign exchange risk of investments in fixed maturity securities
denominated in foreign currencies. The foreign currency forward contracts
obligate the Company to deliver a specified amount of currency at a future
date at a specified exchange rate. A foreign currency swap is a contractual
agreement to exchange the currencies of two different countries at a fixed
rate of exchange in the future.
COMMODITY SWAPS
The Company used a commodity swap to hedge its exposure to fluctuations in
the price of gold. A commodity swap is a contractual agreement to exchange a
certain amount of a particular commodity for a fixed amount of cash. The
Company owned a fixed income security that met its coupon
S-26
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
10. RESTRICTIONS, COMMITMENTS AND CONTINGENCIES (CONTINUED)
payment obligations in gold bullion. The Company is obligated to pay to the
counterparty the gold bullion, and in return, receives from the counterparty
a stream of fixed income payments. The fixed income payments were the
product of the swap notional multiplied by the fixed rate stated in the swap
agreement. The net receipts or payments from commodity swaps were recorded
in net investment income. The fixed income security was called in the third
quarter of 1999 and the commodity swap expired.
ADDITIONAL DERIVATIVE INFORMATION
Expenses for the agreements and contracts described above amounted to
$6,200,000, $10,000,000 and $7,000,000 in 1999, 1998 and 1997, respectively.
Deferred gains of $100,000 as of December 31, 1999, were the result of
terminated interest rate swaps. These gains are included with the related
fixed maturity securities to which the hedge applied or as deferred
liabilities and are being amortized over the life of such securities.
The Company is exposed to credit loss in the event of nonperformance by
counterparties on various derivative contracts. However, the Company does
not anticipate nonperformance by any of the counterparties. The credit risk
associated with such agreements is minimized by purchasing such agreements
from financial institutions with long-standing, superior performance
records. The amount of such exposure is essentially the net replacement cost
or market value less collateral held for such agreements with each
counterparty if the net market value is in the Company's favor. At
December 31, 1999, the exposure was $8,500,000.
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following discussion outlines the methodologies and
assumptions used to determine the estimated fair values of
the Company's financial instruments. Considerable judgment
is required to develop these fair values. Accordingly, the
estimates shown are not necessarily indicative of the
amounts that would be realized in a one-time, current market
exchange of all of the Company's financial instruments.
BONDS AND UNAFFILIATED COMMON STOCK
Fair values of bonds are based on quoted market prices,
where available. For bonds not actively traded, fair values
are estimated using values obtained from independent pricing
services. In the case of private placements, fair values are
estimated by discounting expected future cash flows using a
current market rate applicable to the coupon rate, credit
quality and maturity of the investments. The fair values of
unaffiliated common stocks are based on quoted market
prices.
PREFERRED STOCK
Fair values of preferred stock are based on quoted market
prices, where available. For preferred stock not actively
traded, fair values are based on values of issues of
comparable yield and quality.
MORTGAGE LOANS ON REAL ESTATE
The estimated fair value of mortgage loans on real estate
was established using a discounted cash flow method based on
credit rating, maturity and future income. The ratings for
mortgages in good standing are based on property type,
location, market conditions, occupancy, debt service
coverage, loan to value, caliber of tenancy, borrower and
payment record. Fair values for impaired mortgage loans are
based on: 1) the present value of expected future cash flows
discounted at the loan's effective interest rate; 2) the
loan's market price; or 3) the fair value of the collateral
if the loan is collateral dependent.
POLICY LOANS
The estimated fair values of investments in policy loans are
calculated on a composite discounted cash flow basis using
Treasury interest rates consistent with the maturity
durations assumed. These durations are based on historical
experience.
OTHER INVESTMENTS AND CASH AND SHORT-TERM INVESTMENTS
The carrying values for assets classified as other
investments and cash and short-term investments in the
accompanying statutory-basis balance sheets approximate
their fair value.
INVESTMENT-TYPE INSURANCE CONTRACTS
The balance sheet captions, "Future policy benefits and
claims" and "Other policyholder funds," include investment
type insurance contracts (i.e.,
S-27
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
deposit contracts and guaranteed interest contracts). The
fair values for the deposit contracts and certain guaranteed
interest contracts are based on their approximate surrender
values. The fair values for the remaining guaranteed
interest and similar contracts are estimated using
discounted cash flow calculations. These calculations are
based on interest rates currently offered on similar
contracts with maturities that are consistent with those
remaining for the contracts being valued.
The remainder of the balance sheet captions "Future policy
benefits and claims" and "Other policyholder funds," that do
not fit the definition of "investment-type insurance
contracts" are considered insurance contracts. Fair value
disclosures are not required for these insurance contracts
and have not been determined by the Company. It is the
Company's position that the disclosure of the fair value of
these insurance contracts is important because readers of
these financial statements could draw inappropriate
conclusions about the Company's capital and surplus
determined on a fair value basis. It could be misleading if
only the fair value of assets and liabilities defined as
financial instruments are disclosed.
SHORT-TERM DEBT
For short-term debt, the carrying value approximates fair
value.
SURPLUS NOTES DUE TO LNC
Fair values for surplus notes are estimated using discounted
cash flow analysis based on the Company's current
incremental borrowing rate for similar types of borrowing
arrangements.
GUARANTEES
The Company's guarantees include guarantees related to
mortgage loan pass-through certificates. Based on historical
performance where repurchases have been negligible and the
current status, which indicates none of the loans are
delinquent, the fair value liability for the guarantees
related to the mortgage loan pass-through certificates is
zero.
DERIVATIVES
The Company employs several different methods for
determining the fair value of its derivative instruments.
Fair values for these contracts are based on current
settlement values. These values are based on quoted market
prices for the foreign currency exchange contracts and
industry standard models that are commercially available for
interest rate cap agreements, swaptions, spread lock
agreements, interest rate swaps, commodity swaps and put
options.
INVESTMENT COMMITMENTS
Fair values for commitments to make investment in fixed
maturity securities (primarily private placements), mortgage
loans on real estate and real estate are based on the
difference between the value of the committed investments as
of the date of the accompanying balance sheets and the
commitment date. These estimates would take into account
changes in interest rates, the counterparties' credit
standing and the remaining terms of the commitments.
SEPARATE ACCOUNTS
Assets held in separate accounts are reported in the
accompanying statutory-basis balance sheets at fair value.
The related liabilities are also reported at fair value in
amounts equal to the separate account assets.
S-28
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
11. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The carrying values and estimated fair values of the
Company's financial instruments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------------------------
1999 1998
-------------------------------------------------------------
CARRYING CARRYING
ASSETS (LIABILITIES) VALUE FAIR VALUE VALUE FAIR VALUE
--------------------------------------------------------------------------------------------------------------
(IN MILLIONS)
-------------------------------------------------------------
<S> <C> <C> <C> <C>
Bonds $ 22,985.0 $ 22,376.3 $ 23,830.9 $ 25,065.5
-----------------------------------------------
Preferred stocks 253.8 223.6 236.0 242.5
-----------------------------------------------
Unaffiliated common stocks 166.9 166.9 259.3 259.3
-----------------------------------------------
Mortgage loans on real estate 4,211.5 4,104.0 3,932.9 4,100.1
-----------------------------------------------
Policy loans 1,652.9 1,770.5 1,606.0 1,685.9
-----------------------------------------------
Other investments 426.6 426.6 434.4 434.4
-----------------------------------------------
Cash and short-term investments 1,409.2 1,409.2 1,725.4 1,725.4
-----------------------------------------------
Investment-type insurance contracts:
Deposit contracts and certain guaranteed
interest contracts (17,730.4) (17,364.3) (17,845.8) (17,486.4)
--------------------------------------------
Remaining guaranteed interest and similar
contracts (454.7) (465.1) (714.4) (738.2)
--------------------------------------------
Short-term debt (205.0) (205.0) (140.0) (140.0)
-----------------------------------------------
Surplus notes due to LNC (1,250.0) (1,022.1) (1,250.0) (1,335.1)
-----------------------------------------------
Derivatives 17.4 (4.0) 25.5 18.2
-----------------------------------------------
Investment commitments -- (0.8) -- (.6)
-----------------------------------------------
Separate account assets 46,105.1 46,105.1 36,907.0 36,907.0
-----------------------------------------------
Separate account liabilities (46,105.1) (46,105.1) (36,907.0) (36,907.0)
-----------------------------------------------
</TABLE>
12. ACQUISITIONS AND SALES OF SUBSIDIARIES
In 1997, LNC contributed 25,000,000 shares of common stock of American
States to the Company. American States is a property casualty insurance
holding company of which LNC owned 83.3%. The contributed common stock was
accounted for as a capital contribution equal to the fair value of the
common stock received by the Company. Subsequently, the American States
common stock owned by the Company, along with all other American States
common stock owned by LNC and its affiliates, was sold. The Company received
proceeds from the sale in the amount of $1,175,000,000. The Company
recognized no gain or loss on the sale of its portion of the common stock
due to the receipt of the stock at fair value. The proceeds from this sale
of stock were used to partially finance the CIGNA indemnity reinsurance
transaction.
13. TRANSACTIONS WITH AFFILIATES
A wholly owned subsidiary of LNC, Lincoln Life and Annuity
Distributors, Inc. ("LLAD"), has a nearly exclusive general agent's contract
with the Company under which it sells the Company's products and provides
the service that otherwise would be provided by a home office marketing
department and regional offices. For providing these selling and marketing
services, the Company paid LLAD override commissions of $60,400,000 and
$76,700,000 in 1999 and 1998, respectively, and override commissions and
operating expense allowances of $61,600,000 in 1997. LLAD incurred expenses
of $113,400,000, $102,400,000 and
S-29
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
13. TRANSACTIONS WITH AFFILIATES (CONTINUED)
$5,500,000 in 1999, 1998 and 1997, respectively, in excess of the override
commissions and operating expense allowances received from the Company,
which the Company is not required to reimburse. Effective in January 1998,
the Company and LLAD agreed to increase the override commission expense and
eliminate the operating expense allowance.
Cash and short-term investments at December 31, 1999 and 1998 include the
Company's participation in a short-term investment pool with LNC of
$390,300,000 and $383,600,000, respectively. Related investment income
amounted to $16,700,000, $16,800,000 and $15,500,000 in 1999, 1998 and 1997,
respectively. Short-term loan payable to parent company at December 31, 1999
and 1998 represent notes payable to LNC.
The Company provides services to and receives services from affiliated
companies which resulted in a net payment of $49,400,000, $92,100,000 and
$48,500,000 in 1999, 1998 and 1997, respectively.
The Company cedes and accepts reinsurance from affiliated companies.
Premiums in the accompanying statements of income include premiums on
insurance business accepted under reinsurance contracts and exclude premiums
ceded to other affiliated companies, as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
------------------------
(IN MILLIONS)
------------------------
<S> <C> <C> <C>
Insurance assumed $ 19.7 $ 13.7 $ 11.9
----------------------
Insurance ceded 777.6 290.1 100.3
</TABLE>
The balance sheets include reinsurance balances with affiliated companies as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
1999 1998
-----------------------
(IN MILLIONS)
-----------------------
<S> <C> <C>
Future policy benefits
and claims assumed
$ 413.7 $ 197.3
------------------------
Future policy benefits
and claims ceded 1,680.4 1,125.0
------------------------
Amounts recoverable on
paid and unpaid losses 146.4 84.2
------------------------
Reinsurance payable on
paid losses 8.8 6.0
------------------------
Funds held under
reinsurance treaties --
net liability 2,106.4 1,375.4
------------------------
</TABLE>
Substantially all reinsurance ceded to affiliated companies is with
unauthorized companies. To take a reserve credit for such reinsurance, the
Company holds assets from the reinsurer, including funds held under
reinsurance treaties, and is the beneficiary on letters of credit
aggregating $917,300,000 and $318,300,000 at December 31, 1999 and 1998,
respectively. The letters of credit are issued by banks and represent
guarantees of performance under the reinsurance agreement. At December 31,
1999 and 1998, LNC had guaranteed $818,900,000 and $237,000,000,
respectively, of these letters of credit. At December 31, 1999 and 1998, the
Company has a receivable (included in the foregoing amounts) from affiliated
insurance companies in the amount of $118,800,000 and $122,400,000,
respectively, for statutory surplus relief received under financial
reinsurance ceded agreements.
14. SEPARATE ACCOUNTS
Separate account assets held by the Company consist primarily of long-term
bonds, common stocks, short-term investments and mutual funds and are
carried at market value. Substantially none of the separate accounts have
any minimum guarantees and the investment risks associated with market
S-30
<PAGE>
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
NOTES TO STATUTORY-BASIS FINANCIAL STATEMENTS (CONTINUED)
14. SEPARATE ACCOUNTS (CONTINUED)
value changes are borne entirely by the policyholder.
Separate account premiums, deposits and other considerations amounted to
$4,572,600,000, $3,953,300,000 and $4,821,800,000 in 1999, 1998 and 1997,
respectively. Reserves for separate accounts with assets at fair value were
$45,198,900,000 and $36,145,900,000 at December 31, 1999 and 1998,
respectively. All reserves are subject to discretionary withdrawal at market
value.
A reconciliation of transfers to (from) separate accounts is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1999 1998 1997
-----------------------------------
(IN MILLIONS)
-----------------------------------
<S> <C> <C> <C>
Transfers as reported in the Summary of Operations of the
various separate accounts:
Transfers to separate accounts $ 4,573.2 $ 3,954.9 $ 4,824.0
------------------------------------------------------------
Transfers from separate accounts (4,933.8) (4,069.8) (2,943.8)
------------------------------------------------------------ --------- --------- ---------
Net transfers to (from) separate accounts as reported in the
Summary of Operations $ (360.6) $ (114.9) $ 1,880.2
------------------------------------------------------------ ========= ========= =========
</TABLE>
15. CENTURY COMPLIANCE (UNAUDITED)
The Year 2000 issue was complex and affected many aspects of the Company's
business. The Company was particularly concerned with Year 2000 issues that
related to the Company's computer systems and interfaces with the computer
systems of vendors, suppliers, customers and business partners. From 1996
through 1999 the Company and its operating subsidiaries redirected a large
portion of internal Information Technology ("IT") efforts and contracted
with outside consultants to update systems to address Year 2000 issues.
Experts were engaged to assist in developing work plans and cost estimates
and to complete remediation activities.
For the year ended December 31, 1999, the Company identified expenditures of
$39,500,000 to address this issue. This brings the expenditures for 1996
through 1999 to $75,300,000. Because updating systems and procedures is an
integral part of the Company's on-going operations, most of the expenditures
shown above are expected to continue after all Year 2000 issues have been
resolved. All Year 2000 expenditures have been funded from operating cash
flows.
The scope of the overall Year 2000 program included the following four major
project areas: 1) addressing the readiness of business applications,
operating systems and hardware on mainframe, personal computer and local
area network platforms (IT); 2) addressing the readiness of non-IT embedded
software and equipment (non-IT); 3) addressing the readiness of key business
partners and 4) establishing Year 2000 contingency plans. The Company
completed these projects prior to year-end.
The Company's businesses have not identified any major problems in their
business processing. Minor problems have been resolved quickly. The
Company's businesses have not experienced any significant interruption in
service to clients or business partners or in reporting to regulators.
S-31
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
The Lincoln National Life Insurance Company
We have audited the accompanying statutory-basis balance sheets
of The Lincoln National Life Insurance Company (the "Company"),
a wholly owned subsidiary of Lincoln National Corporation, as of
December 31, 1999 and 1998, and the related statutory-basis
statements of operations, changes in capital and surplus and
cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
As described in Note 1 to the financial statements, the Company
presents its financial statements in conformity with accounting
practices prescribed or permitted by the Indiana Department of
Insurance, which practices differ from accounting principles
generally accepted in the United States. The variances between
such practices and accounting principles generally accepted in
the United States and the effects on the accompanying financial
statements are also described in Note 1.
In our opinion, because of the effects of the matter described
in the preceding paragraph, the financial statements referred to
above do not present fairly, in conformity with accounting
principles generally accepted in the United States, the
financial position of The Lincoln National Life Insurance
Company at December 31, 1999 and 1998, or the results of its
operations or its cash flows for each of the three years in the
period ended December 31, 1999.
However, in our opinion, the financial statements referred to
above present fairly, in all material respects, the financial
position of The Lincoln National Life Insurance Company at
December 31, 1999 and 1998, and the results of its operations
and its cash flows for each of the three years in the period
ended December 31, 1999, in conformity with accounting practices
prescribed or permitted by the Indiana Department of Insurance.
January 31, 2000
S-32
<PAGE>
PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) List of Financial Statements
1. Part A -- The Table of Condensed Financial Information is included in
Part A of this Registration Statement
2. Part B -- The following Financial Statements for the Variable Account
are included in Part B of this Registration Statement:
Statement of Assets and Liability -- December 31, 1999
Statement of Operations -- Year ended December 31, 1999
Statements of Changes in Net Assets -- Year ended December 31, 1999 and
1998
Notes to Financial Statements -- December 31, 1999
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 Part B of this Registration
Statement;
Balance Sheets -- Statutory Basis -- December 31, 1999, and 1998
Statements of Operations -- Statutory Basis -- Years ended December 31,
1999, 1998, and 1997
Statements of Changes in Capital and Surplus -- Statutory Basis -- Years
ended December 31, 1999, 1998, and 1997
Statements of Cash Flows -- Statutory Basis -- Years ended December 31,
1999, 1998, and 1997
Notes to Statutory-Basis Financial Statements -- December 31, 1999
Report of Ernst & Young LLP, Independent Auditors
(b) Exhibits
(1)
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 is incorporated herein by reference to
Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999
(b) Wholesale Agreement is incorporated herein by reference to
Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999
(c) Amendment to Selling Group is incorporated herein by reference to
Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999
(d) Amendment to Schedule A of Selling Group dated February 14, 2000
(e) "Form of" Amendment to Wholesale Agreement
(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 is
incorporated herein by reference to Post-Effective Amendment No. 3
(333-40937) filed on April 29, 1999
(d) Section 403(b) Annuity Endorsement is incorporated herein by
reference to Post-Effective Amendment No. 3 (333-40937) filed on
April 29, 1999
(e) Section 457 Government Deferred Compensation Plan Endorsement is
incorporated herein by reference to Post-Effective Amendment No. 3
(333-40937) filed on April 29, 1999
(f) IRA Contract Amendment is incorporated herein by reference to
Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999
(g) Roth IRA Endorsement is incorporated herein by reference to
Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999
(h) Contract Amendment is incorporated herein by reference to
Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999
(i) Contract Amendment (Definitions)
(j) Contract Amendment (Death Benefit)
(k) Contract Amendment (CRT)
(l) Contract Amendment (AG)
(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)
Fund Participation Agreements and Amendments
(a) Agreements and Amendments between The Lincoln National Life
Insurance Company and:
(i) AIM Variable Insurance Funds, Inc.
(ii) BT Insurance Funds Trust
C-1
<PAGE>
(iii) Delaware Group Premium Fund, Inc.
(iv) Dreyfus Variable Investment Fund is incorporated herein by
reference to Post-Effective Amendment No. 4 (333-40937) filed December 17,
1999.
(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 is incorporated herein by
reference to Post-Effective Amendment No. 3 (333-40937) filed on April 29,
1999.
(vii) Lincoln National Bond Fund, Inc.
(viii) Lincoln National Money Market Fund, Inc.
(ix) Fidelity Variable Insurance Products Fund
(x) MFS-Registered Trademark- Variable Insurance Trust
(xi) OCC Accumulation Trust
(xii) American Variable Insurance Series
(xiii) Alliance FPA.
(xiv) Templeton 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 Growth & Income Fund, Form N-1A 2-80741,
Amendment No. 21 filed on April 10, 2000.
(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 is incorporated herein
by reference to Post-Effective Amendment No. 4 (333-40937) filed December 17,
1999.
(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 Todd R. Stephenson is incorporated herein by
reference to Post-Effective Amendment No. 4 (333-40937) filed on December 17,
1999 as 16(g).
(16) (b) Power of Attorney - Lawrence T. Rowland is incorporated herein by
reference to Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999.
(16) (c) Power of Attorney - Keith J. Ryan is incorporated herein by
reference to Post-Effective Amendment No. 4 (333-40937) filed on December 17,
1999.
(16) (d) Power of Attorney - H. Thomas McMeekin is incorporated herein by
reference to Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999.
(16) (e) Power of Attorney - Richard C. Vaughn is incorporated herein by
reference to Post-Effective Amendment No. 3 (333-40937) filed on April 29, 1999.
(f) Power of Attorney - Jon Boscia.
ITEM 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME POSITIONS AND OFFICES WITH DEPOSITOR
- ---- ------------------------------------
Jon A. Boscia** President and Director
John H. Gotta**** Chief Executive Officer of Life Insurance,
Senior Vice President, and Director
Stephen H. Lewis* Interim Chief Executive Officer of Annuities,
Senior Vice President, and Director
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* Vice President, Controller and Chief Accounting
Officer
Todd R. Stephenson* Senior Vice President, Chief Financial Officer
and Assistant Treasurer
Eldon J. Summers* Second Vice President and Treasurer
Richard C. Vaughan** Director
Roy V. Washington* Vice President and Chief Compliance Officer
</TABLE>
* Principal business address is 1300 South Clinton Street, Fort
Wayne, Indiana 46802-3506.
** Principal business address is Centre Square, West Tower
1500 Market St., Suite 3900 Philadelphia, PA 19102-2112
*** 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 One Commerce Square, 2005 Market
Street, 39th Floor, Philadelphia, PA 19103
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 February 29, 2000 there were 6,053 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 Life Variable Annuity Account N; Lincoln Life Flexible Premium
Variable Life Account M; Lincoln Life Flexible Premium Variable Life Account
R; Lincoln Life Flexible Premium Variable Life Account S; 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, 1999.
<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 $176,441 None $2,289,189
</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 this
Amendment to the Registration Statement to be signed on its behalf, in the City
of Fort Wayne, and the State of Indiana on this 19th day of April, 2000.
LINCOLN LIFE VARIABLE ANNUITY
ACCOUNT N--Lincoln ChoicePlus
(Registrant)
By: /s/ Jeffrey K. Dellinger
-----------------------------------
Jeffrey K. Dellinger
Vice President, LNL
By: THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY (Depositor)
By: /s/ Stephen H. Lewis
-----------------------------------
Stephen H. Lewis
(Signature-Officer of Depositor)
Interim Chief Executive Officer &
Senior Vice President, LNL
(Title)
(b) As required by the Securities Act of 1933, this Amendment to the
Registration Statement has been signed for the Depositors by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<C> <S> <C>
** President and Director April 19, 2000
- ------------------------------ (Principal Executive Officer)
Jon A. Boscia
*
- ------------------------------ Executive Vice President April 19, 2000
Lawrence T. Rowland and Director
**
- ------------------------------ Vice President, and Controller April 19, 2000
Keith J. Ryan (Principal Accounting Officer)
**
- ------------------------------ Senior Vice President, Chief April 19, 2000
Todd R. Stephenson Financial Officer and Assistant
Treasurer
(Principal Financial Officer)
- ------------------------------ Chief Executive Officer of April , 2000
John H. Gotta Life Insurance, Senior Vice
President and Director
/s/ Stephen H. Lewis Interim Chief Executive Officer April 19, 2000
- ------------------------------ of Annuities, Senior Vice
Stephen H. Lewis President and Director
*
- ------------------------------ Director April 19, 2000
H. Thomas McMeekin
*
- ------------------------------ Director April 19, 2000
Richard C. Vaughan
*By: /s/ Steven M. Kluever Pursuant to a Power of Attorney filed with
-------------------------- Post-Effective Amendment No. 3 to the
Steven M. Kluever Registration Statement
**By: /s/ Steven M. Kluever Pursuant to a Power of Attorney filed with
-------------------------- Post-Effective Amendment No. 4 to the
Steven M. Kluever Registration Statement
</TABLE>
C-5
<PAGE>
Amendment to Schedule A
To the Selling Group Agreement Between
The Company and The Broker
Effective February 14, 2000
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(R) 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(R) 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 Life Variable Annuity Account N)
6. Lincoln National Life Insurance Company
Group Multi-Fund(R)
(Lincoln Life Variable Annuity Account Q)
7. Lincoln National Life Insurance Company
SVUL
(Lincoln Life Flexible Premium Variable Life Account R)
8. Lincoln National Life Insurance Company
eAnnuity(TM) Variable Annuity Contracts
(Lincoln National Variable Annuity Account C)
9. Lincoln National Life Insurance Company
Lincoln Director(TM)
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 ADVISORS, INC.
INSURANCE COMPANY [COMPANY] [BROKER]
By: /s/ Kelly D. Clevenger By: /s/ Richard C. Boyles
---------------------------- ----------------------------------
Kelly D. Clevenger Richard C. Boyles
Vice President Second Vice President and
Controller
<PAGE>
Form of Amendment to
--------------------
Schedule 1.d
------------
Separate Account Subaccounts
Available under the Contracts
Subject to the Wholesaling Agreement
Effective February 22, 2000
<TABLE>
<CAPTION>
Name of Separate Account Subaccounts
- ------------------------ -----------
<S> <C>
Lincoln Life Variable Annuity Account N AIM V.I. Capital Appreciation Subaccount
AIM V.I. Growth Subaccount
AIM V.I. International Equity Subaccount
AIM V.I. Value Subaccount
Alliance Growth and Income Subaccount
Alliance Growth Subaccount
Alliance Premier Growth Subaccount
Alliance Technology Subaccount
AVIS Global Small Capitalization Subaccount
AVIS Growth Subaccount
AVIS Growth-Income Subaccount
AVIS International Subaccount
BT Equity 500 Index Subaccount
Delaware Premium Aggressive Growth
Delaware Premium Delchester Subaccount
Delaware Premium Devon Subaccount
Delaware Premium Emerging Markets Subaccount
Delaware Premium Growth & Income Subaccount
Delaware Premium International Equity
Subaccount
Delaware Premium REIT Subaccount
Delaware Premium Select Growth Subaccount
Delaware Premium Small Cap Value Subaccount
Delaware Premium Social Awareness Subaccount
Delaware Premium Trend Subaccount
Dreyfus Variable Fund Small Cap Subaccount
Fidelity VIP Equity-Income Subaccount
Fidelity VIP Growth Subaccount
Fidelity VIP III Growth Opportunities
Subaccount
Fidelity VIP Overseas Subaccount
Franklin Global Growth Subaccount
Franklin International Subaccount
Franklin Small Cap Securities Subaccount
Kemper Variable Series Govt. Securities
Subaccount
Kemper Variable Series Small Cap Growth
Subaccount
Liberty Variable Trust Colonial U.S. Growth &
Income Subaccount
Liberty Variable Trust Newport Tiger
Subaccount
Lincoln National Bond Subaccount
Lincoln National Money Market Subaccount
MFS Variable Trust Emerging Growth Subaccount
MFS Variable Trust Research Subaccount
MFS Variable Trust Total Return Subaccount
MFS Variable Trust Utilities Subaccount
OCC Trust Global Equity Subaccount
OCC Trust Managed Subaccount
Templeton Mutual Shares Securities Subaccount
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Amendment to
------------
Schedule 1.g
------------------
Contracts Subject to Wholesaling Agreement
Effective November 29, 1999
SEC (`33 Act)
Marketing Policy Registration Name of
Name of Contract Form No. No. Separate Account
- ------------------ -------- ------------ ---------------------
<S> <C> <C> <C>
Delaware-Lincoln Choice Plus AN425-LL* 333-40937 Lincoln Life Variable
Annuity Account N
Delaware-Lincoln Choice Plus XL AN425-LL* 333-62819 Lincoln Life Variable
Annuity Account N
</TABLE>
*There are multiple versions by state.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedules 1.d to be executed in its name and behalf by its duly authorized
officer on the date specified below.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:_____________________________ Date:_______________
Name: G. Michael Antrobus
Title: Second Vice President
DELAWARE DISTRIBUTORS, L.P.
By: DELAWARE DISTRIBUTORS, INC.
(General Partner)
By:_____________________________ Date:_______________
Name: Wayne A. Stork
Title: Chairman, President and
Chief Executive Officer
<PAGE>
Optional 4A
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.
Form OMS99
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.
<PAGE>
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.
Form OMS99
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.
<PAGE>
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 due 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
Form OMS99
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
No 120 240
Period Months Months Cash
<PAGE>
Age Certain Certain Certain Refund
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
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
$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
Age Adjustment Table
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
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.
Form OMS99
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
No 120 240
Period Months Months Unit
Age Certain Certain Certain Refund
60 $4.78 $4.73 $4.56 $4.56
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
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 4.95
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
</TABLE>
JOINT AND SURVIVOR ANNUITIES
<TABLE>
<CAPTION>
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
Age Adjustment Table
Year of Birth Adjustment to Age Year of Birth Adjustment to Age
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>
Form OMS99
Amendment to Schedule A
To the Selling Group Agreement Between
The Company and The Broker
Effective February 14, 2000
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(R) 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)
<PAGE>
3. Lincoln National Life Insurance Company
Multi-Fund(R) 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 Life Variable Annuity Account N)
6. Lincoln National Life Insurance Company
Group Multi-Fund(R)
(Lincoln Life Variable Annuity Account Q)
7. Lincoln National Life Insurance Company
SVUL
(Lincoln Life Flexible Premium Variable Life Account R)
8. Lincoln National Life Insurance Company
eAnnuity(TM) Variable Annuity Contracts
(Lincoln National Variable Annuity Account C)
9. Lincoln National Life Insurance Company
Lincoln Director (TM)
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 ADVISORS, INC.
INSURANCE COMPANY [COMPANY] [BROKER]
By: /s/ Kelly D. Clevenger By: /s/ Richard C. Boyles
----------------------------- ----------------------------------
Kelly D. Clevenger Richard C. Boyles
Vice President Second Vice President and
Controller
<PAGE>
Ex4i
VARIABLE ANNUITY AMENDMENT
Made a part of the Contract to which it is attached.
The following paragraph is added to the Definitions provision of the Contract:
OWNER. The Owner on the Date of Issue will be the person designated in the
Contract Specifications. If no Owner is designated, the Annuitant(s) will be the
Owner. The Owner may name a Joint Owner. Joint Owner(s) shall be treated as
having equal, undivided interests in the Contract, including rights of
survivorship. Either Joint Owner, independently of the other, may exercise any
ownership rights in the Contract.
The following provisions completely replace the provisions of the same title in
the contract.
DEATH BENEFIT. If there is a single Owner, upon the death of the Owner, the
Company will pay a Death Benefit to the designated Beneficiary(s) in accordance
with the "Payment of Death Benefit" provision. If the designated Beneficiary of
the Death Benefit is the surviving spouse of the deceased Owner, the spouse may
elect to continue the contract as the new Owner. If there is no designated
Beneficiary, the Company will pay a Death Benefit to the Owner's estate. Upon
the death of the spouse who continues the Contract as the new Owner, the Company
will pay a Death Benefit to the designated Beneficiary(s) named by the spouse as
the new Owner.
If there are Joint Owners, upon the death of the first Joint Owner, the Company
will treat the surviving Joint Owner as the Beneficiary and will pay a Death
Benefit to the surviving Joint Owner in accordance with the "Payment of Death
Benefit" provision. If the surviving Joint Owner is the spouse of the deceased
Joint Owner, the spouse may elect to continue the contract as sole Owner. Upon
the death of the Joint Owner, who continues the Contract, the Company will pay a
Death Benefit to the designated Berieficiary(s) in accordance with the "Payment
of Death Benefit" provision.
If the Annuitant is also the Owner or Joint Owner, upon the death of the
Annuitant, the Company will pay a Death Benefit in accordance with the preceding
provisions applicable to the death of an Owner or Joint Owner. If the surviving
spouse of the deceased Owner/Annuitant continues the contract, the Contingent
Annuitant becomes the Annuitant. If no Contingent Annuitant is named, the
surviving spouse becomes the Annuitant.
If the Annuitant is not the Owner or a Joint Owner, upon the death of the
Annuitant, the Contingent Annuitant (if named) becomes the Annuitant and no
Death Benefit is payable due to the death of the Annuitant. If no Contingent
Annuitant is named, the Owner (or the younger of Joint Owners) becomes the
Annuitant. In lieu of continuing the Contract, the Owner or Joint Owners may
elect to be treated as the Beneficiary(s) and receive (in equal shares, if
applicable) a Death Benefit, provided that the Annuitant has not been changed
(except due to the death of a prior Annuitant) and provided that notification of
the election of the Death Benefit is received by the Company within 75 days of
the death of the Annuitant. If no Owner is living on the date of death of the
Annuitant, the Death Benefit will be paid to the Beneficiary in accordance with
the "Payment of Death Benefit" provision. This Contract will terminate when any
Death Benefit is paid due to the death of the Annuitant. A Death Benefit payable
on the death of the Annuitant will not be paid if the Annuitant has been changed
subsequent to the effective date of this Contract unless the change occurred
because of the death of a prior Annuitant.
All Death Benefit payments will be subject to the laws and regulations governing
death benefits.
Notwithstanding any provision of this Contract to the contrary, the payment of
Death Benefits provided under this Contract must be made in compliance with Code
Section 72(s) or 401(a)(9) as applicable, as amended from time to time.
PAYMENT OF DEATH BENEFIT. If the Death Benefit is to be paid in one sum to the
Beneficiary or to the estate of the deceased person, or if the Death Benefit is
to be paid into the Annuity Account Value, payment will be made within 7 days of
the date the Death Benefit election becomes effective or is deemed to become
effective, provided due proof of the death is received by the Company at its
Home Office, except as the Company may be permitted to defer any such payment of
amounts derived from the Variable Account in accordance with the Investment
Company Act of 1940. If settlement under the settlement options provision is
elected, the Income Payments will commence 30 days following the effective date
or the deemed effective date of the election and the Annuity Account will be
maintained in effect until such Income Payments commence.
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
Form DBS99
Period during which the Death Benefit election is effective or is deemed to
become effective, (b) the sum of all the Premium Payments made under the
contract, minus the sum of all partial withdrawals, partial annuitizations, or
premium tax deductions, or (c) the highest Annuity Account Value ever attained
on a Contract Anniversary Date
<PAGE>
occurring on or before the 80th birthday of the deceased person upon whose death
the Death Benefit is payable, increased by the sum of all Premium Payments made
since such Contract Anniversary Date and decreased by the sum of all partial
withdrawals, partial annuitizations, and premium tax deductions made since such
Contract Anniversary.
Upon the death of the Owner or Joint Owner of this Contract, if the surviving
spouse continues the Contract, the Death Benefit payable on the deceased spouse
is the excess of the Death Benefit over the Annuity Account Value for the
Valuation Period during which the Death Benefit election is effective or is
deemed to become effective. This excess will be paid into the Contract and will
only apply one time for each Contract. This Contract option is not available
upon the death of the Annuitant.
The Lincoln National Life Insurance Company
NANCY J. ALFORD, VICE PRESIDENT
Form DBS99
<PAGE>
EX4-J
VARIABLE ANNUITY AMENDMENT
Made a part of the Contract to which it is attached.
This Amendment is effective only if the Owner is a non-natural person and the
Contract names Joint Annuitants. The Owner may not change the Joint Annuitants
at any time.
The following provisions completely replace the provisions of the same title in
the contract:
DEATH BENEFIT. Upon the death of the first of the Joint Annuitants to die,
unless the Owner elects to receive the Death Benefit and terminate the contract,
the Company will pay into the Annuity Account Value an amount equal to the
excess of the Death Benefit over the Annuity Account Value for the Valuation
Period during which the Death Benefit election is effective or is deemed to
become effective.
Provided the Contract remains in force until the death of the second of the
Joint Annuitants to die, upon the death of the second of the Joint Annuitants to
die, the Company will pay the Death Benefit to the Owner and the Contract will
terminate.
The Death Benefit will be paid if the Company is in receipt of: (1) proof,
satisfactory to the Company, of the death; (2) written authorization for
payment; and (3) all claim forms, fully completed.
All Death Benefit payments will be subject to the laws and regulations governing
death benefits.
PAYMENT OF DEATH BENEFIT. If the Death Benefit is to be paid in one lump sum or
is to be paid into the Annuity Account Value, payment of the Death Benefit will
be made within 7 days of the date the Death Benefit election becomes effective
or is deemed to become effective, provided due proof of the death is received by
the Company at its Home Office, except as the Company may be permitted to defer
any such payment of amounts derived from the Variable Account in accordance with
the Investment Company Act of 1940. If settlement under the settlement options
provision is elected, the Income Payments will commence 30 days following the
effective date or the deemed effective date of the election and the Annuity
Account will be maintained in effect until such Income Payments commence.
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 Payments made under the contract, minus the sum of
all partial withdrawals, partial annuitizations, or premium tax deduction, or
(c) the highest Annuity Account Value ever attained on a Contract Anniversary
Date occurring on or before the 80th birthday of the deceased person upon whose
death the Death Benefit is payable, increased by the sum of all Premium Payments
made since such Contract Anniversary Date and decreased by the sum of all
partial withdrawals, partial annuitizations, and premium tax deductions made
since such Contract Anniversary.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Jon A. Boscia, President
Form DBJ99
<PAGE>
Ex4-K
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
VARIABLE ANNUITY AMENDMENT
This amendment is made part of the Contract to which it is attached.
The following paragraph is added to the Definitions provision of the Contract:
EARNINGS. Earnings shall be defined as the excess of the Contract Value
over Purchase Payments which have not yet been withdrawn from the Contract.
The following provisions completely replace the provisions of the same titles in
the contract.
WITHDRAWAL CHARGES. If a cash withdrawal is made, a withdrawal charge may
be assessed by the Company. The length of time between the Company
acceptance of the Premium Payment(s) and the receipt of a withdrawal
request determines the withdrawal charge.
For purposes of calculating withdrawal charges on withdrawals, the Company
assumes that:
a. The Free Amount (see PENALTY-FREE PARTIAL WITHDRAWALS OR
TRANSFERS section) will be withdrawn from the Premium Payments on
a "first in-first out (FIFO)" basis.
b. Any amount withdrawn above the Free Amount will be withdrawn in
the following order:
1. from Premium Payments (FIFO) to which a CDSC no longer
applies until exhausted; then
2. from Earnings until exhausted; then
3. from Premium Payments (FIFO) to which a CDSC still applies.
The schedule of withdrawal charges is set forth in the "Schedule of Charges,
Expenses and Fees". On withdrawal, any applicable Annuity Account Fee and Market
Value Adjustment will be applied before the application of any withdrawal
charge.
Withdrawal charges are deducted proportionately from the Fixed and/or Variable
Account Sub-Account(s) from which the withdrawal is to be made, provided such
Sub-Account(s) have sufficient account value(s) for making such deduction(s). If
any of the account value(s) of such Sub-Account(s), however, are insufficient,
its remaining withdrawal charges will be deducted pro rata from all Fixed and/or
Variable SubAccounts in proportion to the then current account value(s) of such
Sub-Account(s).
See "Penalty-Free Withdrawals, Transfers and Annuitization Provisions" for
situations in which a withdrawal charge is not imposed.
For the purpose of any qualified plan riders which may be attached to this
contract, the term "Surrender Charge" wherever referenced therein, shall mean
"withdrawal charge" as set forth above.
PENALTY-FREE PARTIAL WITHDRAWALS OR TRANSFERS. During any Contract Year prior to
the Annuity Date, the Owner may request, in writing, to withdraw up to the Free
Amount without incurring a withdrawal charge. The Free Amount is equal to 15% of
Purchase Payments. Any such withdrawal from a Fixed Account Sub-Account may be
subject to a Market Value Adjustment unless the withdrawal is made at the end of
a Guaranteed Period set forth below. The Owner must specify from which Fixed
and/or Variable Account Sub-Accounts the withdrawal is to be made, otherwise the
Company may effect such withdrawal on a proportionate basis from all Fixed
and/or Variable Sub-Accounts in which the Annuity Account is invested.
Such partial withdrawals may be either taken as a lump sum or, upon consent of
the Company, paid in equal installments.
No withdrawal charge will be imposed on any withdrawal with respect to a Premium
Payment after the end of the seventh year following the Company's acceptance of
that Premium Payment.
The Owner may also transfer amounts within the Annuity Account during the
Accumulation Period without the application of a withdrawal charge, however, any
transfers would be subject to any terms and conditions as may be imposed under
the "Transfer Privilege" provision.
Form CRTAN425LL 1199 [Effective Date:March 1, 2000]
The following provision replaces the first paragraph of the provision of the
same title in the contract.
<PAGE>
ANNUITY DATE. The Annuity Date selected by the Owner is shown in the
Contract Specifications. The Annuity Date may be changed from time to time
by the Owner by notifying the Company in writing. The notice must be
received at the Company's Home Office at least 45 days prior to the Annuity
Date then in effect. The Annuity Date selected must be at least 30 days
after the effective date of the change and not later than the Annuitant's
100th birthday.
THE LINCOLN NATIONAL LIFE INSURANCE Company
Jon A. Boscia, President
Form CRTAN425LL 1199 [Effective Date: March 1, 2000)
<PAGE>
EX4-L
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
VARIABLE ANNUITY AMENDMENT
This amendment is made part of the Contract to which it is attached.
The following paragraph is added to the Definitions provision of the Contract:
EARNINGS. Earnings shall be defined as the excess of the Contract Value
over Purchase Payments which have not yet been withdrawn from the Contract.
The following provisions completely replace the provisions of the same titles in
the contract.
WITHDRAWAL CHARGES. If a cash withdrawal is made, a withdrawal charge may
be assessed by the Company. The length of time between the Company
acceptance of the Premium Payment(s) and the receipt of a withdrawal
request determines the withdrawal charge.
For purposes of calculating withdrawal charges on withdrawals, the Company
assumes that:
a. The Free Amount (see PENALTY-FREE PARTIAL WITHDRAWALS OR TRANSFERS
section) will be withdrawn from the Premium Payments on a "first in-
first out (FIFO)" basis.
b. Prior to the seventh anniversary of the Contract Date, any amount
withdrawn above the Free Amount will be withdrawn in the following
order:
1. from Premium Payments (FIFO) until exhausted; then
2. from Earnings.
c. On or after the seventh anniversary of the Contract Date, any amount
withdrawn above the Free Amount will be withdrawn in the following
order:
1. from Premium Payments (FIFO) to which a CDSC no longer applies
until exhausted; then
2. from Earnings until exhausted; then
3. from Premium Payments (FIFO) to which a CDSC still applies.
The schedule of withdrawal charges is set forth in the "Schedule of Charges,
Expenses and Fees". On withdrawal, any applicable Annuity Account Fee and Market
Value Adjustment will be applied before the application of any withdrawal
charge,
Withdrawal charges are deducted proportionately from the Fixed and/or Variable
Account Sub-Account(s) from which the withdrawal is to be made, provided such
Sub-Account(s) have sufficient account value(s) for making such deduction(s). If
any of the account value(s) of such Sub-Account(s), however, are insufficient,
its remaining withdrawal charges will be deducted pro rata from all Fixed and/or
Variable Sub-Accounts in proportion to the then current account value(s) of such
Sub-Account(s).
See "Penalty-Free Withdrawals, Transfers and Annuitization Provisions" for
situations in which a withdrawal charge is not imposed.
For the purpose of any qualified plan riders which may be attached to this
contract, the term "Surrender Charge" whenever referenced therein, shall mean
"withdrawal charge" as set forth above.
PENALTY-FREE PARTIAL WITHDRAWALS OR TRANSFERS. During any Contract Year prior to
the Annuity Date, the Owner may request, in writing, to withdraw up to the Free
Amount without incurring a withdrawal charge. The Free Amount is equal to 15% of
the Premium Payment(s). Any such withdrawal from a Fixed Account Sub-Account may
be subject to a Market Value Adjustment unless the withdrawal is made at the end
of a Guaranteed Period set forth below. The Owner must specify from which Fixed
and/or Variable Account Sub-Accounts the withdrawal is to be made, otherwise the
Company may effect such withdrawal on a proportionate basis from all Fixed
and/or Variable Sub-Accounts in which the Annuity Account is invested.
Form AGAAN425LL 1199 [Effective Date:March 1, 2000]
Such partial withdrawals may be either taken as a lump sum or, upon consent of
the Company, paid in equal installments.
<PAGE>
No withdrawal charge will be imposed on any withdrawal with respect to a Premium
Payment after the end of the seventh year following the Company's acceptance of
that Premium Payment.
The Owner may also transfer amounts within the Annuity Account during the
Accumulation Period without the application of a withdrawal charge, however, any
transfers would be subject to any terms and conditions as may be imposed under
the "Transfer Privilege" provision.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Jon A. Boscia, President
Form AGAAN425LL 1199 [Effective Date:March 1, 2000]
<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
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
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
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION PAGE
- ----------- ----
<S> <C>
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
</TABLE>
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
1
<PAGE>
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.
2
<PAGE>
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.
3
<PAGE>
(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.
4
<PAGE>
(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
5
<PAGE>
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.
6
<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
7
<PAGE>
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
8
<PAGE>
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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<PAGE>
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.
21
<PAGE>
(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
22
<PAGE>
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.
23
<PAGE>
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 w ill 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 from 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
<S> <C> <C>
REGISTRATION
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. 3
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 LN605LULN615LULN617LULN680
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: 10-14-99
----------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
Name: Nancy L.Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
SAAGR\PAA51AV1.doc
100699(1)hg 1 of 2
<PAGE>
A I M DISTRIBUTORS, INC.
Attest: By:
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Attest: By:
Name: Steven M. Kluever Name: Kelly D. Clevenger
Title: Assistant Vice President Title: Vice President
(SEAL)
SAAGR\PAA51AV1, doc
100699(1)hg 2 of 2
<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>
AMENDMENT NO. 4
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 LN605LL/LN615LL/LN617LL/LN660/
LN680 and state variations thereof
- The Lincoln National Life Insurance Company:
Flexible Premium Variable Life Insurance Policy On
the Lives of Two Insureds LN650LL/LN655 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:
----------------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: By:
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
1 of 2
<PAGE>
A I M DISTRIBUTORS, INC.
Attest: By:
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
Attest: By:
Name: Name:
------------------------- ---------------------------
Title: Title:
------------------------- ---------------------------
(SEAL)
2 of 2
<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
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writing) of such request for redemption by 9:00 a.m. New York time on the next
Business Day.
1.4 TRUST shall furnish, on or before each ex-dividend date, notice to
LIFE COMPANY of any income dividends or capital gain distributions payable on
the shares of any Portfolio of TRUST. LIFE COMPANY hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. LIFE COMPANY reserves
the right to change such election. TRUST shall notify LIFE COMPANY or its
designee of the number of shares so issued as payment of such dividends and
distributions.
1.5 TRUST shall make the net asset value per share for the selected
Portfolio(s) available to LIFE COMPANY on a daily basis as soon as reasonably
practicable after the net asset value per share is calculated but shall use its
best efforts to make such net asset value available by 6:30 p.m. New York time.
If TRUST provides LIFE COMPANY with materially incorrect share net asset value
information through no fault of LIFE COMPANY, LIFE COMPANY on behalf of the
Separate Accounts, shall be entitled to an adjustment to the number of shares
purchased or redeemed on each day for which such incorrect information was
provided to reflect the correct share net asset value. Any material error in the
calculation of net asset value per share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY.
1.6 At the end of each Business Day, LIFE COMPANY shall use the
information described in Section 1.5 to calculate Separate Account unit values
for the day. Using these unit values, LIFE COMPANY shall process each such
Business Day's Separate Account transactions based on requests and premiums
received by it by the close of trading on the floor of the New York Stock
Exchange (currently 4:00 p.m. New York time) to determine the net dollar amount
of TRUST shares which shall be purchased or redeemed at that day's closing net
asset value per share. The net purchase or redemption orders so determined
shall be transmitted to TRUST by LIFE COMPANY by 9:00 a.m. New York Time on the
Business Day next following LIFE COMPANY's receipt of such requests and premiums
in accordance with the terms of Sections 1.2 and 1.3 hereof.
1.7 If LIFE COMPANY's order requests the purchase of TRUST shares, LIFE
COMPANY shall pay for such purchase by wiring federal funds to TRUST or its
designated custodial account by 2:00 pm on the day the order is transmitted by
LIFE COMPANY. If LIFE COMPANY's order requests a net redemption resulting in a
payment of redemption proceeds to LIFE COMPANY, TRUST shall 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
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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
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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.
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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 distribution to prospective
purchasers or to owners of existing Variable Contracts not funded by the shares.
In the event that LIFE COMPANY requests that TRUST or its designee provide
TRUST's prospectus in a "camera ready" or diskette format, TRUST shall be
responsible for providing the prospectus (or prospectuses) in the format in
which it is accustomed to formatting prospectuses and shall bear the expense of
providing the prospectus (or prospectuses) in such format (e.g. typesetting
expenses), and LIFE COMPANY shall bear the expense of adjusting or changing the
format to conform with any of its prospectuses.
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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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TRUST, as such registration statement and prospectus may be amended or
supplemented from time to time, or in sales literature or other promotional
material approved by TRUST or its designee, except with the written permission
of TRUST or ADVISER.
4.5 For purposes of this Agreement, the phrase "sales literature or other
promotional material" or words of similar import include, without limitation,
advertisements (such as material published, or designed for use, in a newspaper,
magazine or other periodical, radio, television, telephone or tape recording,
videotape display, signs or billboards, motion pictures or other public media),
sales literature (such as any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, or reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports and
proxy materials, and any other material constituting sales literature or
advertising under National Association of Securities Dealers, Inc. ("NASD")
rules, the '40 Act, the '33 Act or rules thereunder.
Article V. POTENTIAL CONFLICTS
5.1 The parties acknowledge that TRUST has received an order from the SEC
granting relief from various provisions of the '40 Act and the rules thereunder
to the extent necessary to permit TRUST shares to be sold to and held by
Variable Contract separate accounts of both affiliated and unaffiliated
Participating Insurance Companies and Qualified Plans. The Exemptive Order
requires TRUST and each Participating Insurance Company to comply with
conditions and undertakings substantially as provided in this Section 5. The
TRUST will not enter into a participation agreement with any other Participating
Insurance Company unless it imposes the same conditions and undertakings as are
imposed on LIFE COMPANY hereby.
5.2 The Board will monitor TRUST for the existence of any material
irreconcilable conflict between the interests of Variable Contract owners of all
separate accounts and with participants of Qualified Plans investing in TRUST.
An irreconcilable material conflict may arise for a variety of reasons, which
may include: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling or any similar action by
insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which 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
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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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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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(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.
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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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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
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(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;
14
<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.
18
<PAGE>
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:
19
<PAGE>
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
20
<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 NO. 2
to the
FUND PARTICIPATION AGREEMENT
AMENDMENT, dated as of May 1, 1999, to the Fund Participation Agreement
dated 11th day of May, 1998 (the "Agreement"), by and between BT Insurance Funds
Trust ("Trust"), Bankers Trust Company ("Adviser"), and The Lincoln National
Life Insurance Company ("Life Company").
WHEREAS, Trust, Life Company and Adviser wish to revise Appendices A and B
to the Agreement;
NOW, THEREFORE, in accordance with Section 10.9 of the Agreement, Trust,
Life Company and Adviser hereby agree as follows:
I. Appendix A to the Agreement is hereby amended, and restated in its
entirety, by the Appendix A attached to this Amendment.
2. Appendix B to the Agreement is hereby amended, and restated in its
entirety, by the Appendix B attached to this Amendment.
Except as expressly set forth above, all other terms and provisions of the
Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Amendment as of the date and year first above written.
BT INSURANCE FUNDS TRUST
By
Name:
Title
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
By:
Name:
Title: Vice President
BANKERS TRUST COMPANY
By:
Name:
Title:
<PAGE>
APPENDIX A
(Revised effective May 1, 1999)
BT INSURANCE FUNDS TRUST PORTFOLIOS
Equity 500 Index Fund
Small Cap Index Fund
EAFE Equity Index Fund
<PAGE>
APPENDIX B
(Revised effective May 1, 1999)
SEPARATE ACCOUNTS
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT C
LINCOLN LIFE VARIABLE ANNUITY ACCOUNT N
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT Q
LINCOLN NATIONAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 53
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT M
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE SEPARATE ACCOUNT R
LINCOLN LIFE FLEXIBLE PREMIUM VARIABLE LIFE ACCOUNT S
LINCOLN NATIONAL LIFE INSURANCE COMPANY SEPARATE ACCOUNT 36
(EFFECTIVE AUGUST 13, 1999)
<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
BETWEEN
LINCOLN NATIONAL LIFE INSURANCE COMPANY
AND
DELAWARE DISTRIBUTORS, LP
THIS AGREEMENT, made and entered into this 30th day of May, 1996, by
and between the LINCOLN NATIONAL LIFE INSURANCE COMPANY, an Indiana insurance
company (the "Company"), on its own behalf and on behalf of each separate
account of the Company named in Schedule I to this Agreement as in effect at the
time this Agreement is executed and such other separate accounts that may be
added to or deleted from Schedule 1 from time to time in accordance with the
provisions of Article IX of this Agreement (each such account is herein referred
to as the "Account"), and DELAWARE DISTRIBUTORS, LP, a Delaware limited
partnership (the "Distributor").
WHEREAS, the investment companies set forth on Schedule 2 to this
Agreement and such other investment companies that may be added to Schedule 2
from time to time in accordance with the provisions of Article IX of this
Agreement (such investment companies are herein referred to as the "Funds") are
engaged in business as open-end management investment companies;
WHEREAS, the common stock of each Fund (the "Fund shares") consists of
separate series ("Series") issuing separate classes of shares ("Series shares"),
each such class representing an interest in a particular managed portfolio of
securities and other assets;
WHEREAS, the Company has established the Accounts, to serve as
investment vehicles for the group annuity contracts offered by the Company
("Contracts"). Selection of a particular Account is made by the owner of a
Contract in accordance with the provisions of the applicable Contract;
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");
WHEREAS, the Distributor and each of the Funds have entered into
agreements (the "Fund Distribution Agreement") pursuant to which the Distributor
will distribute Fund shares;
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Series shares on behalf of the
Account to fund the Contracts and the Distributor is authorized to sell such
Series shares to the Account at net asset value; and
<PAGE>
NOW, THEREFORE, in consideration of their mutual promises, the
Company, and the Distributor agree as follows:
ARTICLE I. SALE OF FUND SHARES
1.1. The Distributor agrees to sell to the Company those Series 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. Each Fund shall make the shares of its Series 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, each Fund shall use reasonable efforts to calculate such net asset
value on each such Business Day. The Company acknowledges that the Board of
Directors of the Funds (the "Fund Board") may suspend or terminate the offering
of a Fund's shares of any Series, 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 of any Series.
1.3. Each Fund shall 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 in accordance with Section 1.4
of this Agreement, the applicable provisions of the Investment Company Act of
1940 (the " 1940 Act") and the then currently effective prospectus for such Fund
("Fund Prospectus"). Notwithstanding the foregoing, the Company acknowledges
that the Fund may delay redemption of Fund shares of any Series to the extent
permitted by the 1940 Act, any rules, regulations or orders thereunder, or the
then currently effective Fund Prospectus.
1.4.
(a) For purposes of Sections 1. 1, 1.2 and 1.3, the Company shall
be the agent of the Distributor 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 Distributor prior to the time prescribed in the
current Fund Prospectus (which as of the date of execution of this
Agreement is 4 p.m.) shall constitute receipt by the Fund on that same
Business Day, provided that the Fund receives notice of such redemption or
purchase request by 9:30 a.m. Eastern 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.
2
<PAGE>
(b) The Company shall pay for shares of each Series on the same
Business Day it places an order with the Fund to purchase those Series
shares for an Account. Payment for Series shares will be made by the
Account or the Company in Federal Funds transmitted to the Fund by wire to
be received by 3:00 p.m. Eastern Time. If payment in federal funds for any
purchase is not received or is received by the Fund after 3: 00 p.m.
Eastern Time on such Business Day, the Company shall promptly, upon the
Fund's request, reimburse the Fund for any charges, costs, fees, interest
or other expenses incurred by the Fund in connection with any advances to,
or borrowings or overdrafts by, the Fund, or any similar expenses incurred
by the Fund, as a result of portfolio transactions effected by the Fund
based upon such purchase request. 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.
(c) Payment for Series shares redeemed by the Account or the
Company will be made in Federal Funds transmitted to the Company by wire to
be received by 3:00 p.m. Eastern Time on the Business Day the Fund is
notified of the redemption order of Series shares (unless redemption
proceeds are applied to the purchase of shares of other Series). If payment
in federal funds for any redemption is not received by 3:00 p.m. Eastern
Time on such Business Day, the Fund shall promptly, upon the Company's
request, reimburse the Company for any changes, costs, fees, interest or
other expenses incurred by the Company in connection with any advances to,
or borrowings or overdrafts by the Company, or any similar expenses
incurred by the Company as a result of redemption proceed payments effected
by the Company. The Company acknowledges that the Fund reserves the right
to delay payment of redemption proceeds, but in no event may such payment
be delayed longer than the period permitted under Section 22(e) of the 1940
Act. Neither the Fund nor the Distributor shall bear any responsibility
whatsoever for the proper disbursement or crediting of redemption proceeds;
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 Series 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 Series shares in the form of additional shares of that Series. 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 Series shares so issued as payment of such dividends
and distributions.
3
<PAGE>
1.7. The Fund shall use its best efforts to make the net asset value
per share for each Series available to the Company by 6:00 p.m. Eastern Time
each Business Day, and in any event, as soon as reasonably practicable after the
net asset value per share for such Series is calculated, and shall calculate
such net asset value in accordance with the then currently effective Fund
Prospectus. Neither the Fund, any Series, the Distributor, nor 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 or the Distributor or any of their
affiliates.
1.8.
(a) The Company may withdraw the Account's investment in the Fund
or a Series only: (i) as necessary to facilitate Contract owner requests;
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application or (iii) as determined by the
Company in its sole discretion, to be exercised in good faith, in order to
fulfill its fiduciary responsibilities under ERISA.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that Fund shares may be
sold to other insurance companies and, the cash value of the Contracts may
be invested in other investment companies.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2. 1. The Company represents and warrants that the Contracts and any
certificates thereunder are not registered because they are properly exempt from
registration under the Securities Act of 1933 (" 1933 Act") or will be offered
exclusively in transactions that are properly exempt from registration under the
1933 Act. The Company further represents and warrants that the Contracts and any
certificates thereunder 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 in
good standing under applicable law, that it has legally and validly established
the Account prior to any issuance or sale thereof as a segregated investment
account under Indiana insurance laws, and that it has not registered the Account
in proper reliance upon an exclusion from registration under the 1940 Act.
2.2. The Distributor makes no representations as to whether any aspect
of the Funds' operations, including but not limited to, investment policies,
fees, and expenses, complies with the insurance and other applicable laws of the
various states.
2.3. The Distributor represents that the Fund is lawfully organized
and validly existing under the laws of the State of Maryland and it does and
will comply in all material respect with the 1940 Act.
4
<PAGE>
2.4. The Distributor represents and warrants that it is a member in
good standing of the NASD and is registered as a broker-dealer with the SEC.
Distributor further represents that it will sell and distribute the Fund shares
in accordance with the laws of any applicable state and federal securities laws.
2.5 The Company represents that the Contracts are currently treated as
group annuity contracts under state law and applicable provisions of the
Internal Revenue Code of 1986, as amended and that it will make every effort to
maintain such treatment and that it will notify 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.
ARTICLE 111. PROSPECTUSES; SALES MATERIAL AND OTHER INFORMATION
3. 1. The Distributor shall provide the Company (at the Company's
expense) with as many copies of the current Fund Prospectus as the Company may
reasonably request.
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. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Distributor 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.
3.4. The Company shall not give any information or make any
representations or statements on behalf of the Funds or concerning the Funds
other than the information or representations contained in the Funds' effective
registration statement (the "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 Funds, 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. 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 Distributor 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 approved by the
Company. The Company agrees to respond
5
<PAGE>
to any request for permission on a prompt and timely basis. Failure of the
Company to respond within 10 days of the request by the Distributor shall
relieve the Distributor of the obligation to obtain the prior written permission
of the Company.
3.6. 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, signs or billboards, motion pictures or other public media), sales
literature (Le-, 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 NASD rules, the 1940 Act or the 1933 Act.
ARTICLE IV. VOTING
4.1 Unless otherwise required by applicable federal law, the Company
may vote Fund shares in its sole discretion.
ARTICLE V. FEES AND EXPENSES
5.1 The Distributor shall pay no fee or other compensation to the
Company under this Agreement.
5.2 All expenses incident to performance by the Distributor under this
Agreement shall be paid by the Distributor except as otherwise provided herein.
The Funds shall see to it that all their shares are registered and authorized
for issuance in accordance with applicable federal law and, if and to the extent
deemed advisable by a Fund, in accordance with applicable state laws prior to
their sale. The Funds shall bear the expenses for the cost of registration and
qualification of the Funds' shares, preparation and filing of the Funds'
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 Funds'
shares.
5.3 The Company shall bear the expenses of printing and distributing
the Fund's prospectus and SAI to owners of Contracts issued by the Company. If
required by applicable law, the Distributor, at its expense, shall provide the
Company with copies of the Funds' proxy
6
<PAGE>
material, reports to shareholders, and other communications to shareholders in
such quantity as the Company shall reasonably require for distributing the
Contract owners.
ARTICLE VI. INDEMNIFICATION
6. 1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless each Fund, the Distributor and each person who controls or is
associated with the Fund or the Distributor within the meaning of such terms
under the federal securities laws and any officer, trustee, director, employee
or agent of the foregoing, against any and all losses, claims, damages or
liabilities, joint or several (including any investigative, legal and other
expenses reasonably incurred in connection with, and any amounts paid in
settlement of, any action, suit or proceeding or any claim asserted), to which
they or any of them may become subject under any statute or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Contracts,
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 obligation to indemnify shall not apply if such
statement or omission or such alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing to the Company by the Distributor (or a person authorized in
writing to do so on behalf of the Distributor) for use in the Contracts or
sales literature (or any amendment or supplement) or otherwise for use in
connection with the sale of the Contracts or any Fund shares;
(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 any
Fund shares;
(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 or the Distributor by or on behalf of the Company; or
7
<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;
(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 NAV
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.
6.2. INDEMNIFICATION BY THE DISTRIBUTOR. . The Distributor agrees to
indemnify and hold harmless the Company and each person who controls or is
associated with the Company within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in the Fund
Registration Statement, Fund Prospectus (or any amendment or supplement
thereto) or sales literature or other promotional material of the Fund, or
arise out of or are based upon the omission or the alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances in
which they were made; provided that this obligation to indemnify shall not
apply if such statement or omission or alleged statement or alleged
omission was made in reliance upon and in conformity with information
furnished in writing by the Company to the Fund or the Distributor for use
in the Fund 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 any Fund shares;
(b) arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact by the Distributor (other than
statements or representations
8
<PAGE>
contained in the Fund Registration Statement, Fund Prospectus or sales
literature or other promotional material of the Fund not supplied by the
Distributor or persons under its control) or wrongful conduct of the
Distributor or persons under its control with respect to the sale or
distribution of the Contracts or any Fund shares;
(c) arise out of any untrue statement or alleged untrue statement
of a material fact contained in the Contracts or sales literature or other
promotional material for the Contracts (or any amendment or supplement
thereto), or the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which they were
made, if such statement or omission was made in reliance upon information
furnished in writing by the Distributor to the Company (or a person
authorized in writing to do so on behalf of the Distributor);
(d) arise out of a failure by the Fund to provide the Company
with accurate information sufficient for it to calculate its accumulation
and/or annuity unit values as required by law; or
(e) arise out of any material breach by the Distributor or the
Fund of this Agreement.
This indemnification will be in addition to any liability which the Distributor
may otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
6.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VI 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 VI ("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 VI, 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
9
<PAGE>
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 VI. The
indemnification provisions contained in this Article VI shall survive any
termination of this Agreement.
ARTICLE VII. APPLICABLE LAW
7. 1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Pennsylvania, without giving effect to the principles of conflicts of laws.
7.2. 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 VIII. TERMINATION
8. 1. This Agreement shall terminate:
(a) at the option of any party upon six months advance
written notice to the other parties; or
(b) at the option of the Company if shares of any Series are
not reasonably 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, said termination to be
effective ten days after receipt of notice unless the Fund makes available
a sufficient number of Fund shares to meet the requirements of the
Contracts within said ten-day period; or
(c) at the option of the Distributor upon institution of
formal proceedings against the Company by the NASD, or upon institution of
formal proceedings against the Distributor or the Funds by 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 any Fund shares, or an expected or anticipated
ruling, judgment or
10
<PAGE>
outcome which would, in the Distributor's reasonable judgment, materially
impair the Company's ability to meet and perform the Company's obligations
and duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Distributor by the NASD, or upon institution of
formal proceedings against the Distributor or the Funds by the SEC, or any
state securities or insurance commission or any other regulatory body; or
(e) at the option of the Company upon ten days advance
written notice to the Distributor if any 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 counsel satisfactory to such Fund that such Fund may fail
to so qualify; or
(f) at the option of Distributor upon thirty days advance
written notice to the Company, if the Distributor 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 any of the Funds or the Distributor; or
(g) at the option of the Company upon thirty days advance
written notice to the Distributor, if the Company shall determine, in its
sole judgment exercised in good faith, that any of the Funds or the
Distributor shall have been the subject of material adverse change which is
likely to have a material adverse impact upon the business and operations
of the Company.
8.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 8. 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:
(a) In the event that any termination is based upon the
provisions of Section 8. 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 8. 1 (c) or 8. 1 (d) of this Agreement, such prior
written notice shall be given at least ninety (90) days before the
effective date of termination.
11
<PAGE>
8.3. Effect of Termination. Notwithstanding any termination of this
Agreement pursuant to Section 8.1 of this Agreement, the Distributor subject to
Section 1.2, at the option of the Company, shall continue to make available
additional Fund shares, 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.
ARTICLE IX. 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 or delete Funds. The provisions of this Agreement shall be equally
applicable to each such Contracts and Funds.
ARTICLE X. 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 Company:
Lincoln National Life Insurance Company
1300 South Clinton Street
Fort Wayne, IN 46809
Attn: Pension Product Management
If to the Distributor:
Delaware Distributors, L.P.
1818 Market Street
Philadelphia, PA 19103
Attn: Ms. Minette van Noppen
12
<PAGE>
ARTICLE XI. MISCELLANEOUS
11.1. 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.
11.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
11.3. 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.
11. 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.
11.5. 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.
11.6. In each instance in this Agreement where an action, duty,
responsibility or undertaking is to be performed by the Fund, the Distributor
shall use its best efforts to cause the Fund to perform such action, duty,
responsibility or undertaking.
13
<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 LIFE INSURANCE COMPANY
(Company)
Date: By:
Name:
Title:
DELAWARE DISTRIBUTORS, LP
(Distributor)
By: Delaware Distributors, Inc.
Date: By:
14
<PAGE>
SCHEDULE I
Separate Accounts of Lincoln Life Insurance Company
Investing in the Fund
As of May 30, 1996
Lincoln National Life Insurance Company Separate Account 60
Lincoln National Life Insurance Company Separate Account 61
15
<PAGE>
SCHEDULE 2
Participating Funds
As of May 30, 1996
Delaware Group Global and International Funds, Inc.
Global Bond Series - Institutional Class
Delaware Group Decatur Fund, Inc.
Decatur Total Return Series - Institutional Class
16
<PAGE>
Formation of Separate Account 61
of
The Lincoln National Life Insurance Company
Pursuant to the authority given me by Resolution No. 93-18, dated May 13,
1993, of the Board of Directors of The Lincoln National Life Insurance Company
(the "Company"), I establish a separate account designated The Lincoln National
Life Insurance Company Separate Account 61 ("Account 61") as follows:
1. Account 61 is established to permit contractowners of certain group
annuity contracts (the "Contracts") issued by the Company to designate that
contributions to such Contracts be allocated in whole or in part to Account 61.
Account 61 is a separate investment account under Indiana insurance law.
2. The income, gains and losses from contributions allocated to Account 61
shall, in accordance with the Contracts, be credited to or charged against such
Account 61 without regard to other income, gains, or losses of the Company.
3. The fundamental investment policy of Account 61 shall be to invest and
reinvest contributions allocated to Account 61 in shares of Delaware Group
Decatur Fund, Decatur Total Return Series, a mutual fund. The Decatur Total
Return Series invests primarily in equity securities of U.S. companies.
4. Investments in Account 61 are required to conform at the time they are
made to the categories, conditions, limitations and standards set forth in the
Indiana insurance law (I.C. 27-1-12-2.5), and those limitations and standards
set forth in Prohibited Transaction Exemption 78-19, (redesignated PTE 90-1) 43
FED. REG. 59915 (Dec. 22, 1978), and all other applicable laws and regulations
relating to the investment of qualified pension plan assets in insurance company
separate accounts.
The effective date of Account 61 shall be June 1, 1996, regardless of the
date on which this document was signed.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By
Jon A. Boscia, President
The Lincoln National Life Insurance Company
Dated:
<PAGE>
Formation of Separate Account 60
of
The Lincoln National Life Insurance Company
Pursuant to the authority given me by Resolution No. 93-18, dated May 13,
1993, of the Board of Directors of The Lincoln National Life Insurance Company
(the "Company"), I establish a separate account designated The Lincoln National
Life Insurance Company Separate Account 60 ("Account 60") as follows:
1. Account 60 is established to permit contractowners of certain group
annuity contracts (the "Contracts") issued by the Company to designate that
contributions to such Contracts be allocated in whole or in part to Account 60.
Account 60 is a separate investment account under Indiana insurance law.
2. The income, gains and losses from contributions allocated to Account
60 shall, in accordance with the Contracts, be credited to or charged against
such Account 60 without regard to other income, gains, or losses of the Company.
3. The fundamental investment policy of Account 60 shall be to invest and
reinvest contributions allocated to Account 60 in shares of Delaware Group
Global and International Funds, Global Bond Series, a mutual fund. The Global
Bond Series invests primarily in debt securities of domestic and foreign
governments and corporations.
4. Investments in Account 60 are required to conform at the time they are
made to the categories, conditions, limitations and standards set forth in the
Indiana insurance law (I.C. 27-1-12-2.5), and those limitations and standards
set forth in Prohibited Transaction Exemption 78-19, (redesignated PTE 90-1) 43
FED. REG. 59915 (Dec. 22, 1978), and all other applicable laws and regulations
relating to the investment of qualified pension plan assets in insurance company
separate accounts.
The effective date of Account 60 shall be June 1, 1996, regardless of the
date on which this document was signed.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
By
Jon A. Boscia, President
The Lincoln National Life Insurance Company
Dated:
<PAGE>
PARTICIPATION AGREEMENT
AMONG
DELAWARE GROUP PREMIUM FUND, INC.
AND
LINCOLN NATIONAL LIFE INSURANCE CO.
AND
DELAWARE DISTRIBUTORS, LP
THIS AGREEMENT, made and entered into this Ist day of May, 1996, by and
between DELAWARE GROUP PREMIUM FUND, INC., a corporation organized under the
laws of Maryland (the "Fund"), and LINCOLN NATIONAL LIFE INSURANCE CO., an
Indiana insurance corporation (the "Company"), on its own behalf and on behalf
of each separate account of the Company named in Schedule I to this Agreement as
in effect at the time this Agreement is executed and such other separate
accounts that may be added to Schedule I from time to time in accordance with
the provisions of Article XI of this Agreement (each such account referred to as
the "Account"), and DELAWARE DISTRIBUTORS, LP, a Delaware limited partnership
(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 common stock of the Fund (the "Fund shares") consists of
separate series ("Series") issuing separate classes of shares ("Series shares"),
each such class representing an interest in a particular managed portfolio of
securities and other assets-, 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. 811-5162) under the Investment Company Act of 1940,
as amended (the " 1940 Act"), and the Fund shares (File No. 3 3 -143 63) under
the Securities Act of 1933, as amended (the "1933 Act"); and
WHEREAS, the Company has filed a registration statement with the SEC to
register under the 1933 Act certain variable annuity contracts described in
Schedule 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
1
<PAGE>
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
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, Delaware Management Company, Inc. (the "Investment Manager") is
registered as an investment adviser under the 1940 Act and any applicable state
securities laws and serves as an investment manager to the Fund pursuant to an
agreement; and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase Series shares on behalf of each
Account to fund its Contracts and the Distributor is authorized to sell such
Series 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 Series 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 the shares of its Series 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 such net asset
value by 6:00 p.m., E.S.T., on each such Business Day. Notwithstanding any other
2
<PAGE>
provision in this Agreement to the contrary, the Board of Directors of the Fund
(the "Fund Board") may suspend or terminate the offering of Fund shares of any
Series, 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 of any Series (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 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 Series to the extent permitted by the
1940 Act, any rules, regulations or orders thereunder, or the then currently
effective Fund Prospectus.
1.4.
(a) For purposes of Sections 1. 1, 1.2 and 1.3, the Company shall be
the agent of the Fund for the limited purpose of receiving redemption and
purchase requests from 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 11:00 a.m., E.S.T. on the next following Business Day. For
purposes of this Agreement, "Business Day" shall mean any day on which the
New York Stock exchange is open for trading.
(b) The Company shall pay for shares of each Series on the same day
that it places an order with the Fund to purchase those Series shares for
an Account. Payment for Series 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 Series shares. If Federal Funds are not received on
time, such funds will be invested, and Series shares purchased thereby will
be issued, as soon as practicable.
(c) Payment for Series shares redeemed by the Account or the Company
will be made in Federal Funds transmitted to the Company by wire on the day
the Fund is notified of the redemption order of Series shares, except that
the Fund reserves the right to delay payment of redemption proceeds, but in
no event may such payment be delayed longer than the period permitted under
Section 22(e) of the 1940 Act. Neither the Fund nor the Distributor shall
bear any responsibility whatsoever for the proper disbursement or crediting
of redemption proceeds; the Company alone shall be responsible for such
action.
3
<PAGE>
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
Series 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
Series shares in the form of additional shares of that Series. 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 Series 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 for each Series available to the Company by 6 p.m., E.S.T. each Business
Day, and in any event, as soon as reasonably practicable after the net asset
value per share for such Series is calculated, and shall calculate such net
asset value in accordance with the then currently effective Fund Prospectus.
Neither the Fund, any Series, the Distributor, nor the Investment Manager nor
any of their affiliates shall be liable for any information provided to the
Company pursuant to this Agreement which information is based on incorrect
information supplied by the Company to the Fund, the Distributor or the
Investment Manager.
1.8.
(a) The Company may withdraw the Account's investment in the Fund
or a Series only: (I) necessary to facilitate Contract owner requests; (ii)
upon a determination by a majority of the Fund Board, or a majority of
disinterested Fund Board members, that an irreconcilable material conflict
exists among the interests of (x) any Product Owners or (y) the interests
of the Participating Insurance Companies investing in the Fund; (iii) upon
requisite vote of the Contractowners having an interest in the affected
Series to substitute the shares of another investment company for Series
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.
4
<PAGE>
(c) The Company shall not, without prior notice to the Distributor
(unless otherwise required by applicable law), take any action to operate
the 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 complying with Article VII of this Agreement is in
effect to govern such sales. No Fund shares of any Series will be sold to the
general public.
ARTICLE H. 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 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 and the Distributor immediately upon having a reasonable basis
5
<PAGE>
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 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 Distributor, on behalf of the Investment Manager, represents and
warrants that the Investment Manager is registered as an investment adviser
under the Investment Advisers Act of 1940 and is in compliance with applicable
federal and state securities laws.
2.9. The Fund represents and warrants that it has and maintains a fidelity
bond in accordance with Rule 17g- I under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS, SALES MATERIAL AND OTHER
INFORMATION
3. 1. The Distributor shall provide the Company with as many copies of the
current Fund Prospectus as the Company may reasonably request. If requested by
the Company in lieu thereof, the Fund at its expense shall provide to the
Company a camera-ready copy of the current Fund Prospectus suitable for printing
and other assistance as is reasonably necessary in order for the Company to have
a new Contracts Prospectus printed together with the Fund Prospectus in one
document. See Article V for a detailed explanation of the responsibility for the
cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Distributor (or, in the Fund's
discretion, the Fund Prospectus shall state that such Statement is available
from the Fund), and the Distributor (or the Fund) shall provide such Statement
free of charge to the Company and to any outstanding or prospective Contract
owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other communications to
shareholders (except proxy material), in each case in a form suitable for
printing. The Fund shall be responsible for the costs of printing and
distributing these materials to Contract owners.
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(b) The Fund at its expense shall be responsible for preparing,
printing and distributing its proxy material. The Company will provide the
appropriate Contractowner names and addresses to the Fund for this purpose.
3.4. The Company shall furnish each piece of sales literature or other
promotional material in which the Fund or the Investment Manager is named to the
Fund or the Distributor prior to its use. No such material shall be used, except
with the prior written permission of the Fund or the Distributor. The Fund and
the Distributor agree to respond to any request for approval on a prompt and
timely basis. Failure of the Fund to respond within 10 days of the request by
the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund or the Distributor.
3.5. The Company shall not give any information or make any representations
or statements on behalf of the Fund or concerning the Fund other than the
information or representations contained in the Fund Registration Statement or
Fund Prospectus, as such Registration Statement and Prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or by
the Distributor, except with the prior written permission of the Fund or the
Distributor. The Fund agrees to respond to any request for permission on a
prompt and timely basis. If neither the Fund nor the Distributor responds within
10 days of a request by the Company, then the Company shall be relieved of the
obligation to obtain the prior written permission of the Fund.
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, 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 or the
Distributor, then the Fund and the Distributor are relieved of the obligation to
obtain the prior written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy of all
Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, promptly 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, promptly after the filing of such document
with the SEC or other regulatory authorities.
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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 1111, 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 (Lie., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports and proxy materials, and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the 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 of each Series attributable to Contract owners
in accordance with structions or proxies received in timely fashion from such
Contract owners;
(b) vote Fund shares of each Series 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 of each Series 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
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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- I under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contract owners. (If for this purpose the
Company prints the Fund Prospectuses and SAIs in a booklet containing disclosure
for the Contracts and for underlying funds other than those of the Fund, then
the Fund shall pay only its proportionate share of the total cost to distribute
the booklet to existing Contract owners.)
The Company is responsible for the cost of printing and distributing Fund
prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contract owners. 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- I to finance distribution expenses.
(a) The Company shall amend Schedule 3 when appropriate in order to
inform the Fund of any applicable state-mandated investment restrictions with
which the Fund must comply.
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(b) Should the Fund or the Distributor become aware of any
restrictions which may be appropriate for inclusion in Schedule 3, the Company
shall be informed immediately of the substance of those restrictions.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Company has reviewed a copy of the order (the "Mixed and Shared
Funding Order") dated November 2, 1987 of the Securities and Exchange Commission
under Section 6 of the Act and, in particular, has reviewed the conditions to
the relief set forth in the related Notice As set forth therein, the Company
agrees to report to the Board of Directors of the Fund (the "Board") any
potential or existing conflicts between the interests of Product Owners of all
separate accounts investing in the Fund, and to assist the Board in carrying out
its responsibilities under the conditions of the Mixed and Shared Funding Order
by providing all information reasonably necessary for the Board to consider any
issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested Board
Members, determines that a material irreconcilable conflict exists, the Board
shall give prompt notice to all Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to the Company and
a reasonable opportunity for the Company to appear before it and present its
case, determines that the Company is responsible for said conflict, and if the
Company agrees with that determination, the Company shall, at its sole cost and
expense, take whatever steps are necessary to remedy the irreconcilable material
conflict. These steps could include: (a) withdrawing the assets allocable to
some or all of the affected Accounts from the Fund or any Series and reinvesting
such assets in a different investment vehicle, including another Series of the
Fund, or submitting the question of whether such segregation should be
implemented to a vote of all affected Contractowners and, as appropriate,
segregating the assets of any particular group (i.e., variable annuity
Contractowners, variable life insurance policyowners, or variable Contractowners
of one or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Contractowners the option of making
such a change; and (b) establishing a new registered mutual fund or management
separate account, or taking such other action as is necessary to remedy or
eliminate the irreconcilable material conflict.
(b) If the Company disagrees with the Board's determination, the
Company shall file a written protest with the Board, reserving its right to
dispute the determination as between just the Company and the Fund. After
reserving that right the Company, although disagreeing with the Board that it
(the Company) was responsible for the conflict, shall take the necessary steps,
under protest, to remedy the conflict, substantially in accordance with
paragraph (a) just above, for the protection of Contractowners.
(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 controversy.
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If the matter has not been amicably resolved within 60 days from the date
of the Company's notice of its intent to press the dispute, then before either
party shall undertake to litigate the dispute it shall be submitted to
non-binding arbitration conducted expeditiously in accordance with the CPR Rules
for Non-Administered Arbitration of Business Disputes, by a sole arbitrator;
PROVIDED, HOWEVER, that if one party has requested the other party to seek an
amicable resolution and the other party has failed to participate, the
requesting party may initiate arbitration before expiration of the 60-day period
set out just above.
If within 45 days of the commencement of the process to select an
arbitrator the parties cannot agree upon the arbitrator, then he or she will be
selected from the CPR Panels of Neutrals. The arbitration shall be governed by
the United States Arbitration Act, 9 U.S.C. Sec. 1-16. The place of arbitration
shall be Fort Wayne, Indiana. The Arbitrator is not empowered to award damages
in excess of compensatory damages.
(d) If the Board shall determine that the Fund or another insurer was
responsible for the conflict, then the Board shall notify the Company
immediately of that determination. The Fund shall assure the Company that it
(the Fund) or that other insurer, as applicable, shall, at its sole cost and
expense, take whatever steps are necessary to eliminate the conflict.
7.3. If a material irreconcilable conflict arises because of the Company's
decision to disregard Contract owner 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 Subject to the terms of Section 7.2 above, the Company shall carry out
the responsibility to take remedial action in the event of a Board determination
of an irreconcilable material conflict with a view only to the interests of
Contract Owners.
7.5. For purposes of this Article, a majority of the disinterested members
of the Board shall determine whether or not any proposed action adequately
remedies any irreconcilable conflict, but in no event will the Fund be required
to establish a new funding medium for any variable contract, nor will the
Company be required to establish a new funding medium for any Contract if an
offer to do so has been declined by a vote of a majority of affected
Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify and
hold harmless the Fund, the Distributor and each person who controls or is
associated with the Fund (other than another Participating Insurance Company) or
the Distributor within the meaning of such terms under the federal securities
laws and any officer, trustee, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Contracts
Registration Statement, Contracts Prospectus, sales literature or other
promotional material for the Contracts or the Contracts themselves(or any
amendment or supplement to any of the foregoing(, or arise out of or are
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<PAGE>
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 Distributor (or a person
authorized in writing to do so on behalf of the Fund or the Distributor)
for use in the Contracts Registration Statement, Contracts Prospectus or in
the Contracts or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the Contracts or Fund
shares; or
(b) arise out of or are based upon any untrue statement or alleged
untrue statement of a material fact by or on behalf of the Company (other
than statements or representations contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other 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 fight 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 DISTRIBUTOR. The Distributor agrees to
indemnify and hold harmless the Company and each person who controls or is
associated with the Company within the meaning of such terms under the federal
securities laws and any officer, director, employee or agent of the foregoing,
against any and all losses, claims, damages or liabilities, joint or several
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amounts paid in settlement of, any action, suit or
proceeding or any claim asserted), to which they or any of them may become
subject under any statute or regulation, at common law or otherwise, insofar as
such losses, claims, damages or liabilities:
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<PAGE>
(a) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund Registration
Statement, Fund Prospectus (or any amendment or supplement thereto) or
sales literature or other promotional material of the Fund, or arise out of
or are based upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances in which
they were made; provided that this obligation to indemnify shall not apply
if such statement or omission or alleged statement or alleged omission was
made in reliance upon and in conformity with information furnished in
writing by the Company to the Fund or the Distributor for use in the Fund
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 Distributor or the Fund
(other than statements or representations contained in the Fund
Registration Statement, Fund Prospectus or sales literature or other
promotional material of the Fund not supplied by the Distributor or the
Fund or persons under their control) or wrongful conduct of the Distributor
or persons under its control with respect to the sale or distribution of
the Contracts or Fund 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 fight
of the circumstances in which they were made, if such statement or omission
was made in reliance upon information furnished in writing by the
Distributor or the Fund to the Company (or a person authorized in writing
to do so on behalf of the Fund or the Distributor); or
(d) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this Agreement
(including, but not by way of limitation, a failure, whether unintentional
or in good faith or otherwise: (i) to comply with the diversification
requirements specified in Article VI of this Agreement; and (ii) to provide
the Company with accurate information sufficient for it to calculate its
accumulation and/or annuity unit values in timely fashion as required by
law and by the Contracts Prospectuses); or
(e) arise out of any material breach by the Distributor or the Fund of
this Agreement.
This indemnification will be in addition to any liability which the Distributor
may otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, 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
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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
(b) at the option of the Company if shares of any Series 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, or an expected or anticipated ruling, judgment or outcome which
would, in the Fund's reasonable
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judgment, materially impair the Company's ability to perform the
Company's obligations and duties hereunder; or
(d) at the option of the Company upon institution of formal
proceedings against the Fund, the Distributor, the Investment Manager or
any Sub-Investment Manager, by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body regarding the duties
of the Fund or the Distributor under this Agreement, or an expected or
anticipated ruling, judgment or outcome which would, in the Company's
reasonable judgment, materially impair the Fund's or the Distributor's
ability to perform Fund's or Distributor's obligations and duties
hereunder; or
(e) at the option of the Company upon institution of formal
proceedings against the Investment Manager or Sub-investment Manager by the
NASD, the SEC, or any state securities or insurance commission or any other
regulatory body which would, in the good faith opinion of the Company,
result in material harm to the Accounts, the Company, or Contractowners.
(f) upon requisite vote of the Contract owners having an interest in
the affected Series (unless otherwise required by applicable law) and
written approval of the Company, to substitute the shares of another
investment company for the corresponding Series shares of the Fund in
accordance with the terms of the Contracts; or
(g) at the option of the Fund in the event any of the Contracts are
not registered, issued or sold in accordance with applicable Federal and/or
state law; or
(h) at the option of the Company or the Fund upon a determination by
a majority of the Fund Board, or a majority of disinterested Fund Board
members, that an irreconcilable material conflict exists among the
interests of (i) any Product owners or (ii) the interests of the
Participating Insurance Companies investing in the Fund; or
(i) at the option of the Company if the Fund ceases to qualify as a
Regulated Investment Company under Subchapter M of the Code, or under any
successor or similar provision, or if the Company reasonably believes,
based on an opinion of its counsel, that the Fund may fail to so qualify;
or
(j) at the option of the Company if the Fund fails to meet the
diversification requirements specified in Section 817(h) of the Code and
any regulations thereunder; or
(k) at the option of the Fund if the Contracts cease to qualify as
annuity contracts or life insurance policies, as applicable, under the
Code, or if the Fund reasonably believes that the Contracts may fail to so
qualify; or
(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
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<PAGE>
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:
(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
promptly notify the Company whether
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the Distributor and the Fund will continue to make Fund shares available
after such termination. 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 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.
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 fife 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:
Delaware Group Premium Fund, Inc.
Ten Penn Center Plaza
Philadelphia, PA 19103
Attn: Christopher Price
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Distributor:
Delaware Distributors, Inc.
Ten Penn Center Plaza
Philadelphia, PA 19103
Attn: Keith E. Mitchell
17
<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.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be
executed in its name and behalf by its duly authorized officer on the date
specified below.
DELAWARE GROUP PREMIUM FUND, INC. (Fund)
Date: By:
Name:
Title:
LINCOLN NATIONAL LIFE INSURANCE CO. (Company)
Date: By:
Name:
Title:
DELAWARE DISTRIBUTORS, LP (Distributor)
Date: By:
Name:
Title:
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.
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.
DELAWARE GROUP PREMIUM FUND, INC. (Fund)
Date: By:
Name:
Title:
LINCOLN NATIONAL LIFE INSURANCE CO. (Company)
Date: By:
Name:
Title:
DELAWARE DISTRIBUTORS, LP (Distributor)
Date: By:
Name:
Title:
19
<PAGE>
SCHEDULE I
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of May 1, 1996
Lincoln National Variable Annuity Account C
Lincoln Life Flexible Premium Variable Life Account K
20
<PAGE>
SCHEDULE 2
Variable Annuity Contracts
and Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule I
As of May 1, 1996
Multi Fund Variable Annuity Contracts
Multi Fund Variable Life Insurance Contracts
21
<PAGE>
SCHEDULE 3
State-mandated Investment Restrictions
Applicable to the Fund
As of May 1, 1996
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.
22
<PAGE>
AMENDMENT TO SCHEDULE 1
Separate Accounts of Lincoln National Life Insurance Company
Investing in the Fund
As of May 1, 2000
Lincoln National Variable Annuity Account C
Lincoln Life Flexible Premium Variable Life Account K
Lincoln National Variable Annuity Account L
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Variable Annuity Account 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 Life Insurance Company Separate Account 53
<PAGE>
AMENDMENT TO SCHEDULE 2
Variable Annuity Contracts and
Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of May 1, 2000
Multi Fund-Registered Trademark- Individual Variable Annuity Contract
(Registered and non-registered)
Multi Fund-Registered Trademark- Variable Life Insurance Contract
Group Multi Fund-Registered Trademark- Variable Annuity Contract
Delaware-Lincoln New York ChoicePlus Variable Annuity Contract
VUL I Variable Universal Life Insurance Contract
Lincoln VUL Variable Universal Life Insurance Contract
Lincoln VUL(DB) Variable Universal Life Insurance Contract
eAnnuity(TM) Variable Annuity Contract
SVUL I Variable Universal Life Insurance Contract
Lincoln SVUL Variable Universal Life Insurance Contract
Lincoln SVUL II Variable Universal Life Insurance Contract
Lincoln CVUL Variable Universal Life Insurance Contract
Lincoln CVUL Series III Variable Universal Life Insurance Contract
Group Variable Annuity (GVA) I, II, III
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.
DELAWARE GROUP PREMIUM FUND (Fund)
Date: By:
---------------- -----------------------
Name:
Title:
LINCOLN NATIONAL LIFE INSURANCE COMPANY
Date: By:
---------------- -----------------------
Steven M. Kluever
Second Vice President
DELAWARE DISTRIBUTORS, LP (Distributor), by
DELAWARE DISTRIBUTORS, INC., General Partner
Date: By:
---------------- -----------------------
Name:
Title:
<PAGE>
AMENDMENT TO SCHEDULE 2
Variable Annuity Contracts and
Variable Life Insurance Policies
Supported by Separate Accounts
Listed on Schedule 1
As of October 15, 1999
Multi Fund-Registered Trademark- Individual Variable Annuity Contracts
(Registered and non-registered)
Multi Fund-Registered Trademark- Variable Life Insurance Contracts
Group Multi Fund-Registered Trademark- Variable Annuity Contracts
Delaware-Lincoln ChoicePlus Variable Annuity Contracts
VUL I Variable Universal Life Insurance Contracts
Lincoln VUL Variable Universal Life Insurance Contracts
eAnnuity(TM) Variable Annuity Contracts
SVUL I Variable Universal Life Insurance Contracts
Lincoln SVUL Variable Universal Life Insurance Contracts
Lincoln CVUL Variable Universal Life Insurance Contracts
Lincoln VUL(DB) Variable Universal Life Insurance Contracts
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule 2 to be executed in its name and behalf by its duly authorized officer
on the date specified below.
DELAWARE GROUP PREMIUM FUND, INC. (Fund)
Date: By:
-------------------- -----------------------------
LINCOLN NATIONAL LIFE INSURANCE COMPANY
Date: By:
-------------------- -----------------------------
Steven M. Kluever
Second Vice President
DELAWARE DISTRIBUTORS, LP (Distributor), by
DELAWARE DISTRIBUTORS, INC., General Partner
Date: By:
-------------------- -----------------------------
<PAGE>
AMENDMENT TO SCHEDULE 1
Separate Accounts of Lincoln Life Insurance Company
Investing in the Fund
As of May 1, 1999
Lincoln National Variable Annuity Account C
Lincoln Life Flexible Premium Variable Life Account K
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Variable Annuity Account N
Lincoln Life Flexible Premium Variable Life Account R
Lincoln Life Flexible Premium Variable Life Account S
Lincoln National Life Insurance Company Separate Account 53
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule 1 to be executed in its name and behalf by its duly authorized officer
on the date specified below.
DELAWARE GROUP PREMIUM FUND, INC (Fund)
Date: May 26, 1999 By:
------------------- --------------------------------
Jeffrey L. Nick
Chairman/President/Chief Executive
Officer
LINCOLN NATIONAL LIFE INSURANCE COMPANY
Date: June 4, 1999 By:
------------------- --------------------------------
Kelly D. Clevenger
Vice President
DELAWARE DISTRIBUTORS, LP (Distributor), by
DELAWARE DISTRIBUTORS, INC., General Partner
Date: May 26, 1999 By:
------------------- --------------------------------
Bruce D. Barton
President and Chief Executive Officer
--------------------------------
--------------------------------
<PAGE>
AMENDMENT TO SCHEDULE 2
Variable Annuity Contracts and
Variable Life Insurance Policies
Support by Separate Accounts
Listed on Schedule 1
As of May 1, 1999
Multi-Fund -Registered Trademark- Individual Variable Annuity Contracts
(Registered and Non-Registered)
Multi-Fund -Registered Trademark- Variable Life Insurance Contracts
Group Multi-Fund -Registered Trademark- Variable Annuity Contracts
Delaware-Lincoln Accru ChoicePlusVariable Annuity Contracts
VUL I Variable Universal Life Insurance Contracts
Lincoln VUL Variable Universal Life Insurance Contracts
e-Annuity tm Variable Annuity Contracts
SVUL I Variable Universal Life Insurance Contracts
Lincoln SVUL Variable Universal Life Insurance Contracts
CVUL Variable Universal Life Insurance Contracts
<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 Agreement, the
applicable provisions of the 1940 Act and the then currently effective Fund
Prospectus. Notwithstanding the foregoing, the Fund may delay redemption of Fund
shares to the
2
<PAGE>
extent permitted by the 1940 Act, any rules, regulations or orders thereunder,
or the then currently effective Fund Prospectus.
1.4. (a) For purposes of Sections 1.1, 1.2 and 1.3, the
Company shall be the agent of the Fund for the limited purpose
of receiving redemption and purchase requests from the Account
(but not from the general account of the Company), and receipt
on any Business Day by the Company as such limited agent of
the Fund prior to the time prescribed in the current Fund
Prospectus (which as of the date of execution of this
Agreement is 4 p.m., E.S.T.) shall constitute receipt by the
Fund on that same Business Day, provided that the Fund
receives notice of such redemption or purchase request by 9:00
a.m., E.S.T. on the next following Business Day. For purposes
of this Agreement, "Business Day" shall mean any day on which
the New York Stock exchange is open for trading.
(b) The Company shall pay for the shares on the same
day that it places an order with the Fund to purchase those
Fund shares for an Account. Payment for Fund shares will be
made by the Account or the Company in Federal Funds
transmitted to the Fund by wire to be received by 11:00 a.m.,
E.S.T. on the day the Fund is properly notified of the
purchase order for shares. The Fund will confirm receipt of
each trade and these confirmations will be received by the
Company via Fax or Email by 3:00 p.m. E.S.T. If Federal Funds
are not received on time, such funds will be invested, and
shares purchased thereby will be issued, as soon as
practicable.
(c) Payment for shares redeemed by the Account or the
Company will be made in Federal Funds transmitted to the
Company by wire on the same day the Fund is notified of the
redemption order of shares, except that the Fund reserves the
right to delay payment of redemption proceeds, but in no event
may such payment be delayed longer than the period permitted
under Section 22(e) of the 1940 Act. The Fund shall not bear
any responsibility whatsoever for the proper disbursement or
crediting of redemption proceeds if securities must be
redeemed; the Company alone shall be responsible for such
action.
1.5. Issuance and transfer of Fund shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate ledger
for the Account or the appropriate subaccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable
to the Company of any income dividends or capital gain distributions payable on
any shares. The Company, on its behalf and on behalf of the Account, hereby
elects to receive all such dividends and distributions as are payable on any
shares in the form of additional shares of that Fund. The Company reserves the
right, on its behalf and on behalf of the Account, to revoke this election and
to receive all such dividends in cash. The Fund shall notify the Company of the
number of shares so issued as payment of such dividends and distributions.
3
<PAGE>
1.7. The Fund shall use its best efforts to make the net asset value
per share available to the Company by 7:00 p.m., E.S.T. each Business Day, and
in any event, as soon as reasonably practicable after the net asset value per
share is calculated, and shall calculate such net asset value in accordance with
the then currently effective Fund Prospectus. The Fund shall not be liable for
any information provided to the Company pursuant to this Agreement which
information is based on incorrect information supplied by the Company to the
Fund.
1.8. (a) The Company may withdraw the Account's investment in
the Fund only: (i) as necessary to facilitate Contract owner
requests; (ii) upon a determination by a majority of the Fund
Board, or a majority of disinterested Fund Board members, that
an irreconcilable material conflict exists among the interests
of (x) any Product Owners or (y) the interests of the
Participating Insurance Companies investing in the Fund; (iii)
upon requisite vote of the Contractowners having an interest
in the Fund to substitute the shares of another investment
company for shares in accordance with the terms of the
Contracts; (iv) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general
application; or (v) at the Company's sole discretion, pursuant
to an order of the SEC under Section 26(b) of the 1940 Act.
(b) The parties hereto acknowledge that the arrangement
contemplated by this Agreement is not exclusive and that the
Fund shares may be sold to other insurance companies (subject
to Section 1.9 hereof) and the cash value of the Contracts may
be invested in other investment companies.
(c) The Company shall not, without prior notice to the Fund
(unless otherwise required by applicable law), take any action
to operate the Accounts as management investment companies under
the 1940 Act.
1.9. The Fund agrees that Fund shares will be sold only to
Participating Insurance Companies and their separate accounts. The Fund will
not sell Fund shares to any insurance company or separate account unless an
agreement complying with Article VII of this Agreement is in effect to govern
such sales. No Fund shares will be sold to the general public.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the issuance
thereof, (b) that the Contracts will be issued in compliance in all material
respects with all applicable Federal and state laws and (c) that the Company
will require of every person distributing the Contracts that the Contracts be
offered and sold in compliance in all material respects with all applicable
Federal and state laws. The Company further represents and warrants that it is
an insurance company duly organized and validly existing under applicable law
and that it has legally and validly authorized each Account as a separate
account under Section 27-1-5-1 of the Indiana Insurance Code, and has registered
or,
4
<PAGE>
prior to the issuance of any Contracts, will register each Account (unless
exempt therefrom) as a unit investment trust in accordance with the provisions
of the 1940 Act to serve as a separate account for its Contracts, and that it
will maintain such registrations for so long as any Contracts issued under them
are outstanding.
2.2. The Fund represents and warrants that Fund shares sold pursuant
to this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for so long as the Fund shares are sold. The Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
2.3. The Fund represents and warrants that it currently qualifies as
a Regulated Investment Company under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"). The Fund further represents and warrants that
it will make every effort to continue to qualify and to maintain such
qualification (under Subchapter M or any successor or similar provision), and
that it will notify the Company immediately upon having a reasonable basis for
believing that it has ceased to so qualify or that it might not so qualify in
the future.
2.4. The Fund represents and warrants that it will comply with
Section 817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and at
the time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees
and expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement; and with any state- mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Fund, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Fund shall provide the Company with as many copies of the
current Fund
5
<PAGE>
Prospectus as the Company may reasonably request. If requested by the Company in
lieu thereof, the Fund at its expense shall provide to the Company a
camera-ready copy, and electronic version, of the current Fund Prospectus
suitable for printing and other assistance as is reasonably necessary in order
for the Company to have a new Contracts Prospectus printed together with the
Fund Prospectus in one document. See Article V for a detailed explanation of the
responsibility for the cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of
Additional Information for the Fund is available from the Fund and the Fund
shall provide such Statement free of charge to the Company and to any
outstanding or prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company a
camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in
each case in a form suitable for printing, as determined by
the Company. The Fund shall be responsible for the costs of
printing and distributing these materials to Contract owners.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material. The
Company will provide the appropriate Contractowner names and
addresses to the Fund for this purpose.
3.4. The Company shall furnish to the Fund, prior to its use, each
piece of sales literature or other promotional material in which the Fund is
named. No such material shall be used, except with the prior written permission
of the Fund. The Fund agrees to respond to any request for approval on a prompt
and timely basis. Failure of the Fund to respond within 10 days of the request
by the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund other
than the information or representations contained in the Fund Registration
Statement or Fund Prospectus, as such Registration Statement and Prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund, except with the prior written permission of the Fund. The Fund agrees
to respond to any request for permission on a prompt and timely basis. If the
Fund does not respond within 10 days of a request by the Company, then the
Company shall be relieved of the obligation to obtain the prior written
permission of the Fund.
3.6. The Fund shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account
or the Contracts other than the information or representations contained in the
Contracts Registration Statement or Contracts Prospectus, as such Registration
Statement and Prospectus may be amended or supplemented from time to time, or in
published reports of the Account which are in the public domain or approved in
writing by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved in writing by the Company,
except with the prior written permission of the
6
<PAGE>
Company. The Company agrees to respond to any request for permission on a prompt
and timely basis. If the Company fails to respond within 10 days of a request by
the Fund, then the Fund is relieved of the obligation to obtain the prior
written permission of the Company.
3.7. The Fund will provide to the Company at least one complete copy
of all Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy
of all Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft
versions of any registration statements, prospectuses, statements of additional
information, reports, proxy statements, solicitations for voting instructions,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (I.E., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports and proxy materials, and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE IV. VOTING
4.1. Subject to applicable law and the requirements of Article VII,
the Fund shall solicit voting instructions from Contract owners;
7
<PAGE>
4.2. Subject to applicable law and the requirements of Article VII,
the Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with instructions or proxies received in timely
fashion from such Contract owners;
(b) vote Fund shares attributable to Contract owners
for which no instructions have been received in the same
proportion as Fund shares of such Series for which instructions
have been received in timely fashion; and
(c) vote Fund shares held by the Company on its own
behalf or on behalf of the Account that are not attributable to
Contract owners in the same proportion as Fund shares of such
Series for which instructions have been received in timely
fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Fund shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company decided to print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contractowners.)
The Company is responsible for the cost of printing and distributing
Fund prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section
817(h) of the
8
<PAGE>
Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements
under the 1933 Act and the Account's Registration Statement under the 1940 Act
from time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent required by applicable
securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the
1933 Act and the 1940 Act from time to time as required in order to effect for
so long as Fund shares are sold the continuous offering of Fund shares as
described in the then currently effective Fund Prospectus. The Fund shall
register and qualify Fund shares for sale to the extent required by applicable
securities laws of the various states.
6.4. The Company shall be responsible for assuring that any
prospectus offering a Contract that is a life insurance contract where it is
reasonably possible that such Contract would be deemed a "modified endowment
contract," as that term is defined in Section 7702A of the Code, will describe
the circumstances under which a Contract could be treated as a modified
endowment contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
6.6. (a) When appropriate in order to inform the Fund of any
applicable state-mandated investment restrictions with which the
Fund must comply, the Company shall arrange with the Fund to
amend Schedule 3, pursuant to the requirements of Article XI.
(b) Should the Fund become aware of any restrictions
which may be appropriate for inclusion in Schedule 3, the
Company shall be informed immediately of the substance of
those restrictions.
ARTICLE VlI. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of the
Fund (the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist the
Board in carrying out its responsibilities under Section 6e-3(T) of the 1940
Act, by providing all information reasonably necessary for the Board to consider
any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested
Board Members, determines that a material irreconcilable conflict exists, the
Board shall give prompt notice to all
9
<PAGE>
Participating Insurance Companies.
(a) If a majority of the whole Board, after notice to
the Company and a reasonable opportunity for the Company to
appear before it and present its case, determines that the
Company is responsible for said conflict, and if the Company
agrees with that determination, the Company shall, at its sole
cost and expense, take whatever steps are necessary to remedy
the material irreconcilable conflict. These steps could
include: (i) withdrawing the assets allocable to some or all
of the affected Accounts from the Fund and reinvesting such
assets in a different investment vehicle, or submitting the
question of whether such segregation should be implemented to
a vote of all affected Contractowners and, as appropriate,
segregating the assets of any particular group (i.e., variable
annuity Contractowners, variable life insurance policyowners,
or variable Contractowners of one or more Participating
Insurance Companies) that votes in favor of such segregation,
or offering to the affected Contractowners the option of
making such a change; and (ii) establishing a new registered
mutual fund or management separate account; or (iii) taking
such other action as is necessary to remedy or eliminate the
material irreconcilable conflict.
(b) If the Company disagrees with the Board's
determination, the Company shall file a written protest with the
Board, reserving its right to dispute the determination as
between just the Company and the Fund and to seek reimbursement
from the Fund for the reasonable costs and expenses of resolving
the conflict . After reserving that right the Company, although
disagreeing with the Board that it (the Company) was responsible
for the conflict, shall take the necessary steps, under protest,
to remedy the conflict, substantially in accordance with
paragraph (a) just above, for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45
days after the Board's determination the Company elects to press
the dispute, it shall so notify the Board in writing. The
parties shall then attempt to resolve the matter amicably
through negotiation by individuals from each party who are
authorized to settle the matter. If the matter has not been
amicably resolved within 60 days from the date of the Company's
notice of its intent to press the dispute, then before either
party shall undertake to litigate the dispute it shall be
submitted to non-binding arbitration conducted expeditiously in
accordance with the CPR Rules for Non-Administered Arbitration
of Business Disputes, by a sole arbitrator; PROVIDED, HOWEVER,
that if one party has requested the other party to seek an
amicable resolution and the other party has failed to
participate, the requesting party may initiate arbitration
before expiration of the 60-day period set out just above.
If within 45 days of the commencement of the process to
select an arbitrator the parties cannot agree upon the
arbitrator, then he or she will be selected from the CPR
Panels of Neutrals. The arbitration shall be governed by the
United States 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
10
<PAGE>
compensatory damages.
(d) If the Board shall determine that the Fund or
another was responsible for the conflict, then the Board shall
notify the Company immediately of that determination. The Fund
shall assure the Company that it (the Fund) or that other
Participating Insurance Company as applicable, shall, at its
sole cost and expense, take whatever steps are necessary to
eliminate the conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall
constitute a waiver of any right of action which the Company
may have against other Participating Insurance Companies for
reimbursement of all or part of the costs and expenses of
resolving the conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contractowner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company shall withdraw (without charge or penalty) the Account's investment in
the Fund, if the Fund so elects.
7.4. For purposes of this Article, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable conflict. However, in no event will the
Fund be required to establish a new funding medium for any variable contract,
nor will the Company be required to establish a new funding medium for any
Contract, if in either case an offer to do so has been declined by a vote of a
majority of affected Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless the Fund and each person who controls or is associated with
the Fund (other than another Participating Insurance Company) within the meaning
of such terms under the federal securities laws and any officer, trustee,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid with the prior written consent of the Company in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the Contracts Registration Statement, Contracts Prospectus,
sales literature or other promotional material for the Contracts
or the Contracts themselves (or any amendment or supplement to
any of 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
11
<PAGE>
statement or omission or such alleged statement or alleged
omission was made in reliance upon and in conformity with
information furnished in writing to the Company by the Fund (or
a person authorized in writing to do so on behalf of the Fund)
for use in the Contracts Registration Statement, Contracts
Prospectus or in the Contracts or sales literature (or any
amendment or supplement) or otherwise for use in connection
with the sale of the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact by or on behalf
of the Company (other than statements or representations
contained in the Fund Registration Statement, Fund Prospectus
or sales literature or other promotional material of the Fund
not supplied by the Company or persons under its control) or
wrongful conduct of the Company or persons under its control
with respect to the sale or distribution of the Contracts or
Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other
promotional material of the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances in which they were made, if such statement
or omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the
Company; or
(d) arise as a result of any failure by the Company to
provide the services and furnish the materials or to make any
payments under the terms of this Agreement; or
(e) arise out of any material breach by the Company of
this Agreement, including but not limited to any failure to
transmit a request for redemption or purchase of Fund shares
on a timely basis in accordance with the procedures set forth
in Article I; or
(f) arise as a result of the Company's providing the
Fund with inaccurate information, which causes the Fund to
calculate its Net Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify and
hold harmless the Company and each person who controls or is associated with the
Company within the meaning of such terms under the federal securities laws and
any officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
12
<PAGE>
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Fund in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in
the Fund Registration Statement, Fund Prospectus (or any
amendment or supplement thereto) or sales literature or other
promotional material of the Fund, or arise out of or are based
upon the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the
circumstances in which they were made; provided that this
obligation to indemnify shall not apply if such statement or
omission or alleged statement or alleged omission was made in
reliance upon and in conformity with information furnished in
writing by the Company to the Fund for use in the Fund
Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature for the Fund or
otherwise for use in connection with the sale of the Contracts
or Fund shares; or
(b) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact made by the Fund
(other than statements or representations contained in the Fund
Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the
Distributor or the Fund or persons under their control) or
wrongful conduct of the Fund or persons under its control with
respect to the sale or distribution of the Contracts or Fund
shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contract's
Registration Statement, Contracts Prospectus or sales literature
or other promotional material for the Contracts (or any
amendment or supplement thereto), or the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were
made, if such statement or omission was made in reliance upon
information furnished in writing by the Fund to the Company (or
a person authorized in writing to do so on behalf of the Fund);
or
(d) arise as a result of any failure by the Fund to
provide the services and furnish the materials under the terms
of this Agreement (including, but not by way of limitation, a
failure, whether unintentional or in good faith or otherwise:
(i) to comply with the diversification requirements specified
in Sections 2.4 and 6.1 in Article VI of this Agreement; and
(ii) to provide the Company with accurate information
sufficient for it to calculate its accumulation and/or annuity
unit values
13
<PAGE>
in timely fashion as required by law and by the Contracts
Prospectuses); or
(e) arise out of any material breach by the Fund of
this Agreement.
This indemnification will be in addition to any liability which the Fund may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled
to the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of law.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those
14
<PAGE>
statutes, rules and regulations as the SEC may grant, and the terms hereof shall
be limited, interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance
written notice to the other parties; or
(b) at the option of the Company if shares of the Fund
are not available to meet the requirements of the Contracts as
determined by the Company. Prompt notice of the election to
terminate for such cause shall be furnished by the Company.
Termination shall be effective ten days after the giving of
notice by the Company; or
(c) at the option of the Fund upon institution of
formal proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related
to the sale of the Contracts, the operation of the Account, the
administration of the Contracts or the purchase of Fund shares;
(d) at the option of the Company upon institution of
formal proceedings against the Fund, the investment advisor or
any sub-investment advisor, by the NASD, the SEC, or any state
securities or insurance commission or any other regulatory body;
or
(e) upon requisite vote of the Contract owners having
an interest in the Fund (unless otherwise required by applicable
law) and written approval of the Company, to substitute the
shares of another investment company for the corresponding
shares of the Fund in accordance with the terms of the
Contracts; or
(f) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance with
applicable Federal and/or state law; or
(g) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of
disinterested Fund Board members, that an irreconcilable
material conflict exists among the interests of (i) any Product
owners or (ii) the interests of the Participating Insurance
Companies investing in the Fund; or
(h) at the option of the Company if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of
the Code, or under any
15
<PAGE>
successor or similar provision, or if the Company reasonably
believes, based on an opinion of its counsel, that the Fund may
fail to so qualify; or
(i) at the option of the Company if the Fund fails to
meet the diversification requirements specified in Section
817(h) of the Code and any regulations thereunder; or
(j) at the option of the Fund if the Contracts cease
to qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes
that the Contracts may fail to so qualify; or
(k) at the option of the Fund if the Fund shall
determine, in its sole judgment exercised in good faith, that
either (1) the Company shall have suffered a material adverse
change in its business or financial condition; or (2) the
Company shall have been the subject of material adverse
publicity which is likely to have a material adverse impact
upon the business and operations of the Fund; or
(l) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that:
(1) the Fund shall have suffered a material adverse change in
its business or financial condition; or (2) the Fund shall have
been the subject of material adverse publicity which is likely
to have a material adverse impact upon the business and
operations of the Company; or
(m) automatically upon the assignment of this Agreement
(including, without limitation, any transfer of the Contracts
or the Accounts to another insurance company pursuant to an
assumption reinsurance agreement) unless the non-assigning party
consents thereto or unless this Agreement is assigned to an
affiliate of the Company or the Fund, as the case may be.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section
10.1, no termination of this Agreement shall be effective unless and until the
party terminating this Agreement gives prior written notice to the other party
of its intent to terminate, which notice shall set forth the basis for such
termination.
Furthermore:
(a) In the event that any termination is based upon the
provisions of Article VII or the provisions of Section 10.1(a)
of this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such
prior written notice shall be given at least ninety (90) days
before the effective date of termination, or sooner if required
by law or regulation.
10.3. EFFECT OF TERMINATION
16
<PAGE>
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement, the Fund will, at
the option of the Company, continue to make available additional
Fund shares for so long after the termination of this Agreement
as the Company desires, pursuant to the terms and conditions of
this Agreement as provided in paragraph (b) below, for all
Contracts in effect on the effective date of termination of this
Agreement (hereinafter referred to as "Existing Contracts").
Specifically, without limitation, if the Company so elects to
make additional Fund shares available, the owners of the
Existing Contracts or the Company, whichever shall have legal
authority to do so, shall be permitted to reallocate investments
in the Fund, redeem investments in the Fund and/or invest in the
Fund upon the making of additional purchase payments under the
Existing Contracts.
(b) If Fund shares continue to be made available after
such termination, the provisions of this Agreement shall remain
in effect except for Section 10.1(a) and thereafter either the
Fund or the Company may terminate the Agreement, as so continued
pursuant to this Section 10.3, upon prior written notice to the
other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Fund, need not be
for more than six months.
(c) The parties agree that this Section 10.3 shall not
apply to any termination made pursuant to Article VII, and the
effect of such Article VII termination shall be governed by the
provisions set forth or incorporated by reference therein.
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this
Agreement from time to time to reflect changes in or relating to the Contracts
and to add new classes of variable annuity contracts and variable life insurance
policies to be issued by the Company through new or existing Separate Accounts
investing in the Fund. The provisions of this Agreement shall be equally
applicable to each such separate account and each such class of contracts or
policies, unless the context otherwise requires. Any such amendment must be
signed by the parties and must bear an effective date for that amendment.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party(ies) at the address of such party(ies) set
forth below or at such other address as such party(ies) may from time to time
specify in writing to the other party.
If to the Fund:
Lincoln National Bond Fund, Inc.
17
<PAGE>
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Steven M. Kluever
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Amended and Restated Fund Participation Agreement, as of its
effective date, hereby supersedes any and all prior agreements to purchase
shares between Lincoln Life and the Fund.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and behalf by its duly authorized officer
on the date specified below.
LINCOLN NATIONAL 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
---------------------------------------------------
19
<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
20
<PAGE>
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
ACCRU CHOICEPLUS
GROUP MULTI FUND
MULTI FUND - NON-REGISTERED
21
<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 331/3 percent of total assets.
Entering into a reverse repurchase agreement shall be considered "borrowing" as
that term is used herein.
FOREIGN INVESTMENTS - DIVERSIFICATION
The diversification guidelines to be followed by international and global FUNDS
are as follows:
a. An international FUND or a global FUND is sufficiently diversified if
it is invested in a minimum of three different countries at all times,
and has invested no more than 50 percent of total assets in any one
second-tier country and no more than 25 percent of total assets in any
one third-tier country. First-tier countries are: Germany, the United
Kingdom, Japan, the United States, France, Canada, and Australia.
Second-tier countries are all countries not in the first or third tier.
Third-tier countries are countries identified as "emerging" or
"developing" by the International Bank for Reconstruction and
Development ("World Bank") or International Finance Corporation.
b. A regional FUND is sufficiently diversified if it is invested in a
minimum of three countries. The name of the fund must accurately
describe the FUND.
c. The name of the single country FUND must accurately describe the FUND.
d. An index FUND must substantially mirror the index.
22
<PAGE>
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 LIFE 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: By:
---------------------------- ---------------------------
Kelly D. Clevenger
President and Chairman
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: By:
---------------------------- ---------------------------
Stephen H. Lewis
Senior Vice President
<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 October 15, 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
LINCOLN VUL-DB-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule 2 to be executed in its name and behalf by its duly authorized officer
on the date specified below.
LINCOLN NATIONAL BOND FUND, INC.
Date: By:
---------------------------- ---------------------------
Kelly D. Clevenger
President and Chairman
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: By:
---------------------------- ---------------------------
Stephen H. Lewis
Senior Vice President
<PAGE>
The Fund Participation Agreement (the "Agreement"), dated July 1,
1998, by and among The Lincoln National Life Insurance Company and Lincoln
National Bond Fund, Inc. is hereby amended as follows:
Page 2, the second paragraph is replaced in its entirety with the following:
"WHEREAS, the Company has registered or will have registered each
Account with the SEC (unless exempt therefrom) as a unit investment trust under
the 1940 Act before any Contracts are issued by that Account; and"
Page 5, Article 2.1 is replaced in its entirety with the following:
"The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the
issuance thereof (unless exempt therefrom), (b) that the Contracts
will be issued in compliance in all material respects with all
applicable Federal and state laws and (c) that the Company will
require of every person distributing the Contracts that the Contracts
be offered and sold in compliance in all material respects with all
applicable Federal and state laws. The Company further represents and
warrants that it is an insurance company duly organized and validly
existing under applicable law and that it has legally and validly
authorized each Account as a separate account under Section 27-1-5-1
of the Indiana Insurance Code, and has registered or, prior to the
issuance of any Contracts, will register each Account (unless exempt
therefrom) as a unit investment trust in accordance with the
provisions of the 1940 Act to serve as a separate account for its
Contracts, and that it will maintain such registrations for so long
as any Contracts issued under them are outstanding."
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Fund Participation Agreement to be executed in its name and behalf by its duly
authorized officer on the date specified below.
LINCOLN NATIONAL BOND FUND, INC.
Date: By:
---------------------------- ---------------------------
Name: Kelly D. Clevenger
Title: President
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: By:
---------------------------- ---------------------------
Name: Stephen H. Lewis
Title: Senior Vice President
<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.
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
2
<PAGE>
and purchase requests from the Account (but not from the general
account of the Company), and receipt on any Business Day by the
Company as such limited agent of the Fund prior to the time
prescribed in the current Fund Prospectus (which as of the date
of execution of this Agreement is 4 p.m., E.S.T.) shall
constitute receipt by the Fund on that same Business Day,
provided that the Fund receives notice of such redemption or
purchase request by 9:00 a.m., E.S.T. on the next following
Business Day. For purposes of this Agreement, "Business Day"
shall mean any day on which the New York Stock exchange is open
for trading.
(b) The Company shall pay for the shares on the same day
that it places an order with the Fund to purchase those Fund
shares for an Account. Payment for Fund shares will be made by the
Account or the Company in Federal Funds transmitted to the Fund by
wire to be received by 11:00 a.m., E.S.T. on the day the Fund is
properly notified of the purchase order for shares. The Fund will
confirm receipt of each trade and these confirmations will be
received by the Company via Fax or Email by 3:00 p.m. E.S.T. If
Federal Funds are not received on time, such funds will be
invested, and shares purchased thereby will be issued, as soon as
practicable.
(c) Payment for shares redeemed by the Account or the
Company will be made in Federal Funds transmitted to the Company
by wire on the same day the Fund is notified of the redemption
order of shares, except that the Fund reserves the right to delay
payment of redemption proceeds, but in no event may such payment
be delayed longer than the period permitted under Section 22(e) of
the 1940 Act. The Fund shall not bear any responsibility
whatsoever for the proper disbursement or crediting of redemption
proceeds if securities must be redeemed; the Company alone shall
be responsible for such action.
1.5. Issuance and transfer of Fund shares will be by book entry only.
Stock certificates will not be issued to the Company or the Account. Purchase
and redemption orders for Fund shares will be recorded in an appropriate ledger
for the Account or the appropriate subaccount of the Account.
1.6. The Fund shall furnish notice as soon as reasonably practicable to
the Company of any income dividends or capital gain distributions payable on any
shares. The Company, on its behalf and on behalf of the Account, hereby elects
to receive all such dividends and distributions as are payable on any shares in
the form of additional shares of that Fund. The Company reserves the right, on
its behalf and on behalf of the Account, to revoke this election and to receive
all such dividends in cash. The Fund shall notify the Company of the number of
shares so issued as payment of such dividends and distributions.
1.7. The Fund shall use its best efforts to make the net asset value
per share available to the Company by 7:00 p.m., E.S.T. each Business Day, and
in any event, as soon as reasonably practicable after the net asset value per
share is calculated, and shall calculate such net asset value in accordance with
the then currently effective Fund Prospectus. The Fund shall not be liable for
3
<PAGE>
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 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.
4
<PAGE>
2.2. The Fund represents and warrants that Fund shares sold pursuant to
this Agreement shall be registered under the 1933 Act and duly authorized for
issuance in accordance with applicable law and that the Fund is and shall remain
registered under the 1940 Act for so long as the Fund shares are sold. The Fund
further represents and warrants that it is a corporation duly organized and in
good standing under the laws of Maryland.
2.3. The Fund represents and warrants that it currently qualifies as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). The Fund further represents and warrants that it
will make every effort to continue to qualify and to maintain such qualification
(under Subchapter M or any successor or similar provision), and that it will
notify the Company immediately upon having a reasonable basis for believing that
it has ceased to so qualify or that it might not so qualify in the future.
2.4. The Fund represents and warrants that it will comply with Section
817(h) of the Code, and all regulations issued thereunder.
2.5. The Company represents that the Contracts are currently and at the
time of issuance will be treated as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code. The
Company shall make every effort to maintain such treatment and shall notify the
Fund immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the future.
2.6. The Fund represents that the Fund's investment policies, fees and
expenses, and operations are and shall at all times remain in material
compliance with the laws of the state of Maryland, to the extent required to
perform this Agreement; and with any state- mandated investment restrictions set
forth on Schedule 3, as amended from time to time by the Company in accordance
with Section 6.6. The Fund, however, makes no representation as to whether any
aspect of its operations (including, but not limited to, fees and expenses and
investment policies) otherwise complies with the insurance laws or regulations
of any state. The Company alone shall be responsible for informing the Fund of
any investment restrictions imposed by state insurance law and applicable to the
Fund.
2.7. The Fund represents and warrants that it has and maintains a
fidelity bond in accordance with Rule 17g-1 under the 1940 Act. The Fund will
immediately notify the Company in the event the fidelity bond coverage should
lapse at any time.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; SALES MATERIAL AND OTHER
INFORMATION
3.1. The Fund shall provide the Company with as many copies of the
current Fund Prospectus as the Company may reasonably request. If requested by
the Company in lieu thereof, the Fund at its expense shall provide to the
Company a camera-ready copy, and electronic version, of the current Fund
Prospectus suitable for printing and other assistance as is reasonably necessary
in order for the Company to have a new Contracts Prospectus printed together
with the Fund Prospectus in one document. See Article V for a detailed
explanation of the responsibility for
5
<PAGE>
the cost of printing and distributing Fund prospectuses.
3.2. The Fund Prospectus shall state that the Statement of Additional
Information for the Fund is available from the Fund and the Fund shall provide
such Statement free of charge to the Company and to any outstanding or
prospective Contract owner who requests such Statement.
3.3. (a) The Fund at its expense shall provide to the Company
a camera-ready copy of the Fund's shareholder reports and other
communications to shareholders (except proxy material), in each
case in a form suitable for printing, as determined by the
Company. The Fund shall be responsible for the costs of printing
and distributing these materials to Contract owners.
(b) The Fund at its expense shall be responsible for
preparing, printing and distributing its proxy material. The
Company will provide the appropriate Contractowner names and
addresses to the Fund for this purpose.
3.4. The Company shall furnish to the Fund, prior to its use, each
piece of sales literature or other promotional material in which the Fund is
named. No such material shall be used, except with the prior written permission
of the Fund. The Fund agrees to respond to any request for approval on a prompt
and timely basis. Failure of the Fund to respond within 10 days of the request
by the Company shall relieve the Company of the obligation to obtain the prior
written permission of the Fund.
3.5. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund other
than the information or representations contained in the Fund Registration
Statement or Fund Prospectus, as such Registration Statement and Prospectus may
be amended or supplemented from time to time, or in reports or proxy statements
for the Fund, or in sales literature or other promotional material approved by
the Fund, except with the prior written permission of the Fund. The Fund agrees
to respond to any request for permission on a prompt and timely basis. If the
Fund does not respond within 10 days of a request by the Company, then the
Company shall be relieved of the obligation to obtain the prior written
permission of the Fund.
3.6. The Fund shall not give any information or make any
representations on behalf of the Company or concerning the Company, the Account
or the Contracts other than the information or representations contained in the
Contracts Registration Statement or Contracts Prospectus, as such Registration
Statement and Prospectus may be amended or supplemented from time to time, or in
published reports of the Account which are in the public domain or approved in
writing by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved in writing by the Company,
except with the prior written permission of the Company. The Company agrees to
respond to any request for permission on a prompt and timely basis. If the
Company fails to respond within 10 days of a request by the Fund, then the Fund
is relieved of the obligation to obtain the prior written permission of the
Company.
6
<PAGE>
3.7. The Fund will provide to the Company at least one complete copy of
all Fund Registration Statements, Fund Prospectuses, Statements of Additional
Information, annual and semi-annual reports and other reports, proxy statements,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, that relate to the Fund or Fund shares, within 20 days after the filing
of such document with the SEC or other regulatory authorities.
3.8. The Company will provide to the Fund at least one complete copy of
all Contracts Registration Statements, Contracts Prospectuses, Statements of
Additional Information, Annual and Semi-annual Reports, sales literature and
other promotional materials, and all amendments or supplements to any of the
above, that relate to the Contracts, within 20 days after the filing of such
document with the SEC or other regulatory authorities.
3.9. Each party will provide to the other party copies of draft
versions of any registration statements, prospectuses, statements of additional
information, reports, proxy statements, solicitations for voting instructions,
sales literature and other promotional materials, applications for exemptions,
requests for no-action letters, and all amendments or supplements to any of the
above, to the extent that the other party reasonably needs such information for
purposes of preparing a report or other filing to be filed with or submitted to
a regulatory agency. If a party requests any such information before it has been
filed, the other party will provide the requested information if then available
and in the version then available at the time of such request.
3.10. For purposes of this Article III, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use, in a newspaper, magazine or
other periodical, radio, television, telephone or tape recording, videotape
display, computer net site, signs or billboards, motion pictures or other public
media), sales literature (I.E., any written communication distributed or made
generally available to customers or the public, in print or electronically,
including brochures, circulars, research reports, market letters, form letters,
seminar texts, or reprints or excerpts of any other advertisement, sales
literature, or published article), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, registration statements, prospectuses, Statements of Additional
Information, shareholder reports and proxy materials, and any other material
constituting sales literature or advertising under NASD rules, the 1940 Act or
the 1933 Act.
ARTICLE IV. Voting
4.1 Subject to applicable law and the requirements of Article VII, the
Fund shall solicit voting instructions from Contract owners;
4.2 Subject to applicable law and the requirements of Article VII, the
Company shall:
(a) vote Fund shares attributable to Contract owners in
accordance with
7
<PAGE>
instructions or proxies received in timely fashion from such
Contract owners;
(b) vote Fund shares attributable to Contract owners for
which no instructions have been received in the same proportion as
Fund shares of such Series for which instructions have been
received in timely fashion; and
(c) vote Fund shares held by the Company on its own
behalf or on behalf of the Account that are not attributable to
Contract owners in the same proportion as Fund shares of such
Series for which instructions have been received in timely
fashion.
The Company shall be responsible for assuring that voting privileges for the
Accounts are calculated in a manner consistent with the provisions set forth
above.
ARTICLE V. FEES AND EXPENSES
All expenses incident to performance by the Fund under this Agreement
(including expenses expressly assumed by the Fund pursuant to this Agreement)
shall be paid by the Fund to the extent permitted by law. Except as may
otherwise be provided in Section 1.4 and Article VII of this Agreement, the
Company shall not bear any of the expenses for the cost of registration and
qualification of the Fund shares under Federal and any state securities law,
preparation and filing of the Fund Prospectus and Fund Registration Statement,
the preparation of all statements and notices required by any Federal or state
securities law, all taxes on the issuance or transfer of Fund shares, and any
expenses permitted to be paid or assumed by the Fund pursuant to a plan, if any,
under Rule 12b-1 under the 1940 Act.
The Fund is responsible for the cost of printing and distributing Fund
Prospectuses and SAIs to existing Contractowners. (If for this purpose the
Company decided to print the Fund Prospectuses and SAIs in a booklet or separate
booklets containing disclosure for the Contracts and for underlying funds other
than those of the Fund, then the Fund shall pay only its proportionate share of
the total cost to distribute the booklet to existing Contractowners.)
The Company is responsible for the cost of printing and distributing Fund
prospectuses and SAIs for new sales; and Account Prospectuses and SAIs for
existing Contractowners. The Company shall have the final decision on choice of
printer for all Prospectuses and SAIs.
ARTICLE VI. COMPLIANCE UNDERTAKINGS
6.1. The Fund undertakes to comply with Subchapter M and Section 817(h)
of the Code, and all regulations issued thereunder.
6.2. The Company shall amend the Contracts Registration Statements
under the 1933 Act and the Account's Registration Statement under the 1940 Act
from time to time as required in order to effect the continuous offering of the
Contracts or as may otherwise be required by applicable law. The Company shall
register and qualify the Contracts for sale to the extent
8
<PAGE>
required by applicable securities laws of the various states.
6.3. The Fund shall amend the Fund Registration Statement under the
1933 Act and the 1940 Act from time to time as required in order to effect for
so long as Fund shares are sold the continuous offering of Fund shares as
described in the then currently effective Fund Prospectus. The Fund shall
register and qualify Fund shares for sale to the extent required by applicable
securities laws of the various states.
6.4. The Company shall be responsible for assuring that any prospectus
offering a Contract that is a life insurance contract where it is reasonably
possible that such Contract would be deemed a "modified endowment contract," as
that term is defined in Section 7702A of the Code, will describe the
circumstances under which a Contract could be treated as a modified endowment
contract (or policy).
6.5. To the extent that it decides to finance distribution expenses
pursuant to Rule 12b-1, the Fund undertakes to have a Fund Board of Directors, a
majority of whom are not interested persons of the Fund, formulate and approve
any plan under Rule 12b-1 to finance distribution expenses.
6.6. (a) When appropriate in order to inform the Fund of any
applicable state-mandated investment restrictions with which the
Fund must comply, the Company shall arrange with the Fund to amend
Schedule 3, pursuant to the requirements of Article XI.
(b) Should the Fund become aware of any restrictions
which may be appropriate for inclusion in Schedule 3, the Company
shall be informed immediately of the substance of those
restrictions.
ARTICLE VlI. POTENTIAL CONFLICTS
7.1. The Company agrees to report to the Board of Directors of the Fund
(the "Board") any potential or existing conflicts between the interests of
Product Owners of all separate accounts investing in the Fund, and to assist the
Board in carrying out its responsibilities under Section 6e-3(T) of the 1940
Act, by providing all information reasonably necessary for the Board to consider
any issues raised, including information as to a decision to disregard voting
instructions of variable contract owners.
7.2. If a majority of the Board, or a majority of disinterested Board
Members, 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
9
<PAGE>
agrees with that determination, the Company shall, at its sole
cost and expense, take whatever steps are necessary to remedy the
material irreconcilable conflict. These steps could include: (i)
withdrawing the assets allocable to some or all of the affected
Accounts from the Fund and reinvesting such assets in a different
investment vehicle, or submitting the question of whether such
segregation should be implemented to a vote of all affected
Contractowners and, as appropriate, segregating the assets of any
particular group (i.e., variable annuity Contractowners, variable
life insurance policyowners, or variable Contractowners of one or
more Participating Insurance Companies) that votes in favor of
such segregation, or offering to the affected Contractowners the
option of making such a change; and (ii) establishing a new
registered mutual fund or management separate account; or (iii)
taking such other action as is necessary to remedy or eliminate
the material irreconcilable conflict.
(b) If the Company disagrees with the Board's
determination, the Company shall file a written protest with the
Board, reserving its right to dispute the determination as between
just the Company and the Fund and to seek reimbursement from the
Fund for the reasonable costs and expenses of resolving the
conflict . After reserving that right the Company, although
disagreeing with the Board that it (the Company) was responsible
for the conflict, shall take the necessary steps, under protest,
to remedy the conflict, substantially in accordance with paragraph
(a) just above, for the protection of Contractowners.
(c) As between the Company and the Fund, if within 45
days after the Board's determination the Company elects to press
the dispute, it shall so notify the Board in writing. The parties
shall then attempt to resolve the matter amicably through
negotiation by individuals from each party who are authorized to
settle the matter. If the matter has not been amicably resolved
within 60 days from the date of the Company's notice of its intent
to press the dispute, then before either party shall undertake to
litigate the dispute it shall be submitted to non-binding
arbitration conducted expeditiously in accordance with the CPR
Rules for Non-Administered Arbitration of Business Disputes, by a
sole arbitrator; PROVIDED, HOWEVER, that if one party has
requested the other party to seek an amicable resolution and the
other party has failed to participate, the requesting party may
initiate arbitration before expiration of the 60-day period set
out just above.
If within 45 days of the commencement of the process to select
an arbitrator the parties cannot agree upon the arbitrator, then
he or she will be selected from the CPR Panels of Neutrals. The
arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. Sec. 1-16. The place of arbitration shall be Fort
Wayne, Indiana. The Arbitrator is not empowered to award damages
in excess of compensatory damages.
(d) If the Board shall determine that the Fund or
another was responsible for the conflict, then the Board shall
notify the Company immediately
10
<PAGE>
of that determination. The Fund shall assure the Company that it
(the Fund) or that other Participating Insurance Company as
applicable, shall, at its sole cost and expense, take whatever
steps are necessary to eliminate the conflict.
(e) Nothing in Sections 7.2(b) or 7.2(c) shall
constitute a waiver of any right of action which the Company may
have against other Participating Insurance Companies for
reimbursement of all or part of the costs and expenses of
resolving the conflict.
7.3. If a material irreconcilable conflict arises because of the
Company's decision to disregard Contractowner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company shall withdraw (without charge or penalty) the Account's investment in
the Fund, if the Fund so elects.
7.4. For purposes of this Article, a majority of the disinterested
members of the Board shall determine whether or not any proposed action
adequately remedies any irreconcilable conflict. However, in no event will the
Fund be required to establish a new funding medium for any variable contract,
nor will the Company be required to establish a new funding medium for any
Contract, if in either case an offer to do so has been declined by a vote of a
majority of affected Contractowners.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless the Fund and each person who controls or is associated with
the Fund (other than another Participating Insurance Company) within the meaning
of such terms under the federal securities laws and any officer, trustee,
director, employee or agent of the foregoing, against any and all losses,
claims, damages or liabilities, joint or several (including any investigative,
legal and other expenses reasonably incurred in connection with, and any amounts
paid with the prior written consent of the Company in settlement of, any action,
suit or proceeding or any claim asserted), to which they or any of them may
become subject under any statute or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
Contracts Registration Statement, Contracts Prospectus, sales
literature or other promotional material for the Contracts or the
Contracts themselves (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading in light of the circumstances in which they were made;
provided that this obligation to indemnify shall not apply if such
11
<PAGE>
statement or omission or such alleged statement or alleged
omission was made in reliance upon and in conformity with
information furnished in writing to the Company by the Fund (or a
person authorized in writing to do so on behalf of the Fund) for
use in the Contracts Registration Statement, Contracts Prospectus
or in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(b) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact by or on behalf of
the Company (other than statements or representations contained in
the Fund Registration Statement, Fund Prospectus or sales
literature or other promotional material of the Fund not supplied
by the Company or persons under its control) or wrongful conduct
of the Company or persons under its control with respect to the
sale or distribution of the Contracts or Fund shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Fund Registration
Statement, Fund Prospectus or sales literature or other
promotional material of the Fund or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the
circumstances in which they were made, if such statement or
omission was made in reliance upon and in conformity with
information furnished to the Fund by or on behalf of the Company;
or
(d) arise as a result of any failure by the Company to
provide the services and furnish the materials or to make any
payments under the terms of this Agreement; or
(e) arise out of any material breach by the Company of
this Agreement, including but not limited to any failure to
transmit a request for redemption or purchase of Fund shares on a
timely basis in accordance with the procedures set forth in
Article I; or
(f) arise as a result of the Company's providing the
Fund with inaccurate information, which causes the Fund to
calculate its Net Asset Values incorrectly.
This indemnification will be in addition to any liability which the Company may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.2. INDEMNIFICATION BY THE FUND. The Fund agrees to indemnify and hold
harmless the Company and each person who controls or is associated with the
Company within the meaning of such terms under the federal securities laws and
any officer, director, employee or agent of the foregoing, against any and all
losses, claims, damages or liabilities, joint or several (including any
12
<PAGE>
investigative, legal and other expenses reasonably incurred in connection with,
and any amounts paid with the prior written consent of the Fund in settlement
of, any action, suit or proceeding or any claim asserted), to which they or any
of them may become subject under any statute or regulation, at common law or
otherwise, insofar as such losses, claims, damages or liabilities:
(a) arise out of or are based upon any untrue statement
or alleged untrue statement of any material fact contained in the
Fund Registration Statement, Fund Prospectus (or any amendment or
supplement thereto) or sales literature or other promotional
material of the Fund, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances in which they
were made; provided that this obligation to indemnify shall not
apply if such statement or omission or alleged statement or
alleged omission was made in reliance upon and in conformity with
information furnished in writing by the Company to the Fund for
use in the Fund Registration Statement, Fund Prospectus (or any
amendment or supplement thereto) or sales literature for the Fund
or otherwise for use in connection with the sale of the Contracts
or Fund shares; or
(b) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact made by the Fund
(other than statements or representations contained in the Fund
Registration Statement, Fund Prospectus or sales literature or
other promotional material of the Fund not supplied by the
Distributor or the Fund or persons under their control) or
wrongful conduct of the Fund or persons under its control with
respect to the sale or distribution of the Contracts or Fund
shares; or
(c) arise out of any untrue statement or alleged untrue
statement of a material fact contained in the Contract's
Registration Statement, Contracts Prospectus or sales literature
or other promotional material for the Contracts (or any amendment
or supplement thereto), or the omission or alleged omission to
state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances in which they were made, if such statement or
omission was made in reliance upon information furnished in
writing by the Fund to the Company (or a person authorized in
writing to do so on behalf of the Fund); or
(d) arise as a result of any failure by the Fund to
provide the services and furnish the materials under the terms of
this Agreement (including, but not by way of limitation, a
failure, whether unintentional or in good faith or otherwise: (i)
to comply with the diversification requirements specified in
Sections 2.4 and 6.1 in Article VI of this Agreement; and (ii) to
provide the Company with accurate information sufficient for it to
calculate its accumulation and/or annuity unit values
13
<PAGE>
in timely fashion as required by law and by the Contracts
Prospectuses); or
(e) arise out of any material breach by the Fund of this
Agreement.
This indemnification will be in addition to any liability which the Fund may
otherwise have; provided, however, that no party shall be entitled to
indemnification if such loss, claim, damage or liability is due to the willful
misfeasance, bad faith, gross negligence or reckless disregard of duty by the
party seeking indemnification.
8.3. INDEMNIFICATION PROCEDURES. After receipt by a party entitled to
indemnification ("indemnified party") under this Article VIII of notice of the
commencement of any action, if a claim in respect thereof is to be made by the
indemnified party against any person obligated to provide indemnification under
this Article VIII ("indemnifying party"), such indemnified party will notify the
indemnifying party in writing of the commencement thereof as soon as practicable
thereafter, provided that the omission to so notify the indemnifying party will
not relieve it from any liability under this Article VIII, except to the extent
that the omission results in a failure of actual notice to the indemnifying
party and such indemnifying party is damaged solely as a result of the failure
to give such notice. The indemnifying party, upon the request of the indemnified
party, shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying party and the
indemnified party and representation of both parties by the same counsel would
be inappropriate due to actual or potential differing interests between them.
The indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.
A successor by law of the parties to this Agreement shall be entitled to
the benefits of the indemnification contained in this Article VIII. The
indemnification provisions contained in this Article VIII shall survive any
termination of this Agreement.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the state of Indiana,
without giving effect to the principles of conflicts of law.
9.2. This Agreement shall be subject to the provisions of the 1933,
1934 and 1940 Acts, and the rules and regulations and rulings thereunder,
including such exemptions from those
14
<PAGE>
statutes, rules and regulations as the SEC may grant, and the terms hereof shall
be limited, interpreted and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall terminate:
(a) at the option of any party upon 120 days advance
written notice to the other parties; or
(b) at the option of the Company if shares of the Fund
are not available to meet the requirements of the Contracts as
determined by the Company. Prompt notice of the election to
terminate for such cause shall be furnished by the Company.
Termination shall be effective ten days after the giving of notice
by the Company; or
(c) at the option of the Fund upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory body
regarding the Company's duties under this Agreement or related to
the sale of the Contracts, the operation of the Account, the
administration of the Contracts or the purchase of Fund shares;
(d) at the option of the Company upon institution of
formal proceedings against the Fund, the investment advisor or any
sub-investment advisor, by the NASD, the SEC, or any state
securities or insurance commission or any other regulatory body;
or
(e) upon requisite vote of the Contract owners having an
interest in the Fund (unless otherwise required by applicable law)
and written approval of the Company, to substitute the shares of
another investment company for the corresponding shares of the
Fund in accordance with the terms of the Contracts; or
(f) at the option of the Fund in the event any of the
Contracts are not registered, issued or sold in accordance with
applicable Federal and/or state law; or
(g) at the option of the Company or the Fund upon a
determination by a majority of the Fund Board, or a majority of
disinterested Fund Board members, that an irreconcilable material
conflict exists among the interests of (i) any Product owners or
(ii) the interests of the Participating Insurance Companies
investing in the Fund; or
(h) at the option of the Company if the Fund ceases to
qualify as a Regulated Investment Company under Subchapter M of
the Code, or under any
15
<PAGE>
successor or similar provision, or if the Company reasonably
believes, based on an opinion of its counsel, that the Fund may
fail to so qualify; or
(i) at the option of the Company if the Fund fails to
meet the diversification requirements specified in Section 817(h)
of the Code and any regulations thereunder; or
(j) at the option of the Fund if the Contracts cease to
qualify as annuity contracts or life insurance policies, as
applicable, under the Code, or if the Fund reasonably believes
that the Contracts may fail to so qualify; or
(k) at the option of the Fund if the Fund shall
determine, in its sole judgment exercised in good faith, that
either (1) the Company shall have suffered a material adverse
change in its business or financial condition; or (2) the Company
shall have been the subject of material adverse publicity which is
likely to have a material adverse impact upon the business and
operations of the Fund; or
(l) at the option of the Company, if the Company shall
determine, in its sole judgment exercised in good faith, that: (1)
the Fund shall have suffered a material adverse change in its
business or financial condition; or (2) the Fund shall have been
the subject of material adverse publicity which is likely to have
a material adverse impact upon the business and operations of the
Company; or
(m) automatically upon the assignment of this Agreement
(including, without limitation, any transfer of the Contracts or
the Accounts to another insurance company pursuant to an
assumption reinsurance agreement) unless the non-assigning party
consents thereto or unless this Agreement is assigned to an
affiliate of the Company or the Fund, as the case may be.
10.2. NOTICE REQUIREMENT. Except as otherwise provided in Section 10.1,
no termination of this Agreement shall be effective unless and until the party
terminating this Agreement gives prior written notice to the other party of its
intent to terminate, which notice shall set forth the basis for such
termination. Furthermore:
(a) In the event that any termination is based upon the
provisions of Article VII or the provisions of Section 10.1(a) of
this Agreement, such prior written notice shall be given in
advance of the effective date of termination as required by such
provisions; and
(b) in the event that any termination is based upon the
provisions of Section 10.1(c) or 10.1(d) of this Agreement, such
prior written notice shall be given at least ninety (90) days
before the effective date of termination, or sooner if required by
law or regulation.
10.3. EFFECT OF TERMINATION
16
<PAGE>
(a) Notwithstanding any termination of this Agreement
pursuant to Section 10.1 of this Agreement, the Fund will, at the
option of the Company, continue to make available additional Fund
shares for so long after the termination of this Agreement as the
Company desires, pursuant to the terms and conditions of this
Agreement as provided in paragraph (b) below, for all Contracts in
effect on the effective date of termination of this Agreement
(hereinafter referred to as "Existing Contracts"). Specifically,
without limitation, if the Company so elects to make additional
Fund shares available, the owners of the Existing Contracts or the
Company, whichever shall have legal authority to do so, shall be
permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making
of additional purchase payments under the Existing Contracts.
(b) If Fund shares continue to be made available after
such termination, the provisions of this Agreement shall remain in
effect except for Section 10.1(a) and thereafter either the Fund
or the Company may terminate the Agreement, as so continued
pursuant to this Section 10.3, upon prior written notice to the
other party, such notice to be for a period that is reasonable
under the circumstances but, if given by the Fund, need not be for
more than six months.
(c) The parties agree that this Section 10.3 shall not
apply to any termination made pursuant to Article VII, and the
effect of such Article VII termination shall be governed by the
provisions set forth or incorporated by reference therein.
ARTICLE XI. APPLICABILITY TO NEW ACCOUNTS AND NEW CONTACTS
The parties to this Agreement may amend the schedules to this Agreement
from time to time to reflect changes in or relating to the Contracts and to add
new classes of variable annuity contracts and variable life insurance policies
to be issued by the Company through new or existing Separate Accounts investing
in the Fund. The provisions of this Agreement shall be equally applicable to
each such separate account and each such class of contracts or policies, unless
the context otherwise requires. Any such amendment must be signed by the parties
and must bear an effective date for that amendment.
ARTICLE XII. NOTICES
Any notice shall be sufficiently given when sent by registered or
certified mail to the other party(ies) at the address of such party(ies) set
forth below or at such other address as such party(ies) may from time to time
specify in writing to the other party.
If to the Fund:
Lincoln National Money Market Fund, Inc.
17
<PAGE>
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Kelly D. Clevenger
If to the Company:
Lincoln National Life Insurance Co.
1300 South Clinton Street
Fort Wayne, Indiana 46802
Attn: Steven M. Kluever
ARTICLE XIII. MISCELLANEOUS
13.1. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
13.2. This Agreement may be executed simultaneously in two or more
counterparts, each of which together shall constitute one and the same
instrument.
13.3. If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
13.4. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities (including without limitation the SEC, the
NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
13.5. Each party represents that the execution and delivery of this
Agreement and the consummation of the transactions contemplated herein have been
duly authorized by all necessary corporate or trust action, as applicable, by
such party, and when so executed and delivered this Agreement will be the valid
and binding obligation of such party enforceable in accordance with its terms.
ARTICLE XIV. PRIOR AGREEMENTS
This Amended and Restated Fund Participation Agreement, as of its
effective date, hereby supersedes any and all prior agreements to purchase
shares between Lincoln Life and the Fund.
18
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and behalf by its duly authorized officer on the date
specified below.
LINCOLN NATIONAL 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
--------------------------------------------------------------
19
<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
20
<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
21
<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.
22
<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 October 15, 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
LINCOLN VUL-DB-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to
Schedule 2 to be executed in its name and behalf by its duly authorized officer
on the date specified below.
LINCOLN NATIONAL MONEY MARKET
FUND, INC.
Date: By:
---------------------- ----------------------------
Kelly D. Clevenger
President and Chairman
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: By:
---------------------- ----------------------------
Stephen H. Lewis
Senior Vice President
<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 VARIABLE ANNUITY ACCOUNT N
LINCOLN 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 Insurane 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: By:
---------------------- ----------------------------
Kelly D. Clevenger
President and Chairman
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
Date: By:
---------------------- ----------------------------
Stephen H. Lewis
Senior Vice President
<PAGE>
The Fund Participation Agreement (the "Agreement"), dated July 1, 1998,
by and among The Lincoln National Life Insurance Company and Lincoln National
Money Market Fund, Inc. is hereby amended as follows:
Page 2, the second paragraph is replaced in its entirety with the following:
"WHEREAS, the company has registered or will have registered each Account
with the SEC (unless exempt therefrom) as a unit investment trust under the 1940
Act before any Contracts are issued by that Account; and"
Page 5, Article 2.1 is replaced in its entirety with the following:
"The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the
issuance thereof (unless exempt therefrom), (b) that the Contracts will
be issued in compliance in all material respects with all applicable
Federal and state laws and (c) that the Company will require of every
person distributing the Contracts that the Contracts be offered and sold
in compliance in all material respects with all applicable Federal and
state laws. The Company further represents and warrants that it is an
insurance company duly organized and validly existing under applicable
law and that it has legally and validly authorized each Account as a
separate account under Section 27-1-5-1 of the Indiana Insurance Code,
and has registered or, prior to the issuance of any Contracts, will
register each Account (unless exempt therefrom) as a unit investment
trust in accordance with the provisions of the 1940 Act to serve as a
separate account for its Contracts, and that it will maintain such
registrations for so long as any Contracts issued under them are
outstanding."
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Fund Participation Agreement to be executed in its name and behalf by its duly
authorized officer on the date specified below.
LINCOLN NATIONAL MONEY MARKET
FUND, INC.
Date: By:
------------------ --------------------------
Name: Kelly D. Clevenger
------------------------
Title: President
-----------------------
LINCOLN NATIONAL LIFE INSURANCE
COMPANY
Date: By:
------------------ --------------------------
Name: Stephen H. Lewis
------------------------
Title: Senior Vice President
-----------------------
<PAGE>
The Fund Participation Agreement (the "Agreement"), dated July 1, 1998,
by and among The Lincoln National Life Insurance Company and Lincoln National
Money Market Fund, Inc. is hereby amended as follows:
Page 2, the second paragraph is replaced in its entirety with the following:
"WHEREAS, the Company has registered or will have registered each
Account with the SEC (unless exempt therefrom) as a unit investment trust under
the 1940 Act before any Contracts are issued by that Account; and"
Page 5, Article 2.1 is replaced in its entirety with the following:
"The Company represents and warrants (a) that the Contracts are
registered under the 1933 Act or will be so registered before the
issuance thereof (unless exempt therefrom), (b) that the Contracts will
be issued in compliance in all material respects with all applicable
Federal and state laws and (c) that the Company will require of every
person distributing the Contracts that the Contracts be offered and
sold in compliance in all material respects with all applicable Federal
and state laws. The Company further represents and warrants that it is
an insurance company duly organized and validly existing under
applicable law and that it has legally and validly authorized each
Account as a separate account under Section 27-1-5-1 of the Indiana
Insurance Code, and has registered or, prior to the issuance of any
Contracts, will register each Account (unless exempt therefrom) as a
unit investment trust in accordance with the provisions of the 1940 Act
to serve as a separate account for its Contracts, and that it will
maintain such registrations for so long as any Contracts issued under
them are outstanding."
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment to the
Fund Participation Agreement to be executed in its name and behalf by its duly
authorized officer on the date specified below.
LINCOLN NATIONAL MONEY MARKET FUND, INC.
Date: 9/8/99 By: /s/ Kelly D. Clevenger
------------------ ------------------------------------
Name: Kelly D. Clevenger
------------------------------------
Title: President
------------------------------------
LINCOLN NATIONAL LIFE INSURANCE COMPANY
Date: By: /s/ Stephen H. Lewis
------------------ ------------------------------------
Name: Stephen H. Lewis
------------------------------------
Title: Senior Vice President
------------------------------------
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND,
FIDELITY DISTRIBUTORS CORPORATION
and
LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the lst day of
September, 1996, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Indiana corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular
managed portfolio of securities and other assets, any one or more of which may
be made available under this Agreement, as may be amended from time to time by
mutual agreement of the parties hereto (each such series hereinafter referred
to as a "Portfolio"); and
WHEREAS, the Fund filed with the Securities and Exchange
Commission (the "SEC") a registration statement on Form N- I A and the SEC has
declared effective said registration statement; and
WHEREAS, the Fund has obtained an order from the SEC- dated
October 15, 1985 (File No. 812-6102), granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the " 1940.
1
<PAGE>
Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding
Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser")
is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors
of the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each
Account as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with
the SEC under the Securities Exchange Act of 1934, as amended, (hereinafter the
" 1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws
and regulations, the Company intends to purchase shares in the Portfolios on
behalf of each Account to fund certain of the aforesaid variable life and
variable annuity contracts and the Underwriter is authorized to sell such
shares to unit investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those
shares of the Fund which each Account orders, executing such orders on a daily
basis at the net asset value next computed after receipt by the Fund or its
designee of the order for the shares of the Fund. For purposes of this Section
1. 1, the Company shall be the designee of the Fund for receipt of such orders
from each Account and receipt by such designee shall constitute receipt by the
Fund; provided that the
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<PAGE>
Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely
for purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value
pursuant to rules of the Securities and Exchange Commission and the Fund shall
use reasonable efforts to calculate such net asset value on each day which the
New York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to
any insurance company or separate account unless an agreement containing
provisions substantially the same as Articles 1, 1111, V, VII and Section 2.5
of Article II of this Agreement is in effect to govern such sales.
1.5. The Fund. agrees to redeem for cash, on the Company's
request, any full or fractional shares of the Fund held by the Company,
executing such requests on a daily basis at the net asset value next computed
after receipt by the Fund or its designee of the request for redemption. For
purposes of this Section 1.5, the Company shall be the designee of the Fund for
receipt of requests for redemption from each Account and receipt by such
designee shall constitute receipt by the Fund; provided that the Fund receives
notice of such request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable annuity contracts with the
form number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, (as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto), (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in the
Company's general account, provided that such amounts may also be invested in
investment companies other than the Fund. The Company shall notify the Fund as
to which other investment companies are available as investment options under
the Contract not later than the time such investment companies are made
available to owners of the
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<PAGE>
Contracts. The investment companies available to Contract owners as of the date
of this Agreement are as shown on Schedule C.
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1. 1 hereof. Payment shall be in federal funds
transmitted by wire. For purpose of Section 2. 10 and 2.11, upon receipt by the
Fund of -the federal funds so wired, such funds shall cease to be the
responsibility of the Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any
Account. Shares ordered from the Fund will be recorded in an appropriate title
for each Account or the appropriate subaccount. of each Account.
1.9. The Fund shall furnish same day notice (by wire or
telephone, followed by written confirmation) to the Company of any income,
dividends or capital gain distributions payable on the Fund's shares. The
Company hereby elects to receive all such income dividends and capital gain
distributions as are payable on the Portfolio shares in additional shares of
that Portfolio. The Company reserves the light to revoke this election and to
receive all such income dividends and capital gain distributions in cash. The
Fund shall notify the Company of the number of shares so issued as payment of
such dividends and distributions.
1.10. The Fund shall make the net asset value per share for
each Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act; that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
state laws and that the Company will require of every person distributing the
Contracts that the Contracts be offered and sold in compliance in all material
respects with all applicable Federal and state laws. The Company further
represents and warrants that it is an insurance company duly organized and
validly existing under applicable law and that it has legally and validly
established each Account, prior to any issuance or sale thereof, as a segregated
asset account under Section 27-1-5-1 of the Indiana Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, win register each
Account as a unit investment trust in accordance with the provisions of the 1940
Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Indiana and all applicable federal and state securities laws
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<PAGE>
and that the Fund is and shall remain registered under the 1940 Act. The Fund
shall amend the Registration Statement for its shares under the 1933 Act and
the 1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently
treated as life insurance policies or annuity insurance contracts, under
applicable provisions of the Code and that it will make every effort to
maintain such treatment and that it will notify the Fund and the Underwriter
immediately upon having a reasonable basis for believing that the Contracts
have ceased to be so treated or that they might not be so treated in the
future.
2.5. The Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b- I under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or-" defensive" Rule l2b-1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b-1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b- I to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect
of its operations (including, but not limited to, fees and expenses and
investment policies) complies with the insurance laws or regulations of the
various states except that the Fund represents that the Fund's investment
policies, fees and expenses are and shall at all times remain in compliance
with the laws of the State of Indiana and the Fund and the Underwriter
represent that their respective operations are and shall at all times remain in
material compliance with the laws of the State of Indiana to the extent
required to perform this Agreement.
2.7. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Indiana and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and
validly existing under the laws of the Commonwealth of Massachusetts and that
it does and will comply in all material respects with the 1940 Act.
5
<PAGE>
2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws
of the State of Indiana and any applicable state, and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(I) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company. The Fund and the Underwriter agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agree to notify the Company immediately in
the event that such coverage no longer applies.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, and that said bond is issued by a reputable bonding company, includes
coverage for larceny and embezzlement, and is in an amount not less than $5
million. The Company agrees to make all reasonable efforts to see that this
bond or another bond containing these provisions is always in effect, and
agrees to notify the Fund and the Underwriter in the event that such coverage
no longer applies.
ARTICLE III. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company -may reasonably request If requested by the Company
in lieu thereof, the Fund shall provide camera- ready film containing the
Fund's prospectus and Statement of Additional Information, and such other
assistance as is reasonably necessary in order for the Company once each year
(or more frequently if the prospectus and/or Statement of Additional
Information for the Fund is amended during the year) to have the prospectus for
the Contracts and the Fund's prospectus printed together in one document, and
to have the Statement of Additional Information for the Fund and the Statement
of Additional Information for the Contracts printed together in one document.
Alternatively, the Company may print the Fund's prospectus and/or its Statement
of Additional Information in combination with other fund companies'
prospectuses and statements of additional information. Except as provided in
the following three sentences, all expenses of printing and distributing Fund
prospectuses and Statements of Additional Information shall be the expense of
the Company. For prospectuses and Statements of Additional Information provided
by the Company to its existing owners of Contracts in order to update
disclosure as required by the 1933 Act and/or the 1940 Act, the cost of
printing shall be borne by the Fund. If the Company chooses to receive
camera-ready film in lieu of receiving printed copies of the Fund's prospectus,
the Fund
6
<PAGE>
will reimburse the Company in an amount equal to the product of A and B where A
is the number of such prospectuses distributed to owners of the Contracts, and
B is the Fund's per unit cost of typesetting and printing the Fund's
prospectus. The same procedures shall be followed with respect to the Fund's
Statement of Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the
Fund's expenses do not include the cost of printing any prospectuses or
Statements of Additional Information other than those actually distributed to
existing owners of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which are covered in Section 3. 1) to shareholders in such
quantity as the Company shall reasonably require for distributing to Contract
owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with instructions
received from Contract owners; and
(iii) vote Fund shares for which no instructions have been
received in a particular separate account in the same
proportion as Fund shares of such portfolio for which
instructions have been received in that separate
account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund
shares held in any segregated asset account in its own right, to the extent
permitted by law. Participating Insurance Companies shall be responsible for
assuring that each of their separate accounts participating in the Fund
calculates voting privileges in a manner consistent with the standards set
forth on Schedule B attached hereto and incorporated herein by this reference,
which standards will also be provided to the other Participating Insurance
Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either
provide for annual meetings or comply with Section 16(c) of the 1940 Act
(although the Fund is not one of the trusts described in Section 16(c) of that
Act) as well as with Sections 16(a) and, if and when applicable, 16(b).
Further, the Fund will act in accordance with the Securities and Exchange
Commission's interpretation of the requirements of Section 16(a) with respect
to periodic elections of trustees and with whatever rules the Commission may
promulgate with respect thereto.
7
<PAGE>
ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished,
to the Fund or its designee, each piece of sales literature or other
promotional material in which the Fund or its investment adviser or the
Underwriter is named, at least ten Business Days prior to its use. No such
material shall be used if the Fund or its designee reasonably objects to such
use within ten Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or
its designee or by the Underwriter, except with the permission of the Fund or
the Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of
sales literature or other promotional. material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects
to such use within ten Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public
domain or approved by the Company for distribution to Contract owners, or in
sales literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, within
30 days of the filing of such document with the Securities and Exchange
Commission or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to
8
<PAGE>
the Contracts or each Account and their investment in the Fund, within 30 days
of the filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales
literature or other promotional material" includes, but is not limited to, any
of the following that refer to the Fund or any affiliate of the Fund:
advertisements (such as material published, or designed for use in, a
newspaper, magazine, or other periodical, radio, television, telephone or tape
recording, videotape display, signs or billboards, motion pictures, or other
public media), sales literature (IE., any written communication distributed or
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees, and
registration statements, prospectuses, Statements of Additional Information,
shareholder reports, and proxy materials and any other material constituting
sales literature or advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or
any Portfolio adopts and implements a plan pursuant to Rule 12b- 1 to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
ARTICLE VI. DIVERSIFICATION
9
<PAGE>
6.1. The Fund will at all times invest money from the Contracts
in such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without
limiting the scope of the foregoing, the Fund will at all times comply with
Section 8 17 (h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners
of all separate accounts investing in the Fund. An irreconcilable material
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax, or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretative letter, or any similar
action by insurance, tax, or securities regulatory authorities; (c) an
administrative or judicial decision in any relevant proceeding; (d) the manner
in which the investments of any Portfolio are being managed; (e) a difference
in voting instructions given by variable annuity contract and variable life
insurance contract owners; or (f) a decision by an insurer to disregard the
voting instructions of contract owners. The Board shall promptly inform the
Company if it determines that an irreconcilable material conflict exists and
the implications thereof.
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Board. The Company will assist the Board in
carrying out its responsibilities under the Shared Funding Exemptive Order, by
providing the Board with all information reasonably necessary for the Board to
consider any issues raised. This includes, but is not limited to, an obligation
by the Company to inform the Board whenever contract owner voting instructions
are disregarded.
7.3. If it is determined by a majority of the Board, or a
majority of its disinterested trustees, that a material irreconcilable conflict
exists, the Company and other Participating Insurance Companies shall, at their
expense and to the extent reasonably practicable (as determined by a majority
of the disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a
vote of all affected Contract owners and, as appropriate, segregating the
assets of any appropriate group (i.e., annuity contract owners, life insurance
contract owners, or variable contract owners of one or more Participating
Insurance Companies) that votes in favor of such
10
<PAGE>
segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested members of the Board.
Any such withdrawal and termination must take place within six (6) months after
the Fund gives written notice that this provision is being implemented, and
until the end of that six month period the Underwriter and Fund shall continue
to accept and implement orders by the Company for the purchase (and redemption)
of shares of the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board
informs the Company in writing that it has determined that such decision has
created an irreconcilable material conflict; provided, however, that such
withdrawal and termination shall be limited to the extent required by the
foregoing material irreconcilable conflict as determined by a majority of the
disinterested members of the Board. Until the end of the foregoing six month
period, the Underwriter and Fund shall continue to accept and implement orders
by the Company for the purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement,
a majority of the disinterested members of the Board shall determine whether
any proposed action adequately remedies any irreconcilable material conflict
but in no event will the Fund be required to establish a new funding medium for
the Contracts. The Company shall not be required by Section 7.3 to establish a
new funding medium for the Contracts if an offer to do so has been declined by
vote of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Accounts investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any
provision of the Act or the rules promulgated thereunder with respect to mixed
or shared funding (as defined in the Shared Funding Exemptive Order) on terms
and conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance
Companies, as appropriate, shall take such steps as may be necessary to comply
with Rules 6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the
extent such rules are applicable; and (b) Sections 3.4, 3.5, 7. 1,
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<PAGE>
7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.l(a). 'Me Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8. 1)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Company) or litigation
(including reasonable legal and other expenses), to which the Indemnified
Parties may become subject under any statute, regulation, at common law or
otherwise, insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements
or alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Contracts or
contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information
furnished to the Company by or on behalf of the Fund for use in
the Registration Statement or prospectus for the Contracts or
in the Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of
the Contracts or Fund shares; or
(ii) arise out of or as a result of any untrue
statements or representations (other than statements or
representations contained in the Registration Statement,
prospectus or sales literature of the Fund not supplied by the
Company, or persons under its control) or willful misfeasance,
bad faith, or gross negligence of the Company or persons under
its control, with respect to the sale or distribution of the
Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged
untrue statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or any
amendment thereof or supplement thereto or the omission or
alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein
not misleading if such a statement or omission was
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<PAGE>
made in reliance upon information furnished to the Fund by or on
behalf of the Company; or
(iv) arise as a result of any failure by the Company to
provide the services and furnish the materials under the terms
of this Agreement; or
(v) arise out of or result from any material breach of
any representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and in
accordance with the provisions of Sections 8. 1 (b) and 8. 1
(c) hereof.
8.1(b). The Company shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed
against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless
disregard of obligations or duties under this Agreement or to
the Fund, whichever is applicable.
8.1(c). The Company shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Company in writing within a reasonable
time after the summons or other first legal process giving
information of the nature of the claim shall have been served
upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated
agent), but failure to notify the Company of any such claim
shall not relieve the Company from any liability which it may
have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification
provision. In case any such, action is brought against the
Indemnified Parties, the Company shall be entitled to
participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the
defense thereof, with counsel satisfactory to the party named
in the action. After notice from the Company to such party of
the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not be
liable to such party under this Agreement for any legal or
other expenses subsequently incurred by such party
independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1(d). The Indemnified Parties will promptly notify
the Company of the commencement of any litigation or
proceedings against them in connection with the issuance or
sale of the Fund Shares or the Contracts or the operation of
the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
13
<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless
the Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or litigation
(including reasonable legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact
contained in the Registration Statement or prospectus
or sales literature of the Fund (or any amendment or
supplement to any of the foregoing), or arise out of
or are based upon the omission or the alleged omission
to state therein a material fact required to be stated
therein or necessary to make the statements therein
not misleading, provided that this agreement to
indemnify shall not apply as to any Indemnified Party
if such statement or omission or such alleged
statement or omission was made in reliance upon and in
conformity with information furnished to the
Underwriter or Fund by or on behalf of the Company for
use in the Registration Statement or prospectus for
the Fund or in sales literature (or any amendment or
supplement) or otherwise for use in connection with
the sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of any untrue statements
or representations (other than statements or
representations contained in the Registration
Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons
under its control) or willful misfeasance, bad faith,
or gross negligence of the Fund, Adviser or
Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts
or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a
Registration Statement, prospectus, or sales
literature covering the Contracts, or any amendment
thereof or supplement thereto, or the omission or
alleged omission to state therein a material fact
required to be stated therein or necessary to make
the statement or statements therein not misleading,
if such statement or omission was made in reliance
upon information furnished to the Company by or on
behalf of the Fund; or
(iv) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure,
whether unintentional or in good faith or otherwise,
to comply with the diversification requirements
specified in Article VI of this Agreement); or
14
<PAGE>
(v) arise out of or result from any material breach of
any representation and/or warranty made by the
Underwriter in this Agreement or arise out of or
result from any other material breach of this
Agreement by the Underwriter; as limited by and in
accordance with the provisions of Sections 8.2(b) and
8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith,
or gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is
applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by
it, and the Underwriter will not be liable to such party under this Agreement
for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable
costs of investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Fund) or litigation
(including reasonable legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements result from the gross negligence, bad faith or
willful misconduct of the Board or any member thereof, are related to the
operations of the Fund and:
15
<PAGE>
(i) arise as a result of any failure by the Fund to
provide the services and furnish the materials under
the terms of this Agreement (including a failure to
comply with the diversification requirements
specified in Article VI of this Agreement); or
(ii) arise out of or result from any material breach of
any representation and/or warranty made by the Fund
in this Agreement or arise out of or result from any
other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or
litigation incurred or assessed against an Indemnified Party as such may arise
from such Indemnified Parry's willful misfeasance, bad faith, or gross
negligence in the performance of such Indemnified Party's duties or by reason
of such Indemnified Party's reckless disregard of obligations and duties under
this Agreement or to the Company, the Fund, the Underwriter or each Account,
whichever is applicable.
8.3(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing, within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it, and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the
defense thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions
hereof interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
16
<PAGE>
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to,
the Shared Funding Exemptive Order) and the terms hereof shall be interpreted
and construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by six months
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state. and/or
federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or
to be issued by the Company; or
(d) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify;
or
(e) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof-, or
(f) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both of the
Fund or the Underwriter respectively, shall determine, in
their sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
17
<PAGE>
(g) termination by the Company by written notice to the Fund
and the Underwriter, if the Company shall determine, in its
sole judgment exercised in good faith, that either the Fund
or the Underwriter has suffered a material adverse change
in its business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) the requisite vote of the Contract owners having an
interest in a Portfolio (unless otherwise required by
applicable law) and written approval of the Company, to
substitute the shares of another investment company for the
corresponding shares of a Portfolio in accordance with the
terms of the Contracts; or
(i) at the option of the Fund, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory
body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of the
Account, the administration of the Contracts or the
purchase of Fund shares, or an expected or anticipated
ruling, judgment or outcome which would, in the Fund's
reasonable judgment, materially impair the Company's
ability to perform the Company's obligations and duties
hereunder; or
(j) at the option of the Company, upon institution of formal
proceedings against the Fund, the Underwriter, the Fund's
investment adviser or any sub-adviser, by the NASD, the
SEC, or any state securities or insurance commission or any
other regulatory body regarding the duties of the Fund or
the Underwriter under this Agreement, or an expected or
anticipated ruling, judgment or outcome which would, in the
Company's reasonable judgment, materially impair the Fund's
or the Underwriter's ability to perform the Fund's or the
Underwriter's obligations and duties hereunder; or
(k) at the option of the Company, upon institution of formal
proceedings against the Fund's investment adviser of any
sub-adviser by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body which
would, in the good faith opinion of the Company, result in
material harm. to the Accounts, the Company or Contract
owners.
10.2. EFFECT OF TERMINATION. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall at the option of the
Company, continue to make available additional shares of the Fund pursuant to
the terms and conditions of this Agreement, for all Contracts in effect on the
effective date of termination of this Agreement (hereinafter referred to as
"Existing Contracts"). Specifically, without limitation, the owners of the
Existing Contracts shall be permitted to reallocate investments in the Fund,
redeem investments in the Fund and/or invest in the Fund upon the making of
additional purchase payments under the Existing Contracts. The parties agree
that this Section 10.2 shall
18
<PAGE>
not apply to any terminations under Article VII and the effect of such Article
VII terminations shall be governed by Article VII of this Agreement.
10.3. The Company shall not redeem Fund shares attributable to
the Contracts (as opposed to Fund shares attributable to the Company's assets
held in the Account) except (i) as necessary to implement Contract Owner
initiated or approved transactions, or (ii) as required by state and/or federal
laws or regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act.
Upon request, the Company will promptly furnish to the Fund and the Underwriter
the opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or
the Underwriter 90 days notice of its intention to do so.
10.4. Notwithstanding any other provision of this Agreement, each
party's obligation under Article VII to indemnify the other parties shall
survive termination of this Agreement, to the extent that the events giving
rise to the obligation to indemnify the other party occurred prior to the date
of termination.
ARTICLE XI. NOTICES
Any notice shall be sufficiently given when sent by registered
or certified mail to the other party at the address of such party set forth
below or at such other address as such party may from time to time specify in
writing to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, Indiana 46802
Attention: Kelly D. Clevenger
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE XII. MISCELLANEOUS
19
<PAGE>
12.1. All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2. Subject to the requirements of legal process and
regulatory authority, each party here to shall treat as confidential the names
and addresses of the owners of the Contracts and all information reasonably
identified as confidential in writing by any other party hereto and, except as
permitted by this Agreement, shall not disclose, disseminate or utilize such
names and addresses and other confidential information until such time as it
may come into the public domain without the express written consent of the
affected party.
12.3. The captions in this Agreement are included for
convenience of reference only and in no way define or delineate any of the
provisions hereof or otherwise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or
more counterparts, each of which taken together shall constitute one and the
same instrument.
12.5. If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Indiana Insurance Commissioner with any non-privileged
information or reports in connection with services provided under this
Agreement which such Commissioner may request in order to ascertain whether the
insurance operations of the Company are being conducted in a manner consistent
with the Indiana Insurance Regulations and any other applicable law or
regulations.
12.7. The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies
and obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed
and registered to perform the obligations of the Underwriter under this
Agreement.
20
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND
By:
FIDELITY DISTRIBUTORS CORPORATION
By:
21
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Lincoln National Variable Annuity GAC96-1 11
Separate Account L GAC91-101
</TABLE>
22
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 22, 1998 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Lincoln National Variable Annuity Separate GAC96-1 11
Account L GA.C91-101
Lincoln Life Flexible Premium Variable Life
Account M LN605/615 (VUL)
Lincoln Life Flexible Premium Variable Life
Account R SVUL LN650
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND
By:
Name:
Title:
FIDELITY DISTRIBUTORS CORPORATION
By:
Name:
Title:
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for
the handling of proxies relating to the Fund by the Underwriter, the Fund and
the Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the term "Company" shall also include the
department or third party assigned by the Insurance Company to perform the
steps delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done in writing approximately two months
before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by
the Company either before or together with the Customers' receipt of a
proxy statement. Underwriter will provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Legal
Department of the Underwriter or its affiliate ("Fidelity Legal") must
approve the Card before it is printed. Allow approximately 2-4 business
days for printing information on the Cards. Information commonly found
on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
23
<PAGE>
5. During), this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to
Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to
the Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a
small, single sheet of paper that requests Customers to vote
as quickly as possible and that their vote is important. One
copy will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed
and approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not
been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are considered to be not RECEIVED for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated, illegible)
of the procedure are "hand verified," i.e., examined as to why they did
not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston
time. Fidelity Legal may reasonably request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal will provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All arrangements, approvals and "signing-off 'maybe done orally, but must
always be followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Twentieth Century's TCI Portfolios, Inc.
TCI Growth
TCI Balanced
T. Rowe Price International Series, Inc.
Calvert Responsibly Invested Balanced Portfolio
26
<PAGE>
Separate Account: Lincoln National Variable Annuity Separate Account L
Product(s) Name: Group Variable Annuity I, II, and III
Funds Available: Fidelity Investments - Asset Manager
Equity-Income
Growth
American Century - Balanced
Capital Appreciation
Dreyfus - S & P 500 Index
Smallcap
Baron - Asset Fund
Calvert Socially Balanced
Janus - Worldwide
Lynch & Mayer - LN Aggressive Growth
Neuberger & Berman - Partners
T. Rowe Price - International
Vantage Global - LN Social Awareness
<PAGE>
Separate Account: Lincoln Life Flexible Premium Variable Life Account M
Product(s) Name: Variable Universal Life - VUL I
Funds Available: Fidelity Investments - Equity-Income
Asset Manager
Investment Grade Bonds
AIM - Capital Appreciation
Diversified Income
Growth
Value
Delaware - Emerging Markets
Smallcap Value
Trend
MFS - Emerging Growth
Total Return
Utilities
Templeton - Asset Allocation
International
Stock
OpCap - Global Equity
Managed
Bankers Trust - S&P 500 Index
Lincoln Investments - LN Money Market
<PAGE>
Separate Account: Lincoln Life Flexible Premium Variable Life Account R
Product(s) Name: Survivorship, Variable Universal Life - SVUL I
Funds Available: Fidelity Investments - Equity-Income
Asset Manager
Investment Grade Bonds
AIM - Capital Appreciation
Diversified Income
Growth
Value
Delaware - Emerging Markets
Smallcap Value
Trend
MFS - Emerging Growth
Total Return
Utilities
Templeton - Asset Allocation
International
Stock
OpCap - Global Equity
Managed
Bankers Trust - S&P 500 Index
Lincoln Investments - LN Money Market
<PAGE>
PARTICIPATION AGREEMENT
AMONG
VARIABLE INSURANCE PRODUCTS FUND II,
FIDELITY DISTRIBUTORS CORPORATION
AND
LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the Ist day of
September, 1996, by and among LINCOLN NATIONAL LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Indiana corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND II, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund filed with the Securities and Exchange
Commission (the "SEC") a registration statement on Form N- 1 A and the SEC has
declared effective said registration statement; and
WHEREAS, the Fund has obtained an order from the SEC, dated
September 17, 1986 (File No. 812-6422), granting Participating Insurance
Companies and variable annuity and variable life insurance separate accounts
exemptions from the provisions of sections 9(a), 13(a), 15(a), and 15(b) of the
Investment Company Act of 1940, as amended, (hereinafter the " 1940
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Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity and variable life insurance separate accounts of both affiliated and
unaffiliated life insurance companies (hereinafter the "Shared Funding Exemptive
Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser") is
duly registered as an investment adviser under the federal Investment Advisers
Act of 1940 and any applicable state securities law; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with the
SEC under the Securities Exchange Act of 1934, as amended, (hereinafter the
"1934 Act"), and is a member in good standing of the National Association of
Securities Dealers, Inc. (hereinafter "NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life and variable
annuity contracts and the Underwriter is authorized to sell such shares to unit
investmen trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1. 1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall constitute receipt by the Fund;
provided that the
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Fund receives notice of such order by 9:30 a.m. Boston time on the next
following Business Day. "Business Day" shall mean any day on which the New York
Stock Exchange is open for trading and on which the Fund calculates its net
asset value pursuant to the rules of the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles 1, 111, V, VII and Section 2.5 of Article II
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any fun or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable annuity contracts with the
form number(s) which are listed on Schedule A attached hereto and incorporated
herein by this reference, (as such Schedule A may be amended from time to time
hereafter by mutual written agreement of all the parties hereto), (the
"Contracts") shall be invested in the Fund, in such other Funds advised by the
Adviser as may be mutually agreed to in writing by the parties hereto, or in the
Company's general account, provided that such amounts may also be invested in
investment companies other than the Fund. The Company shall notify the Fund as
to which other investment companies are available as investment options under
the Contract not later than the time such investment companies are made
available to owners of the
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Contracts. The investment companies available to Contract owners as of the date
of this Agreement are as shown on Schedule C.
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1. 1 hereof. Payment shall be in federal funds transmitted
by wire. For purpose of Section 2. 10 and 2. 11, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate tide for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. 'Me
Company reserves the right to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1. 10. The Fund shall make the net asset value per share for each
Portfolio available to the Company on a daily basis as soon as reasonably
practical after the net asset value per share is calculated (normally by 6:30
p.m. Boston time) and shall use its best efforts to make such net asset value
per share available by 7 p.m. Boston time.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
2. 1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act-, that the Contracts will be issued and
sold in compliance in all material respects with all applicable Federal and
state, laws and that the Company will require of every person distributing the
Contracts that the Contracts be offered and sold in compliance in all material
respects with all applicable Federal and state laws. 'Me Company further
represents and wan-ants that it is an insurance company duly organized and
validly existing under applicable law and that it has legally and validly
established each Account, prior to any issuance or sale thereof, as a segregated
asset account under Section 27-1-5-1 of the Indiana Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and sold in compliance with the laws of the State of
Indiana and all applicable federal and state securities laws
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and that the Fund is and shall remain registered under the 1940 Act. The Fund
shall amend the Registration Statement for its shares under the 1933 Act and the
1940 Act from time to time as required in order to effect the continuous
offering of its shares. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states only if and to the extent
deemed advisable by the Fund or the Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently
treated as life insurance policies or annuity insurance contracts, under
applicable provisions of the Code and that it will make every effort to maintain
such treatment and that it will notify the Fund and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.5. 'Me Fund currently does not intend to make any payments to
finance distribution expenses pursuant to Rule 12b- I under the 1940 Act or
otherwise, although it may make such payments in the future. The Fund has
adopted a "no fee" or "defensive" Rule 12b- 1 Plan under which it makes no
payments for distribution expenses. To the extent that it decides to finance
distribution expenses pursuant to Rule 12b- 1, the Fund undertakes to have a
board of trustees, a majority of whom are not interested persons of the Fund,
formulate and approve any plan under Rule 12b- I to finance distribution
expenses.
2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Indiana and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Indiana to the extent required to perform this
Agreement.
2.7. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with t he laws of the State of Indiana and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
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2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under all applicable
federal and state securities laws and that the Adviser shall perform its
obligations for the Fund in compliance in all material respects with the laws of
the State of Indiana and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(l) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company. The Fund and the Underwriter agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agree to notify the Company immediately in
the event that such coverage no longer applies.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, and that said bond is issued by a reputable bonding company, includes
coverage for larceny and embezzlement, and is in an amount not less than $5
million. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE Ill. PROSPECTUSES AND PROXY STATEMENTS: VOTING
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund shall provide cameraready film containing the Fund's
prospectus and Statement of Additional Information, and such other assistance as
is reasonably necessary in order for the Company once each year (or more
frequently if the prospectus and/or Statement of Additional Information for the
Fund is amended during the year) to have the prospectus for the Contracts and
the Fund's prospectus printed together in one document, and to have the
Statement of Additional Information for the Fund and the Statement of Additional
Information for the Contracts printed together in one document. Alternatively,
the Company may print the Fund's prospectus and/or its Statement of Additional
Information in combination with other fund companies' prospectuses and
statements of additional information. Except as provided in the following three
sentences, all expenses of printing and distributing Fund prospectuses and
Statements of Additional Information shall be the expense of the Company. For
prospectuses and Statements of Additional Information provided by the Company to
its existing owners of Contracts in order to update disclosure as required by
the 1933 Act and/or the 1940 Act, the cost of printing shall be borne by the
Fund. If the Company chooses to receive camera-ready film in lieu of receiving
printed copies of the Fund's prospectus, the Fund
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will reimburse the Company in an amount equal to the product of A and B where A
is the. number of such prospectuses distributed to owners of the Contracts, and
B is the Fund's per unit cost of typesetting and printing the Fund's prospectus.
The same procedures shall be followed with respect to the Fund's Statement of
Additional Information.
The Company agrees to provide the Fund or its designee with such
information as may be reasonably requested by the Fund to assure that the Fund's
expenses do not include the cost of printing any prospectuses or Statements of
Additional Information other than those actually distributed to existing owners
of the Contracts.
3.2. The Fund's prospectus shall state that the Statement of
Additional Information for the Fund is available from the Underwriter or the
Company (or in the Fund's discretion, the Prospectus shall state that such
Statement is available from the Fund).
3.3. The Fund, at its expense, shall provide the Company with
copies of its proxy statements, reports to shareholders, and other
communications (except for prospectuses and Statements of Additional
Information, which, are covered in Section 3. 1) to shareholders in such
quantity as the Company shall reasonably require for distributing to Contract
owners.
3.4. If and to the extent required by law the Company shall:
(i) solicit voting instructions from Contract owners;
(ii) vote the Fund shares in accordance with
instructions received from Contract owners; and
(iii) vote Fund shares for which no instructions have
been received in a particular separate account in
the same proportion as Fund shares of such
portfolio for which instructions have been received
in that separate account,
so long as and to the extent that the Securities and Exchange Commission
continues to interpret the 1940 Act to require pass-through voting privileges
for variable contract owners. The Company reserves the right to vote Fund shares
held in any segregated asset account in its own right, to the extent permitted
by law. Participating Insurance Companies shall be responsible for assuring that
each of their separate accounts participating in the Fund calculates voting
privileges in a manner consistent with the standards set forth on Schedule B
attached hereto and incorporated herein by this reference, which standards will
also be provided to the other Participating Insurance Companies.
3.5. The Fund will comply with all provisions of the 1940 Act
requiring voting by shareholders, and in particular the Fund will either provide
for annual meetings or comply with Section 16(c) of the 1940 Act (although the
Fund is not one of the trusts described in Section 16(c) of that Act) as well as
with Sections 16(a) and, if and when applicable, 16(b). Further, the Fund will
act in accordance with the Securities and Exchange Commission's interpretation
of the requirements of Section 16(a) with respect to periodic elections of
trustees and with whatever rules the Commission may promulgate with respect
thereto.
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ARTICLE IV. SALES MATERIAL AND INFORMATION
4.1. The Company shall furnish, or shall cause to be furnished, to
the Fund or its designee, each piece of sales literature or other promotional
material in which the Fund or its investment adviser or the Underwriter is
named, at least ten Business Days prior to its use. No such material shall be
used if the Fund or its designee reasonably objects to such use within ten
Business Days after receipt of such material.
4.2. The Company shall not give any information or make any
representations or statements on behalf of the Fund or concerning the Fund in
connection with the sale of the Contracts other than the information or
representations contained in the registration statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee or by the Underwriter, except with the permission of the Fund or the
Underwriter or the designee of either.
4.3. The Fund, Underwriter, or its designee shall furnish, or
shall cause to be furnished, to the Company or its designee, each piece of sales
literature or other promotional material in which the Company and/or its
separate account(s), is named at least ten Business Days prior to its use. No
such material shall be used if the Company or its designee reasonably objects to
such use within ten Business Days after receipt of such material.
4.4. The Fund and the Underwriter shall not give any information
or make any representations on behalf of the Company or concerning the Company,
each Account, or the Contracts other than the information or representations
contained in a registration statement or prospectus for the Contracts, as such
registration statement and prospectus may be amended or supplemented from time
to time, or in published reports for each Account which are in the public domain
or approved by the Company for distribution to Contract owners, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
4.5. The Fund will provide to the Company at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, proxy statements, sales literature and other promotional
materials, applications for exemptions, requests for no-action letters, and all
amendments to any of the above, that relate to the Fund or its shares, within 30
days of the filing of such document with the Securities and Exchange Commission
or other regulatory authorities.
4.6. The Company will provide to the Fund at least one complete
copy of all registration statements, prospectuses, Statements of Additional
Information, reports, solicitations for voting instructions, sales literature
and other promotional materials, applications for exemptions, requests for no
action letters, and all amendments to any of the above, that relate to
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the Contracts or each Account and their investment in the Fund, within 30 days
of the filing of such document with the SEC or other regulatory authorities.
4.7. For purposes of this Article IV, the phrase "sales literature
or other promotional material" includes, but is not limited to, any of the
following that refer to the Fund or any affiliate of the Fund: advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media), sales
literature (IE., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, and registration statements,
prospectuses, Statements of Additional Information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under NASD rules, the 1940 Act or the 1933 Act.
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b- I to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund. Currently, no such payments are contemplated.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
ARTICLE VI. DIVERSIFICATION
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6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretative letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of any Portfolio are being managed; (e) a difference in voting
instructions given by variable annuity contract and variable life insurance
contract owners; or (f) a decision by an insurer to disregard the voting
instructions of contract owners. The Board shall promptly inform the Company if
it determines that an irreconcilable material conflict exists and the
implications thereof.
7.2. The Company will report any potential or existing conflicts
of which it is aware to the Board. The Company will assist the Board in carrying
out its responsibilities under the Shared Funding Exemptive Order, by providing
the Board with all information reasonably necessary for the Board to consider
any issues raised. This includes, but is not limited to, an obligation by the
Company to inform the Board whenever contract owner voting instructions are
disregarded.
7.3. If it is determined by a majority of the Board, or a majority
of its disinterested trustees, that a material irreconcilable conflict exists,
the Company and other Participating Insurance Companies shall, at their expense
and to the extent reasonably practicable (as determined by a majority of the
disinterested trustees), take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, up to and including: (1),
withdrawing the assets allocable to some or all of the separate accounts from
the Fund or any Portfolio and reinvesting such assets in a different investment
medium, including (but not limited to) another Portfolio of the Fund, or
submitting the question whether such segregation should be implemented to a vote
of all affected Contract owners and, as appropriate, segregating the assets of
any appropriate group (i.e., annuity contract owners, life insurance contract
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such
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segregation, or offering to the affected contract owners the option of making
such a change; and (2), establishing a new registered management investment
company or managed separate account.
7.4. If a material irreconcilable conflict arises because of a
decision by the Company to disregard contract owner voting instructions and that
decision represents a minority position or would preclude a majority vote, the
Company may be required, at the Fund's election, to withdraw the affected
Account's investment in the Fund and terminate this Agreement with respect to
such Account; provided, however that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable conflict
as determined by a majority of the disinterested members of the Board. Any such
withdrawal and termination must take place within six (6) months after the Fund
gives written notice that this provision is being implemented, and until the end
of that six month period the Underwriter and Fund shall continue to accept and
implement orders by the Company for the purchase (and redemption) of shares of
the Fund.
7.5. If a material irreconcilable conflict arises because a
particular state, insurance regulator's decision applicable to the Company
conflicts with the majority of other state regulators, then the Company will
withdraw the affected Account's investment in the Fund and terminate this
Agreement with respect to such Account within six months after the Board informs
the Company in writing that it has determined that such decision has created an
irreconcilable material conflict; provided, however, that such withdrawal and
termination shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested members
of the Board. Until the end of the foregoing six month period, the Underwriter
and Fund shall continue to accept and implement orders by the Company for the
purchase (and redemption) of shares of the Fund.
7.6. For purposes of Sections 7.3 through 7.6 of this Agreement, a
majority of the disinterested members of the Board shall determine whether any
proposed action adequately remedies any irreconcilable material conflict, but in
no event will the Fund be required to establish a new funding medium for the
Contracts. The Company shall not be required by Section 7.3 to establish a new
funding medium for the Contracts if an offer to do so has been declined by vote
of a majority of Contract owners materially adversely affected by the
irreconcilable material conflict. In the event that the Board determines that
any proposed action does not adequately remedy any irreconcilable material
conflict, then the Company will withdraw the Account's investment in the Fund
and terminate this Agreement within six (6) months after the Board informs the
Company in writing of the foregoing determination, provided, however, that such
withdrawal and termination shall be limited to the extent required by any such
material irreconcilable conflict as determined by a majority of the
disinterested members of the Board.
7.7. If and to the extent that Rule 6e-2 and Rule 6e-3(T) are
amended, or Rule 6e-3 is adopted, to provide exemptive relief from any provision
of the Act or the rules promulgated thereunder with respect to mixed or shared
funding (as defined in the Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then (a) the Fund and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable; and (b) Sections 3.4, 3.5, 7. 1,
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7.2, 7.3, 7.4, and 7.5 of this Agreement shall continue in effect only to the
extent that terms and conditions substantially identical to such Sections are
contained in such Rule(s) as so amended or adopted.
ARTICLE VIII. INDEMNIFICATION
8.1. INDEMNIFICATION BY THE COMPANY
8.1 (a). The Company agrees to indemnify and hold harmless the
Fund and each trustee of the Board and officers and each person, if any, who
controls the Fund within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8. 1)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Company) or litigation (including
reasonable legal and other expenses), to which the Indemnified Parties may
become subject under any statute, regulation, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof) or settlements are related to the sale or acquisition of the
Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statements or
alleged untrue statements of any material fact contained in
the Registration Statement or prospectus for the Contracts
or contained in the Contracts or sales literature for the
Contracts (or any amendment or supplement to any of the
foregoing), or arise out of or are based upon the omission
or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Company by
or on behalf of the Fund for use in the Registration
Statement or prospectus for the Contracts or in the
Contracts or sales literature (or any amendment or
supplement) or otherwise for use in connection with the
sale of the Contracts or Fund shares; or
(ii) arise out of or as a result of any untrue statements or
representations (other' than statements or representations
contained in the Registration Statement, prospectus or
sales literature of the Fund not supplied by the Company,
or persons under its control) or willful misfeasance, bad
faith, or gross negligence of the Company or persons under
its control, with respect to the sale or distribution of
the Contracts or Fund Shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a Registration
Statement, prospectus, or sales literature of the Fund or
any amendment thereof or supplement thereto or the omission
or alleged omission to state therein a material fact
required to be stated therein or necessary to make the
statements therein not misleading if such a statement or
omission was
12
<PAGE>
made in reliance upon information furnished to the Fund by
or on behalf of the Company; or
(iv) arise as a result of any failure by the Company to provide
the services and furnish the materials under the terms of
this Agreement; or
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Company in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Company, as limited by and
in accordance with the provisions of Sections 8. 1 (b) and
8. 1 (c) hereof.
8.1 (b). The Company shall not be liable under this
indemnification provision with respect to any losses,
claims, damages, liabilities or litigation incurred or
assessed against an Indemnified Party as such may arise
from such Indemnified Party's willful misfeasance, bad
faith, or gross negligence in the performance of such
Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations or duties under
this Agreement or to the Fund, whichever is applicable.
8.1 (c). The Company shall not be liable under this
indemnification provision with respect to any claim made
against an Indemnified Party unless such Indemnified Party
shall have notified the Company in writing within a
reasonable time after the summons or other first legal
process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such
Indemnified Party shall have received notice of such
service on any designated agent), but failure to notify the
Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified
Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, the
Company shall be entitled to participate, at its own
expense, in the defense of such action. The Company also
shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action.
After notice from the Company to such party of the
Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any
additional counsel retained by it, and the Company will not
be liable to such party under this Agreement for any legal
or other expenses subsequently incurred by such party
independently in connection with the defense thereof other
than reasonable costs of investigation.
8.1 (d). The Indemnified Parties will promptly notify the Company
of the commencement of any litigation or proceedings
against them in connection with the issuance or sale of the
Fund Shares or the Contracts or the operation of the Fund.
8.2. INDEMNIFICATION BY THE UNDERWRITER
13
<PAGE>
8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Underwriter) or litigation
(including reasonable legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements are related to the sale or acquisition of the Fund's
shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
the Registration Statement or prospectus or sales
literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon
the omission or the alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statements therein not misleading, provided that
this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such
alleged statement or omission was made in reliance upon and
in conformity with information furnished to the Underwriter
or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in
sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of the
Contracts or Fund shares; or
(ii) arise out of or as a result of any untrue statements or
representations (other than statements or representations
contained in the Registration Statement, prospectus or
sales literature for the Contracts not supplied by the
Underwriter or persons under its control) or willful
misfeasance, bad faith, or gross negligence of the Fund,
Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or
Fund shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained. in a Registration
Statement, prospectus, or sales literature covering the
Contracts, or any amendment thereof or supplement thereto,
or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if
such statement or omission was made in reliance upon
information furnished to the Company by or on behalf of the
Fund; or
(iv) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure, whether unintentional or in
good faith or otherwise, to comply with the diversification
requirements specified in Article VI of this Agreement); or
14
<PAGE>
(v) arise out of or result from any material breach of any
representation and/or warranty made by the Underwriter in
this Agreement or arise out of or result from any other
material breach of this Agreement by the Underwriter; as
limited by and in accordance with the provisions of
Sections 8.2(b) and 8.2(c) hereof
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims, damages,
liabilities or litigation to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an Indemnified
Party unless such Indemnified Party shall have notified the Underwriter in
writing within a reasonable time after the summons or other first legal process
giving information of the nature of the claim shall have been served upon such
Indemnified Party (or, after such Indemnified Party shall have received notice
of such service on any designated agent), but failure to notify the Underwriter
of any such claim shall not relieve the Underwriter from any liability which it
may have to the Indemnified Party against whom such action is brought otherwise
than on account of this indemnification provision. In case any such action is
brought against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. The Underwriter also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the Indemnified
Party shall bear the fees and expenses of any additional counsel retained by it,
and the Underwriter will not be liable to such party under this Agreement for
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
8.2(d). The Company agrees promptly to notify the Underwriter of
the commencement of any litigation or proceedings against it or any of its
officers or directors in connection with the issuance or sale of the Contracts
or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
8.3(a). The Fund agrees to indemnify and hold harmless the
Company, and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.3)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Fund) or litigation (including
reasonable legal and other expenses) to which the Indemnified Parties may become
subject under any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect thereof) or
settlements result from the gross negligence, bad faith or willful misconduct of
the Board or any member thereof, are related to the operations of the Fund and:
15
<PAGE>
(i) arise as a result of any failure by the Fund to provide the
services and furnish the materials under the terms of this
Agreement (including a failure to comply with the
diversification requirements specified in Article VI of
this Agreement); or
(ii) arise out of or result from any material breach of any
representation and/or warranty made by the Fund in this
Agreement or arise out of or result from any other material
breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections 8.3(b) and
8.3(c) hereof.
8.3(b). The Fund shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against an Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
the Company, the Fund, the Underwriter or each Account, whichever is applicable.
83(c). The Fund shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Fund in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Fund of any
such claim shall not relieve the Fund from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Fund will be entitled to participate, at
its own expense, in the defense thereof. The Fund also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees and
expenses of any additional counsel retained by it; and the Fund will not be
liable to such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with the defense
thereof other than reasonable costs of investigation.
8.3(d). The Company and the Underwriter agree promptly to notify
the Fund of the commencement of any litigation or proceedings against it or any
of its respective officers or directors in connection with this Agreement, the
issuance or sale of the Contracts, with respect to the operation of either
Account, or the sale or acquisition of shares of the Fund.
ARTICLE IX. APPLICABLE LAW
9.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
16
<PAGE>
9.2. This Agreement shall be subject to the provisions of the
1933, 1934 and 1940 acts, and the rules and regulations and rulings thereunder,
including such exemptions from those statutes, rules and regulations as the
Securities and Exchange Commission may grant (including, but not limited to, the
Shared Funding Exemptive Order) and the terms hereof shall be interpreted and
construed in accordance therewith.
ARTICLE X. TERMINATION
10.1. This Agreement shall continue in full force and effect until
the first to occur of:
(a) termination by any party for any reason by six months
advance written notice delivered to the other parties; or
(b) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio based
upon the Company's determination that shares of such
Portfolio are not reasonably available to meet the
requirements of the Contracts; or
(c) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event any of the Portfolio's shares are not registered,
issued or sold in accordance with applicable state and/or
federal law or such law precludes the use of such shares as
the underlying investment media of the Contracts issued or
to be issued by the Company; or
(d) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio ceases to qualify as a Regulated
Investment Company under Subchapter M of the Code or under
any successor or similar provision, or if the Company
reasonably believes that the Fund may fail to so qualify;
or
(e) termination by the Company by written notice to the Fund
and the Underwriter with respect to any Portfolio in the
event that such Portfolio fails to meet the diversification
requirements specified in Article VI hereof, or
(f) termination by either the Fund or the Underwriter by
written notice to the Company, if either one or both of the
Fund or the Underwriter respectively, shall determine, in
their sole judgment exercised in good faith, that the
Company and/or its affiliated companies has suffered a
material adverse change in its business, operations,
financial condition or prospects since the date of this
Agreement or is the subject of material adverse publicity;
or
17
<PAGE>
(g) termination by the Company by written notice to the Fund
and the Underwriter, if the Company shall determine, in its
sole judgment exercised in good faith, that either the Fund
or the Underwriter has suffered a material adverse change
in its business, operations, financial condition or
prospects since the date of this Agreement or is the
subject of material adverse publicity; or
(h) the requisite vote of the Contract owners having an
interest in a Portfolio (unless otherwise required by
applicable law) and written approval of the Company, to
substitute the shares of another investment company for the
corresponding shares of a Portfolio in accordance with the
terms of the Contracts; or
(i) at the option of the Fund, upon institution of formal
proceedings against the Company by the NASD, the SEC, the
insurance commission of any state or any other regulatory
body regarding the Company's duties under this Agreement or
related to the sale of the Contracts, the operation of the
Account, the administration of the Contracts or the
purchase of Fund shares, or an expected or anticipated
ruling, judgment or outcome which would, in the Fund's
reasonable judgment, materially impair the Company's
ability to perform the Company's obligations and duties
hereunder; or
(j) at the option of the Company, upon institution of formal
proceedings against the Fund, the Underwriter, the Fund's
investment adviser or any sub-adviser, by the NASD, the
SEC, or any state securities or insurance commission or any
other regulatory body regarding the duties of the Fund or
the Underwriter under this Agreement, or an expected or
anticipated ruling, judgment or outcome which would, in the
Company's reasonable judgment, materially impair the Fund's
or the Underwriter's ability to perform the Fund's or the
Underwriter's obligations and duties hereunder; or
(k) at the option of the Company, upon institution of formal
proceedings against the Fund's investment adviser of any
sub-adviser by the NASD, the SEC, or any state securities
or insurance commission or any other regulatory body which
would, in the good faith opinion of the Company, result in
material harm to the Accounts, the Company or Contract
owners.
10.2. EFFECT OF Termination. Notwithstanding any termination of
this Agreement, the Fund and the Underwriter shall at the option of the Company,
continue to make available additional shares of the Fund pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (hereinafter referred to as "Existing
Contracts"). Specifically, without limitation, the owners of the Existing
Contracts shall be permitted to reallocate investments in the Fund, redeem
investments in the Fund and/or invest in the Fund upon the making of additional
purchase payments under the Existing Contracts. The parties agree that this
Section 10.2 shall
18
<PAGE>
not apply to any terminations under Article VII and the effect of such Article
VII terminations shall be governed by Article VII of this Agreement
10.3 The Company shall not redeem Fund shares attributable to the
Contracts (as opposed to Fund shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract Owner initiated or
approved transactions, or (ii) as required by state and/or federal laws or
regulations or judicial or other legal precedent of general application
(hereinafter referred to as a "Legally Required Redemption") or (iii) as
permitted by an order of the SEC pursuant to Section 26(b) of the 1940 Act. Upon
request, the Company will promptly furnish to the Fund and the Underwriter the
opinion of counsel for the Company (which counsel shall be reasonably
satisfactory to the Fund and the Underwriter) to the effect that any redemption
pursuant to clause (ii) above is a Legally Required Redemption. Furthermore,
except in cases where permitted under the terms of the Contracts, the Company
shall not prevent Contract Owners from allocating payments to a Portfolio that
was otherwise available under the Contracts without first giving the Fund or the
Underwriter 90 days notice of its intention to do so.
10.4 Notwithstanding any other provision of this Agreement, each
party's obligation under Article VII to indemnify the other parties shall
survive termination of this Agreement, to the extent that the events giving rise
to the obligation to indemnify the other party occurred prior to the date of
termination.
ARTICLE XI. NOTICES
Any notice -shall be sufficiently given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as such party may from time to time specify in writing
to the other party.
If to the Fund:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
If to the Company:
Lincoln National Life Insurance Company
1300 S. Clinton Street
Fort Wayne, Indiana 46802
Attention: Kelly D. Clevenger
If to the Underwriter:
82 Devonshire Street
Boston, Massachusetts 02109
Attention: Treasurer
ARTICLE X11. MISCELLANEOUS
19
<PAGE>
12.1 All persons dealing with the Fund must look solely to the
property of the Fund for the enforcement of any claims against the Fund as
neither the Board, officers, agents or shareholders assume any personal
liability for obligations entered into on behalf of the Fund.
12.2 Subject to the requirements of legal process and regulatory
authority, each party hereto shall treat as confidential the names and addresses
of the owners of the Contracts and all information reasonably identified as
confidential in writing by any other party hereto and, except as permitted by
this Agreement, shall not disclose, disseminate or utilize such names and
addresses and other confidential information until such time as it may come into
the public domain without the express written consent of the affected party.
12.3 The captions in this Agreement are included for convenience
of reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
12.4 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
12.5 If any provision of this Agreement shall be held or made
invalid by a court decision, statute, rule or otherwise, the remainder of the
Agreement shall not be affected thereby.
12.6 Each party hereto shall cooperate with each other party and
all appropriate governmental authorities (including without limitation the SEC,
the NASD and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.
Notwithstanding the generality of the foregoing, each party hereto further
agrees to furnish the Indiana Insurance Commissioner with any non-privileged
information or reports in connection with services provided under this Agreement
which such Commissioner may request in order to ascertain whether the insurance
operations of the Company are being conducted in a manner consistent with the
Indiana Insurance Regulations and any other applicable law or regulations.
12.7 The rights, remedies and obligations contained in this
Agreement are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to under
state and federal laws.
12.8. This Agreement or any of the rights and obligations
hereunder may not be assigned by any party without the prior written consent of
all parties hereto; provided, however, that the Underwriter may assign this
Agreement or any rights or obligations hereunder to any affiliate of or company
under common control with the Underwriter, if such assignee is duly licensed and
registered to perform the obligations of the Underwriter under this Agreement
20
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
VARIABLE INSURANCE PRODUCTS FUND II
By:
FIDELITY DISTRIBUTORS CORPORATION
By:
21
<PAGE>
SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Lincoln National Variable Annuity GAC96-111
Separate Account L GAC91-101
</TABLE>
22
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 22, 1998 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts Funded
Date Established by Board of Directors By Separate Account
- -------------------------------------- -------------------
<S> <C>
Lincoln National Variable Annuity Separate GAC96-111
Account L GAC91-101
Lincoln Life Flexible Premium Variable Life
Account M LN605/615 (VUL)
Lincoln Life Flexible Premium Variable Life
Account R SVUL LN650
</TABLE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
VARIABLE INSURANCE PRODUCTS
By:
Name:
Title:
FIDELITY DISTRIBUTORS CORPORATION
By:
Name:
Title:
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities for the
handling of proxies relating to the Fund by the Underwriter, the Fund and the
Company. The defined terms herein shall have the meanings assigned in the
Participation Agreement except that the TERM "Company" shall also include the
department or third party assigned by the Insurance Company to perform the steps
delineated below.
I The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the shareholder
meeting to facilitate the establishment of tabulation procedures. At this
time the Underwriter will inform the Company of the Record, Mailing and
Meeting dates. This will be done in writing approximately two months
before meeting.
2. Promptly after the Record Date, the Company will perform a "tape run", or
other activity, which will generate the names, addresses and number of
units which are attributed to each contractowner/policyholder (the
"Customer.") as of the Record Date. Allowance should be made for account
adjustments made after this date that could affect the status of the
Customers' accounts as of the Record Date.
Note: The number of proxy statements is determined by the activities
described in Step #2. The Company will use its best efforts to call in
the number of Customers to Fidelity, as soon as possible, but no later
than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each Customer by
the Company either before or together with the Customers' receipt of a
proxy statement. Underwriter will provide the last Annual Report to the
Company pursuant to the terms of Section 3.3 of the Agreement to which
this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or "Card")
is provided to the Company by the Fund. The Company, at its expense,
shall produce and personalize the Voting Instruction Cards. The Legal
Department of the Underwriter or its affiliate ("Fidelity Legal") must
approve the Card before it is printed. Allow approximately 2-4 business
days for printing information on the Cards. Information commonly found on
the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification of
votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process due to
possible uncertainties relating to the proposals.)
23
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund will
pay for the Notice of Proxy and the Proxy Statement (one document).
Printed and folded notices and statements will be sent to Company for
insertion into envelopes (envelopes and return envelopes are provided and
paid for by the Insurance Company). Contents of envelope sent to
Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c. return envelope (postage pre-paid by Company) addressed to the
Company or its tabulation agent
d. "urge buckslip" - optional, but recommended. (This is a small,
single sheet of paper that requests Customers to vote as
quickly as possible and that their vote is important. One copy
will be supplied by the Fund.)
e. cover letter - optional, supplied by Company and reviewed and
approved in advance by Fidelity Legal.
6. The above contents should be received by the Company approximately 3-5
business days before mail date. Individual in charge at Company reviews
and approves the contents of the mailing package to ensure correctness
and completeness. Copy of this approval sent to Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the
Company as the shareowner. (A 5-week period is recommended.)
Solicitation time is calculated as calendar days from (but NOT
including) the meeting, counting backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes place
in another department or another vendor depending on process used. An
often used procedure is to sort Cards on arrival by proposal into vote
categories of all yes, no, or mixed replies, and to begin data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not
been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C.
Jones, Trustee," then that is the exact legal name to be printed on the
Card and is the signature needed on the Card.
24
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not signed
properly, they are considered to be NOT RECEIVED for purposes of vote
tabulation. Any Cards that have "kicked out" (e.g. mutilated, illegible)
of the procedure are "hand verified," i.e., examined as to why they did
not complete the system. Any questions on those Cards are usually
remedied individually.
11. There are various control procedures used to ensure proper tabulation of
votes and accuracy of that tabulation. The most prevalent is to sort the
Cards as they first arrive into categories depending upon their vote; an
estimate of how the vote is progressing may then be calculated. If the
initial estimates and the actual vote do not coincide, then an internal
audit of that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then converted
to shares. (It is very important that the Fund receives the tabulations
stated in terms of a percentage and the number of shares.) Fidelity Legal
must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to Fidelity
Legal on the morning of the meeting not later than 10:00 a.m. Boston
time. Fidelity Legal may reasonably request an earlier deadline if
required to calculate the vote in time for the meeting.
14. A Certification of Mailing and Authorization to Vote Shares will be
required from the Company as well as an original copy of the final vote.
Fidelity Legal win provide a standard form for each Certification.
15. The Company will be required to box and archive the Cards received from
the Customers. In the event that any vote is challenged or if otherwise
necessary for legal, regulatory, or accounting purposes, Fidelity Legal
will be permitted reasonable access to such Cards.
16. All arrangements, approvals and "signing-off 'maybe done orally, but must
always be followed up in writing.
25
<PAGE>
SCHEDULE C
Other investment companies currently available under variable annuities or
variable life insurance issued by the Company:
Dreyfus Stock Index Fund
Dreyfus Variable Investment Fund: Small Cap Portfolio
Twentieth Century's TCI Portfolios, Inc.
TCI Growth
TCI Balanced
T. Rowe Price International Series, Inc.
Calvert Responsibly Invested Balanced Portfolio
26
<PAGE>
Separate Account: Lincoln National Variable Annuity Separate Account L
Product(s) Name: Group Variable Annuity 1, 11, and III
Funds Available: Fidelity Investments - Asset Manager
Equity-Income
Growth
American Century - Balanced
Capital Appreciation
Dreyfus - S & P 500 Index
Smallcap
Baron - Asset Fund
Calvert Socially Balanced
Janus - Worldwide
Lynch & Mayer - LN Aggressive Growth
Neuberger & Berman - Partners
T. Rowe Price - International
Vantage Global - LN Social Awareness
<PAGE>
Separate Account: Lincoln Life Flexible Premium Variable Life Account M
Product(s) Name: Variable Universal Life - VUL I
Funds Available: Fidelity Investments - Equity-Income
Asset Manager
Investment Grade Bonds
AIM - Capital Appreciation
Diversified Income
Growth
Value
Delaware - Emerging Markets
Smallcap Value
Trend
MFS - Emerging Growth
Total Return
Utilities
Templeton - Asset Allocation
International
Stock
OpCap - Global Equity
Managed
Bankers Trust - S&P 500 Index
Lincoln Investments - LN Money Market
<PAGE>
Separate Account: Lincoln Life Flexible Premium Variable Life Account R
Product(s) Name: Survivorship Variable Universal Life - SVUL I
Funds Available: Fidelity Investments - Equity-Income
Asset Manager
Investment Grade Bonds
AIM - Capital Appreciation
Diversified Income
Growth
Value
Delaware - Emerging Markets
Smallcap Value
Trend
MFS - Emerging Growth
Total Return
Utilities
Templeton - Asset Allocation
International
Stock
OpCap - Global Equity
Managed
Bankers Trust - S&P 500 Index
Lincoln Investments - LN Money Market
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 1, 1999 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class)
<S> <C> <C>
Lincoln National Variable Annuity Account C 18829, 25982RSC, 28645 0697 Contrafund - Service
Lincoln National Variable Annuity Separate GAC96-1 11 Asset Manager - Initial
Account L GAC9 1 -101
Lincoln Life Flexible Premium Variable Life LN605/615 (VUL) Asset Manager - Initial
Account M LN 605/660 Investment Grade Bond-Initial
Class
Contrafund - Service Class
Lincoln Life Variable Annuity Account Q 28883,28884,28890,28867, Contrafund - Service Class
28868,28891,28903
Lincoln Life Flexible Premium Variable Life SVUL LN650 Investment Grade Bond-Initial
Class
Account R Asset Manager - Initial Class
Contrafund - Service Class
Lincoln Life Flexible Premium Variable Life LN920/921 Contrafund - Service
Account S Asset Manager - Service Class
Lincoln National Life Insurance Company 19476 Contrafund - Service Class
Separate Account 35
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by it its seal to be
hereunder affixed hereto as of the date specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:
Title:
Date VARIABLE INSURANCE TRODUCTS FU S
By:
Name:
Title:
Date FIDELITY DISTRIBUTION
By:
Name
Title:
<PAGE>
Amendment to Schedule C
Effective May 1, 1999
Other investment companies currently available under the separate account listed
in Amended Schedule A:
AIM, American Century, Bankers Trust, Baron, Calvert, Delaware, Dreyfus, Janus,
Kemper, Liberty, Lincoln National, MFS, Neuberger Berman, OpCap, Oppenhiemer, T.
Rowe Price, Templeton
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed In its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
By:
Name:-
Title:
Date VARIABLE INSURANCE PRODUCTS FUND 11
By:
Name:-
Title:
Date FIDELITY DISTRIBUTORS CORPORATION
By:
Name:
Title:
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE OCTOBER 15, 1999 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class)
- -------------------------------------- -------------------------------- ---------------------
<S> <C> <C>
Lincoln National Variable Annuity Account C 18829, 25982RSC, 28645 0697 Contrafund - Service Class
Lincoln National Variable Annuity Separate GAC96-111 Asset Manager - Initial Class
Account L GAC91-101
Lincoln Life Flexible Premium Variable Life LN605/615 (VUL) Asset Manager - Initial Class
Account M LN 605/660 Investment Grade Bond - Initial Class
Contrafund - Service Class
LN680 Contrafund - Service Class
Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, Contrafund - Service Class
28868, 28891, 28903
Lincoln Life Flexible Premium Variable Life SVUL LN650 Investment Grade Bond - Initial Class
Account R Asset Manager - Initial Class
Contrafund - Service Class
Lincoln Life Flexible Premium Variable Life LN920/921 Contrafund - Service Class
Account S Asset Manager - Service Class
Lincoln National Life Insurance Company 19476 Contrafund - Service Class
Separate Account 35
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
---------------------
By:
------------------------
Name: Steven M. Kluever
------------------------
Title: Second Vice President
------------------------
Date VARIABLE INSURANCE PRODUCTS FUNDS II
---------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
Date FIDELITY DISTRIBUTORS CORPORATION
---------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
<PAGE>
PARTICIPATION AGREEMENT
Among
VARIABLE INSURANCE PRODUCTS FUND 111,
FIDELITY DISTRIBUTORS CORPORATION
and
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT, made and entered into as of the ____ day of
October, 1998 by and among THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
(hereinafter the "Company"), an Indiana corporation, on its own behalf and on
behalf of each segregated asset account of the Company set forth on Schedule A
hereto as may be amended from time to time (each such account hereinafter
referred to as the "Account"), and the VARIABLE INSURANCE PRODUCTS FUND III, an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts (hereinafter the "Fund") and FIDELITY DISTRIBUTORS CORPORATION
(hereinafter the "Underwriter"), a Massachusetts corporation.
WHEREAS, the Fund engages in business as an open-end management
investment company and is available to act as the investment vehicle for
separate accounts established for variable life insurance policies and variable
annuity contracts (collectively, the "Variable Insurance Products") to be
offered by insurance companies which have entered into participation agreements
with the Fund and the Underwriter (hereinafter "Participating Insurance
Companies"); and
WHEREAS, the beneficial interest in the Fund is divided into
several series of shares, each representing the interest in a particular managed
portfolio of securities and other assets, any one or more of which may be made
available under this Agreement, as may be amended from time to time by mutual
agreement of the parties hereto (each such series hereinafter referred to as a
"Portfolio"); and
WHEREAS, the Fund has obtained an order from the Securities and
Exchange Commission, dated September 17, 1986 (File No. 812-6422), granting
Participating Insurance Companies and variable annuity and variable life
insurance separate accounts exemptions from the provisions of sections 9(a),
13(a), 15(a), and 15(b) of the Investment Company Act of 1940, as amended,
(hereinafter the "1940 Act") and Rules 6e-2(b) (15) and 6e-3(T) (b) (15)
thereunder, to the extent necessary to permit
1
<PAGE>
shares of the Fund to be sold to and held by variable annuity and variable life
insurance separate accounts of both affiliated and unaffiliated life insurance
companies (hereinafter the "Shared Funding Exemptive Order"); and
WHEREAS, the Fund is registered as an open-end management
investment company under the 1940 Act and its shares are registered under the
Securities Act of 1933, as amended (hereinafter the " 1933 Act"); and
WHEREAS, Fidelity Management & Research Company (the "Adviser")
is duly registered as an investment adviser under the federal Investment
Advisers Act of 1940; and
WHEREAS, the Company has registered or will register certain
variable life insurance and variable annuity contracts under the 1933 Act; and
WHEREAS, each Account is a duly organized, validly existing
segregated asset account, established by resolution of the Board of Directors of
the Company, on the date shown for such Account on Schedule A hereto, to set
aside and invest assets attributable to the aforesaid variable annuity
contracts; and
WHEREAS, the Company has registered or will register each Account
as a unit investment trust under the 1940 Act; and
WHEREAS, the Underwriter is registered as a broker dealer with
the Securities and Exchange Commission ("SEC") under the Securities Exchange Act
of 1934, as amended, (hereinafter the " 1934 Act"), and is a member in good
standing of the National Association of Securities Dealers, Inc. (hereinafter
"NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company intends to purchase shares in the Portfolios on behalf
of each Account to fund certain of the aforesaid variable life insurance and
variable annuity contracts and the Underwriter is authorized to sell such shares
to unit investment trusts such as each Account at net asset value;
NOW, THEREFORE, in consideration of their mutual promises, the
Company, the Fund and the Underwriter agree as follows:
ARTICLE 1. SALE OF FUND SHARES
1.1. The Underwriter agrees to sell to the Company those shares
of the Fund which each Account orders, executing such orders on a daily basis at
the net asset value next computed after receipt by the Fund or its designee of
the order for the shares of the Fund. For purposes of this Section 1. 1, the
Company shall be the designee of the Fund for receipt of such orders from each
Account and receipt by such designee shall
2
<PAGE>
constitute receipt by the Fund; provided that the Fund receives notice of such
order by 9:00 a.m. Boston time on the next following Business Day. "Business
Day" shall mean any day on which the New York Stock Exchange is open for trading
and on which the Fund calculates its net asset value pursuant to the rules of
the Securities and Exchange Commission.
1.2. The Fund agrees to make its shares available indefinitely for
purchase at the applicable net asset value per share by the Company and its
Accounts on those days on which the Fund calculates its net asset value pursuant
to rules of the Securities and Exchange Commission and the Fund shall use
reasonable efforts to calculate such net asset value on each day which the New
York Stock Exchange is open for trading. Notwithstanding the foregoing, the
Board of Trustees of the Fund (hereinafter the "Board") may refuse to sell
shares of any Portfolio to any person, or suspend or terminate the offering of
shares of any Portfolio if such action is required by law or by regulatory
authorities having jurisdiction or is, in the sole discretion of the Board
acting in good faith and in light of their fiduciary duties under federal and
any applicable state laws, necessary in the best interests of the shareholders
of such Portfolio.
1.3. The Fund and the Underwriter agree that shares of the Fund
will be sold only to Participating Insurance Companies and their separate
accounts. No shares of any Portfolio will be sold to the general public.
1.4. The Fund and the Underwriter will not sell Fund shares to any
insurance company or separate account unless an agreement containing provisions
substantially the same as Articles I, III, V, VII and Section 2.5 of Article 11
of this Agreement is in effect to govern such sales.
1.5. The Fund agrees to redeem for cash, on the Company's request,
any full or fractional shares of the Fund held by the Company, executing such
requests on a daily basis at the net asset value next computed after receipt by
the Fund or its designee of the request for redemption. For purposes of this
Section 1.5, the Company shall be the designee of the Fund for receipt of
requests for redemption from each Account and receipt by such designee shall
constitute receipt by the Fund; provided that the Fund receives notice of such
request for redemption on the next following Business Day.
1.6. The Company agrees that purchases and redemptions of
Portfolio shares offered by the then current prospectus of the Fund shall be
made in accordance with the provisions of such prospectus. The Company agrees
that all net amounts available under the variable life insurance or variable
annuity contracts with the form number(s) which are listed on Schedule A
attached hereto and incorporated herein by this reference, as such Schedule A
may be amended from time to time hereafter by mutual written agreement of all
the parties hereto, (the "Contracts") shall be invested in the Fund, in such
other Funds advised by the Adviser as may be mutually agreed to in writing by
the parties hereto, or in the Company's general account, provided that such
amounts may also be invested in one or more investment companies other than the
Fund.
3
<PAGE>
1.7. The Company shall pay for Fund shares on the next Business
Day after an order to purchase Fund shares is made in accordance with the
provisions of Section 1.1 hereof. Payment shall be in federal funds transmitted
by wire. For purpose of Section 2. 10 and 2.11, upon receipt by the Fund of the
federal funds so wired, such funds shall cease to be the responsibility of the
Company and shall become the responsibility of the Fund.
1.8. Issuance and transfer of the Fund's shares will be by book
entry only. Stock certificates will not be issued to the Company or any Account.
Shares ordered from the Fund will be recorded in an appropriate title for each
Account or the appropriate subaccount of each Account.
1.9. The Fund shall furnish same day notice (by wire or telephone,
followed by written confirmation) to the Company of any income, dividends or
capital gain distributions payable on the Fund's shares. The Company hereby
elects to receive all such income dividends and capital gain distributions as
are payable on the Portfolio shares in additional shares of that Portfolio. The
Company reserves the night to revoke this election and to receive all such
income dividends and capital gain distributions in cash. The Fund shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall make the net asset value per share for each
Portfolio available to the Company or its designee on a daily basis as soon as
reasonably practical after the net asset value per share is calculated (normally
by 6:30 p.m. Boston time) and shall use its best efforts to make such net asset
value per share available by 7 p.m. Boston time.
ARTICLE 11. REPRESENTATIONS AND WARRANTIES
2.1. The Company represents and warrants that the Contracts are
or will be registered under the 1933 Act unless an exemption from registration
is available and an opinion of counsel to that effect shall have been furnished
to the Fund; that the Contracts will be issued and sold in compliance in all
material respects with all applicable Federal and State laws. The Company
further represents and warrants that it is an insurance company duly organized
and validly existing under applicable law and that it has legally and validly
established each Account prior to any issuance or sale thereof as a segregated
asset account under Section 27-1-5-1 of the Indiana Insurance Code and has
registered or, prior to any issuance or sale of the Contracts, will register
each Account as a unit investment trust in accordance with the provisions of the
1940 Act to serve as a segregated investment account for the Contracts.
2.2. The Fund represents and warrants that Fund shares sold
pursuant to this Agreement shall be registered under the 1933 Act, duly
authorized for issuance and
4
<PAGE>
sold in compliance with the laws of the State of Indiana and all applicable
federal and state securities laws and that the Fund is and shall remain
registered under the 1940 Act. The Fund shall amend the Registration Statement
for its shares under the 1933 Act and the 1940 Act from time to time as required
in order to effect the continuous offering of its shares. The Fund shall
register and qualify the shares for sale in accordance with the laws of the
various states only if and to the extent deemed advisable by the Fund or the
Underwriter.
2.3. The Fund represents that it is currently qualified as a
Regulated Investment Company under Subchapter M of the Internal Revenue Code of
1986, as amended, (the "Code") and that it will make every effort to maintain
such qualification (under Subchapter M or any successor or similar provision)
and that it will notify the Company immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.
2.4. The Company represents that the Contracts are currently
treated as life insurance policies or annuity insurance contracts under
applicable provisions of the Code; that it will make every effort to maintain
such treatment; and that it will notify the Fund and the Underwriter immediately
upon having a reasonable basis for believing that the Contracts have ceased to
be so treated or that they might not be so treated in the future.
2.5. (a) With respect to Initial Class shares, the Fund currently
does not intend to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act or otherwise, although it may make such
payments in the future. The Fund has adopted a "no fee" or "defensive" Rule
l2b-1 Plan under which it makes no payments for distribution expenses. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
the Fund undertakes to have a board of trustees, a majority of whom are not
interested persons of the Fund, formulate and approve any plan under Rule 12b-1
to finance distribution expenses.
(b) With respect to Service Class shares, the Fund has
adopted a Rule 12b-1 Plan under which it makes payments to finance distribution
expenses. The Fund represents and warrants that it has a board of trustees, a
majority of whom are not interested persons of the Fund, which has formulated
and approved the Fund's Rule 12b-1 Plan to finance distribution expenses of the
Fund and that any changes to the Fund's Rule 12b-1 Plan will be approved by a
similarly constituted board of trustees.
2.6. The Fund makes no representation as to whether any aspect of
its operations (including, but not limited to, fees and expenses and investment
policies) complies with the insurance laws or regulations of the various states
except that the Fund represents that the Fund's investment policies, fees and
expenses are and shall at all times remain in compliance with the laws of the
State of Indiana and the Fund and the Underwriter represent that their
respective operations are and shall at all times remain in material compliance
with the laws of the State of Indiana to the extent required to perform this
Agreement.
5
<PAGE>
2.7. The Underwriter represents and warrants that it is a member
in good standing of the NASD and is registered as a broker-dealer with the SEC.
The Underwriter further represents that it will sell and distribute the Fund
shares in accordance with the laws of the State of Indiana and all applicable
state and federal securities laws, including without limitation the 1933 Act,
the 1934 Act, and the 1940 Act.
2.8. The Fund represents that it is lawfully organized and validly
existing under the laws of the Commonwealth of Massachusetts and that it does
and will comply in all material respects with the 1940 Act.
2.9. The Underwriter represents and warrants that the Adviser is
and shall remain duly registered in all material respects under the Investment
Advisers Act of 1940 and that the Adviser shall perform its obligations for the
Fund in compliance in all material respects with the laws of the State of
Indiana and any applicable state and federal securities laws.
2.10. The Fund and Underwriter represent and warrant that all of
their directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
and shall continue to be at all times covered by a blanket fidelity bond or
similar coverage for the benefit of the Fund in an amount not less than the
minimal coverage as required currently by Rule 17g-(1) of the 1940 Act or
related provisions as may be promulgated from time to time. The aforesaid Bond
shall include coverage for larceny and embezzlement and shall be issued by a
reputable bonding company. The Fund and the Underwriter agree to make all
reasonable efforts to see that this bond or another bond containing these
provisions is always in effect, and agree to notify the Company immediately in
the event that such coverage no longer applies.
2.11. The Company represents and warrants that all of its
directors, officers, employees, investment advisers, and other
individuals/entities dealing with the money and/or securities of the Fund are
covered by a blanket fidelity bond or similar coverage for the benefit of the
Fund, and that said bond is issued by a reputable bonding company, includes
coverage for larceny and embezzlement, and is in an amount not less than $5
million. The Company agrees to make all reasonable efforts to see that this bond
or another bond containing these provisions is always in effect, and agrees to
notify the Fund and the Underwriter in the event that such coverage no longer
applies.
ARTICLE 111. PROSPECTUSES AND PROXY STATEMENTS; VOTING
3.1. The Underwriter shall provide the Company with as many
printed copies of the Fund's current prospectus and Statement of Additional
Information as the Company may reasonably request. If requested by the Company
in lieu thereof, the Fund
6
<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
7
<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
8
<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.
9
<PAGE>
ARTICLE V. FEES AND EXPENSES
5.1. The Fund and Underwriter shall pay no fee or other
compensation to the Company under this agreement, except that if the Fund or any
Portfolio adopts and implements a plan pursuant to Rule 12b- I to finance
distribution expenses, then the Underwriter may make payments to the Company or
to the underwriter for the Contracts if and in amounts agreed to by the
Underwriter in writing and such payments will be made out of existing fees
otherwise payable to the Underwriter, past profits of the Underwriter or other
resources available to the Underwriter. No such payments shall be made directly
by the Fund.
5.2. All expenses incident to performance by the Fund under this
Agreement shall be paid by the Fund. The Fund shall see to it that all its
shares are registered and authorized for issuance in accordance with applicable
federal law and, if and to the extent deemed advisable by the Fund, in
accordance with -applicable state laws prior to their sale. The Fund shall bear
the expenses for the cost of registration and qualification of the Fund's
shares, preparation and filing of the Fund's prospectus and registration
statement, proxy materials and reports, setting the prospectus in type, setting
in type and printing the proxy materials and reports to shareholders (including
the costs of printing a prospectus that constitutes an annual report), the
preparation of all statements and notices required by any federal or state law,
and all taxes on the issuance or transfer of the Fund's shares.
5.3. The Company shall bear the expenses of distributing the
Fund's prospectus, proxy materials and reports to owners of Contracts issued by
the Company.
ARTICLE VI. DIVERSIFICATION
6.1. The Fund will at all times invest money from the Contracts in
such a manner as to ensure that the Contracts will be treated as variable
contracts under the Code and the regulations issued thereunder. Without limiting
the scope of the foregoing, the Fund will at all times comply with Section
817(h) of the Code and Treasury Regulation 1.817-5, relating to the
diversification requirements for variable annuity, endowment, or life insurance
contracts and any amendments or other modifications to such Section or
Regulations. In the event of a breach of this Article VI by the Fund, it will
take all reasonable steps (a) to notify Company of such breach and (b) to
adequately diversify the Fund so as to achieve compliance within the grace
period afforded by Regulation 1.817-5.
ARTICLE VII. POTENTIAL CONFLICTS
7.1. The Board will monitor the Fund for the existence of any
material irreconcilable conflict between the interests of the contract owners of
all separate accounts investing in the Fund. An irreconcilable material conflict
may arise for a variety
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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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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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(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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8.2(a). The Underwriter agrees to indemnify and hold harmless the
Company and each of its directors and officers and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" for purposes of this Section 8.2)
against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter) or
litigation (including legal and other expenses) to which the Indemnified
Parties may become subject under any statute, at common law or otherwise,
insofar as such losses, claims, damages, liabilities or expenses (or
actions in respect thereof) or settlements are related to the sale or
acquisition of the Fund's shares or the Contracts and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration
Statement or prospectus or sales literature of the Fund (or any
amendment or supplement to any of the or the foregoing), or arise out
of or are based upon the omission or the alleged omission to state
therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if
such statement or omission or such alleged statement or omission was
made in reliance upon and in conformity with information furnished to
the Underwriter or Fund by or on behalf of the Company for use in the
Registration Statement or prospectus for the Fund or in sales
literature (or any amendment or supplement to any of the foregoing)
or otherwise for use in connection with the sale of the Contracts or
Fund shares; or
(ii) arise out of or as a result of untrue statements or representations
(other than statements or representations contained in the
Registration Statement, prospectus or sales literature for the
Contracts not supplied by the Underwriter or persons under its
control) or willful misfeasance, bad faith, or gross negligence of
the Fund, Adviser or Underwriter or persons under their control, with
respect to the sale or distribution of the Contracts or Fund shares;
or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a Registration Statement, prospectus, or
sales literature covering the Contracts, or any amendment thereof or
supplement thereto, or the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to
make the statement or statements therein not misleading, if such
statement or omission was made in reliance upon information furnished
to the Company by or on behalf of the Fund; or
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(iv) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement
(including a failure, whether unintentional or in good faith or
otherwise, to comply with the diversification requirements specified
in Article VI of this Agreement); or
(v) arise out of or result from any material breach of any representation
and/or warranty made by the Underwriter in this Agreement or arise
out of or result from any other material breach of this Agreement by
the Underwriter; as limited by and in accordance with the provisions
of Sections 8.2(b) and 8.2(c) hereof.
8.2(b). The Underwriter shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation to which an Indemnified Party
would otherwise be subject by reason of such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to each Company or the Account, whichever
is applicable.
8.2(c). The Underwriter shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Underwriter in writing within a reasonable time after the summons
or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Underwriter of any
such claim shall not relieve the Underwriter from any liability which
it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties,
the Underwriter will be entitled to participate, at its own expense,
in the defense thereof. The Underwriter also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party
named in the action. After notice from the Underwriter to such party
of the Underwriter's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional
counsel retained by it, and the Underwriter will not be liable to
such party under this Agreement for any legal or other expenses
subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
8.2(d). The Company agrees promptly to notify the
Underwriter of the commencement of any litigation or proceedings
against it or any of its officers or directors in connection with the
issuance or sale of the Contracts or the operation of each Account.
8.3. INDEMNIFICATION BY THE FUND
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<PAGE>
8.3(a). The Fund agrees to indemnify and hold harmless
the Company, and each of its directors and officers and each person,
if any, who controls the Company within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of
this Section 8.3) against any and all losses, claims, damages,
liabilities (including amounts paid in settlement with the written
consent of the Fund) or litigation (including legal and other
expenses) to which the Indemnified Parties may become subject under
any statute, at common law or otherwise, insofar as such losses,
claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith
or willful misconduct of the Board or any member thereof, are related
to the operations of the Fund and:
(i) arise as a result of any failure by the Fund to provide the services
and furnish the materials under the terms of this Agreement
(including a failure to comply with the diversification requirements
specified in Article VI of this Agreement);or
(ii) arise out Of Or result from any material breach of any representation
and/or warranty made by the Fund in this Agreement or arise out of or
result from any other material breach of this Agreement by the Fund;
as limited by and in accordance with the provisions of Sections
8.3(b) and 8.3(c) hereof.
8.3(b). The Fund shall not be liable under this
indemnification provision with respect to any losses, claims,
damages, liabilities or litigation incurred or assessed against an
Indemnified Party as such may arise from such Indemnified Party's
willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such
Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Company, the Fund, the Underwriter or
each Account, whichever is applicable.
8.3(c). The Fund shall not be liable under this
indemnification provision with respect to any claim made against an
Indemnified Party unless such Indemnified Party shall have notified
the Fund in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after
such Indemnified Party shall have received notice of such service on
any designated agent), but failure to notify the Fund of any such
claim shall not relieve the Fund from any liability which it may have
to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the Fund
will be entitled to participate, at its own expense, in the defense
thereof. The Fund also shall be entitled to assume the defense
thereof, with counsel satisfactory to the party named in the action.
After notice from the Fund to such party of the Fund's election to
assume the defense thereof, the Indemnified Party shall bear the fees
and
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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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(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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(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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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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12.4. This Agreement may be executed, simultaneously in
two or more counterparts, each of which taken together shall
constitute one and the same instrument.
12.5. If any provision of this Agreement shall be held
or made invalid by a court decision, statute, rule or otherwise,
the remainder of the Agreement shall not be affected thereby.
12.6. Each party hereto shall cooperate with each other
party and all appropriate governmental authorities (including
without limitation the SEC, the NASD and state insurance
regulators) and shall permit such authorities reasonable access
to its books and records in connection with any investigation or
inquiry relating to this Agreement or the transactions
contemplated hereby. Notwithstanding the generality of the
foregoing, each party hereto further agrees to furnish any
insurance commissioner with any information or reports in
connection with services provided under this Agreement which such
Commissioner may request in order to ascertain whether the
insurance operations of the Company are being conducted in a
manner consistent with the insurance regulations and any other
applicable law or regulations of that state.
12.7. The rights, remedies and obligations contained in
this Agreement are cumulative and are in addition to any and all
rights, remedies and obligations, at law or in equity, which the
parties hereto are entitled to under state and federal laws.
12.8. This Agreement or any of the rights and
obligations hereunder may not be assigned by any party without the
prior written consent of all parties hereto; provided, however,
that the Underwriter may assign this Agreement or any rights or
obligations hereunder to any affiliate of or company under common
control with the Underwriter, if such assignee is duly licensed
and registered to perform the obligations of the Underwriter under
this Agreement. The Company shall promptly notify the Fund and
the Underwriter of any change in control of the Company.
12.9. The Company shall furnish, or shall cause to be
furnished, to the Fund or its designee copies of the following
reports:
(a) the Company's annual statement(prepared under
statutory accounting principles) and annual
report (prepared under generally accepted
accounting principles ("GAAP"), if any), as
soon as practical and in any event within 90
days after the end of each fiscal year;
(b) the Company's quarterly statements
(statutory) (and GAAP, if any), as soon as
practical and in any event within 45 days
after the end of each quarterly period:
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(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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SCHEDULE A
SEPARATE ACCOUNTS AND-ASSOCIATED CONTRACTS
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded By Separate Account Fidelity Fund (Class)
- -------------------------------------- -------------------------- ---------------------
<S> <C> <C>
Lincoln Life Variable Annuity AN425LL Growth Opportunities -
Annuity Account N Initial Class
</TABLE>
(November 3, 1997)
24.
<PAGE>
SCHEDULE B
PROXY VOTING PROCEDURE
The following is a list of procedures and corresponding responsibilities
for the handling of proxies relating to the Fund by the Underwriter,
the Fund and the Company. The defined terms herein shall have the
meanings assigned in the Participation Agreement except that the term
"Company" shall also include the department or third party assigned by
the Insurance Company to perform the steps delineated below.
1. The number of proxy proposals is given to the Company by the Underwriter
as early as possible before the date set by the Fund for the
shareholder meeting to facilitate the establishment of tabulation
procedures. At this time the Underwriter will inform the Company of
the Record, Mailing and Meeting dates. This will be done in writing
approximately two months before meeting.
2. Promptly after the Record Date, the Company will perform a "tape
run", or other activity, which will generate the names, addresses
and number of units which are attributed to each
contractowner/policyholder (the "Customer") as of the Record Date.
Allowance should be made for account adjustments made after this
date that could affect the status of the Customers' accounts as of
the Record Date.
Note: The number of proxy statements is determined by the
activities described in Step #2. The Company will use its best
efforts to call in the number of Customers to Fidelity, as soon as
possible, but no later than two weeks after the Record Date.
3. The Fund's Annual Report no longer needs to be sent to each
Customer by the Company either before or together with the
Customers' receipt of a proxy statement. Under-writer will provide
the last Annual Report to the Company pursuant to the terms of
Section 3.3 of the Agreement to which this Schedule relates.
4. The text and format for the Voting Instruction Cards ("Cards" or
"Card") is provided to the Company by the Fund. The Company, at its
expense, shall produce and personalize the Voting Instruction Cards.
The Legal Department of the Underwriter or its affiliate ("Fidelity
Legal") must approve the Card before it is printed. Allow
approximately 2-4 business days for printing information on the Cards.
Information commonly found on the Cards includes:
a. name (legal name as found on account registration)
b. address
c. Fund or account number
d. coding to state number of units
e. individual Card number for use in tracking and verification
of votes (already on Cards as printed by the Fund)
(This and related steps may occur later in the chronological process
due to possible uncertainties relating to the proposals.)
25
<PAGE>
5. During this time, Fidelity Legal will develop, produce, and the Fund
will pay for the Notice of Proxy and the Proxy Statement (one
document). Printed and folded notices and statements will be sent
to Company for insertion into envelopes (envelopes and return
envelopes are provided and paid for by the Insurance Company).
Contents of envelope sent to Customers by Company will include:
a. Voting Instruction Card(s)
b. One proxy notice and statement (one document)
c.return envelope (postage pre-paid by Company) addressed to the Company
or its tabulation agent
d."urge buckslip" - optional, but recommended. (This is a small, single
sheet of paper that requests Customers to vote as quickly as possible
and that their vote is important. One copy will be supplied by the
Fund.)
e. cover letter - optional, supplied by Company and reviewed and approved
in advance by Fidelity Legal.
6. The above contents should be received by the Company at least 7
business days before mail date. Individual in charge at Company
reviews and approves the contents of the mailing package to ensure
correctness and completeness. Copy of this approval sent to
Fidelity Legal.
7. Package mailed by the Company.
* The Fund must allow at least a 15-day solicitation time to the Company
as the shareowner. (A 5-week period is recommended.) Solicitation time is
calculated as calendar days from (but NOT including) the meeting, counting
backwards.
8. Collection and tabulation of Cards begins. Tabulation usually takes
place in another department or another vendor depending on process
used. An often used procedure is to sort Cards on arrival by proposal
into vote categories of all yes, no, or mixed replies, and to begin
data entry.
Note: Postmarks are not generally needed. A need for postmark information
would be due to an insurance company's internal procedure and has not
been required by Fidelity in the past.
9. Signatures on Card checked against legal name on account registration
which was printed on the Card.
Note: For Example, If the account registration is under "Bertram C. Jones,
Trustee," then that is the exact legal name to be printed on the Card
and is the signature needed on the Card.
26
<PAGE>
10. If Cards are mutilated, or for any reason are illegible or are not
signed properly, they are considered to be not received for
purposes of vote tabulation. Any Cards that have "kicked out"
(e.g. mutilated, illegible) of the procedure are "hand verified,"
i.e., examined as to why they did not complete the system. Any
questions on those Cards are usually remedied individually.
11. There are various control procedures used to ensure proper
tabulation of votes and accuracy of that tabulation. The most
prevalent is to sort the Cards as they first arrive into
categories depending upon their vote; an estimate of how the vote
is progressing may then be calculated. If the initial estimates
and the actual vote do not coincide, then an internal audit of
that vote should occur. This may entail a recount.
12. The actual tabulation of votes is done in units which is then
converted to shares. (It is very important that the Fund receives
the tabulations stated in terms of a percentage and the number of
SHARES.) Fidelity Legal must review and approve tabulation format.
13. Final tabulation in shares is verbally given by the Company to
Fidelity Legal on the morning of the meeting not later than 10:00
a.m. Boston time. Fidelity Legal may reasonably request an earlier
deadline if required to calculate the vote in time for the
meeting.
14. A Certification of Mailing and Authorization to Vote Shares will
be required from the Company as well as an original copy of the
final vote. Fidelity Legal will provide a standard form for each
Certification.
15. The Company will be required to box and archive the Cards received
from the Customers. In the event that any vote is challenged or if
otherwise necessary for legal, regulatory, or accounting purposes,
Fidelity Legal will be permitted reasonable access to such Cards.
16. All approvals and "signing-off' maybe done orally, but must always be
followed up in writing.
27
<PAGE>
SCHEDULE C
Other investment companies currently available under variable
annuities or variable life insurance issued by the Company:
Separate Account: Lincoln National Variable Annuity Separate Account N
Product(s) Name: Delaware-Lincoln ChoicePlus Variable Annuity
Investment Companies
Available: Fidelity, Delaware, MFS, AIM, Lincoln Investments, Kemper, Colonial,
Bankers Trust, Dreyfus. Vantage Global
28
<PAGE>
Amended Schedule A
Separate Accounts and Associated Contracts
Effective October 15, 1999
<TABLE>
<CAPTION>
Name of Separate Account and Policy Form Numbers of Contracts
Date Established by Board of Directors Funded by Separate Account Fidelity Fund (Class)
- -------------------------------------- -------------------------- ---------------------
<S> <C> <C>
Lincoln Life Flexible Premium Variable Life LN605/660 Growth Opportunities - Service Class
Account M LN680
Lincoln Life Variable Annuity Account N AN425LL Growth Opportunities - Initial Class
Lincoln Life Flexible Premium Variable Life LN650 Growth Opportunities - Service Class
Account R
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified below.
Date Lincoln National Life Insurance Company
---------------------
By:
------------------------
Name: Steven M. Kluever
------------------------
Title: Second Vice President
------------------------
Date: Variable Insurance Products Fund III
---------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
Date: Fidelity Distributors Corporation
---------------------
By:
------------------------
Name:
------------------------
Title:
------------------------
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 1, 2000
(PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Policy Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
Lincoln National Variable Annuity Account C 18829, 25982RSC, 28645 0697, 18831 Growth - Service Class
(Individual MultiFund)
Lincoln National Variable Annuity Account L GAC91-101; GAC96-111 Equity - Income - Initial Class
GAC96-101 (GVA I, II, III) Growth - Initial Class
Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Equity - Income - Initial Class
Account M
LN660 (VUL) Growth - Service Class
LN680 (VULdb) High Income - Service Class
Lincoln Life Variable Annuity Account N AN425 (Choice Plus) Overseas - Initial Class
Equity - Income - Initial Class
Growth - Initial Class
Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, Growth - Service Class
28868, 28891, 28903
(Group MultiFund)
Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth - Service Class
Separate Account R High Income - Service Class
LN655 (SVUL II) Growth - Service Class
High Income - Service Class
Lincoln Life Flexible Premium Variable Life LN920/921 Growth Portfolio
Account S (CVUL) High Income - Service Class
Overseas - Service Class
LN925/926 Growth Portfolio
(CVUL Series III) High Income - Service Class
</TABLE>
<PAGE>
Overseas - Service Class
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule A to be executed in its name and on its behalf by its
duly authorized representative and its seal to be hereunder affixed hereto
as of the date specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
----------------------
By:
----------------------
Steven M. Kluever
2nd Vice President
Date VARIABLE INSURANCE PRODUCTS FUND
-----------------------
By:
----------------------
Name:
----------------------
Title:
----------------------
Date FIDELITY DISTRIBUTORS CORPORATION
----------------------
By:
----------------------
Name:
----------------------
Title:
----------------------
<PAGE>
AMENDED SCHEDULE A
SEPARATE ACCOUNTS AND ASSOCIATED CONTRACTS
EFFECTIVE MAY 1, 2000 (PURSUANT TO SECTION 1.6 OF THE AGREEMENT)
<TABLE>
<CAPTION>
Policy Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------------- ----------------------
<S> <C> <C>
Lincoln National Variable Annuity Account C 18829, 25982RSC, 28645 0697 Contrafund - Service Class
(Individual MultiFund)
Lincoln National Variable Annuity Account L GAC96-111; GAC91-101 Asset Manager - Initial Class
(GVA I, II, III) Contrafund - Initial Class
Lincoln Life Flexible Premium Variable Life LN605/615 (VUL I) Asset Manager - Initial Class
Account M Investment Grade Bond - Initial Class
LN660 (VUL) Contrafund - Service Class
LN680 (VULdb) Contrafund - Service Class
Lincoln Life Variable Annuity Account Q 28883, 28884, 28890, 28867, Contrafund - Service Class
28868, 28891, 28903
(Group MultiFund)
Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Investment Grade Bond - Initial Class
Separate Account R Asset Manager - Initial Class
Contrafund - Service Class
LN655 (SVUL II) Contrafund - Service Class
Lincoln Life Flexible Premium Variable Life LN920/921 Contrafund - Service Class
Account S (CVUL) Asset Manager - Service Class
LN925/926 (CVUL Series III) Contrafund - Service Class
Asset Manager - Service Class
Lincoln National Life Insurance Company 19476 Contrafund - Service Class
Separate Account 35
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule A to be executed in its name and on its behalf by its duly
authorized representative and its seal to be hereunder affixed hereto as of the
date specified below.
Date__________________ LINCOLN NATIONAL LIFE INSURANCE COMPANY
By: _______________________
Steven M. Kluever
2nd Vice President
Date__________________ VARIABLE INSURANCE PRODUCTS FUNDS II
By: _______________________
Name: _______________________
Title: _______________________
Date__________________ FIDELITY DISTRIBUTORS CORPORATION
By: _______________________
Name: _______________________
Title: _______________________
<PAGE>
Amended Schedule A
Separate Accounts and Associated Contracts
Effective May 1, 2000
<TABLE>
<CAPTION>
Policy Form Numbers of Contracts
Name of Separate Account Funded By Separate Account Fidelity Fund (Class)
- ------------------------ -------------------------- ---------------------
<S> <C> <C>
Lincoln Life Flexible Premium Variable Life LN605/660 (VUL) Growth Opportunities - Service Class
Account M LN680 (VULdb)
Lincoln Life Variable Annuity Account N AN425LL Growth Opportunities - Initial Class
Lincoln Life Flexible Premium Variable Life LN650 (SVUL) Growth Opportunities - Service Class
Separate Account R LN655 (SVUL II)
</TABLE>
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Amendment to Schedule A to be executed in its name and on its behalf by its
duly authorized representative and its seal to be hereunder affixed hereto as
of the date specified below.
Date LINCOLN NATIONAL LIFE INSURANCE COMPANY
----------------------
By:
-------------------------
Steven M. Kluever
2nd Vice President
Date: VARIABLE INSURANCE PRODUCTS FUND III
----------------------
By:
-------------------------
Name:
-----------------------
Title:
----------------------
Date: FIDELITY DISTRIBUTORS CORPORATION
----------------------
By:
------------------------
Name:
----------------------
Title:
---------------------
87158
<PAGE>
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);
<PAGE>
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:
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.
-2-
<PAGE>
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 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.
-3-
<PAGE>
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 7 -
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 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.
-4-
<PAGE>
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 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,
-5-
<PAGE>
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
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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 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.
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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 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
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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, 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
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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 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
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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 information, or sales literature or other
promotional literature of the Tr-ust, 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,
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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 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;
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as limited by and in accordance with the provisions of this Article Vill.
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 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.
ARTICLEIX. APPLICABLE LAW
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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 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
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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 the Existing Policies.
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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.
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<PAGE>
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 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.
-17-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed in its name and on its behalf by its duly authorized
representative and its seal to be hereunder affixed hereto as of the date
specified 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
-18-
<PAGE>
As of May 1998
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<S><C>
NAME OF SEPARATE POLICIES FUNDED PORTFOLIOS
ACCOUNT AND DATE BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
ESTABLISHED BY BOARD OF DIRECTORS
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>
-19-
<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
<PAGE>
AMENDMENT NO. 3 TO PARTICIPATION AGREEMENT
Pursuant to the Participation Agreement, made and entered into as of the
22nd day of May 1998, and as amended on May 1, 1999, by and among MFS Variable
Insurance Trust, The Lincoln National Life Insurance Company and Massachusetts
Financial Services Company, the parties do hereby agree to an amended Schedule A
as attached hereto.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
to the Participation Agreement to be executed in its name and on its behalf by
its duly authorized representative. The Amendment shall take effect on
October 15, 1999.
LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By its authorized officer,
By:
---------------------------------
Title:
------------------------------
MFS VARIABLE INSURANCE TRUST,
ON BEHALF OF THE PORTFOLIOS
By its authorized officer,
By:
---------------------------------
James R. Bordewick, Jr.
Assistant Secretary
MASSACHUSETTS FINANCIAL SERVICES COMPANY
By its authorized officer,
By:
---------------------------------
Jeffrey L. Shames
Chairman and Chief Executive Officer
<PAGE>
As of October 15, 1999
SCHEDULE A
ACCOUNTS, POLICIES AND PORTFOLIOS
SUBJECT TO THE PARTICIPATION AGREEMENT
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
NAME OF SEPARATE
ACCOUNT AND DATE POLICIES FUNDED PORTFOLIOS
ESTABLISHED BY BOARD OF DIRECTORS BY SEPARATE ACCOUNT APPLICABLE TO POLICIES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lincoln Life Flexible / / Variable Universal Life I MFS Emerging Growth Series
Premium Variable Life / / Lincoln Variable Universal Life MFS Total Return Series
Separate Account M / / Lincoln Variable Universal MFS Utilities Series
Life Death Benefit (VUL)
Lincoln Life Flexible / / Survivorship Variable MFS Emerging Growth Series
Premium Variable Life Universal Life I MFS Total Return Series
Separate Account R / / Lincoln Survivorship Variable MFS Utilities Series
Universal Life
Lincoln Life Variable Annuity / / Variable Annuity Contracts MFS Emerging Growth Series
Account N MFS Total Return Series
MFS Utilities Series
MFS Research Series
Lincoln Life Flexible / / Corporate Specialty Markets MFS Total Return Series
Premium Variable Life COLI Product (CVUL) MFS Utilities Series
Separate Account S MFS Capital Opportunities Series
MFS Research Series
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
<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 tinder
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
identical to this Agreement (hereinafter "Participating Insurance Companies");
and
<PAGE>
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)(15) and 6e-3(T)(b)(15) thereunder, to the extent
necessary to permit shares of the Fund to be sold to and held by variable
annuity 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 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
2
<PAGE>
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 I. 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 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.
3
<PAGE>
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 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
4
<PAGE>
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
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
5
<PAGE>
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
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
6
<PAGE>
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 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.
7
<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 l2b-1 under the 1940 Act or otherwise,
although it may 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 l2b-I to finance distribution
expenses.
8
<PAGE>
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 coverage as required currently by Rule 17g-(I) 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
9
<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 III. 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 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
10
<PAGE>
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:
(i) solicit voting instructions from contractowners or
participants;
(ii) vote the Fund shares held in an Account in accordance
with in structions received from contractowners or
participants; and
(iii) 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 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
11
<PAGE>
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 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, 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.
12
<PAGE>
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 literature or other promotional material approved by the Company,
except with the permission of the Company. The Company agrees to respond to any
request for approval on a prompt and timely basis.
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
13
<PAGE>
tape recording, videotape display, signs or billboards, motion pictures, or
other public media), sales literature (ie., any written communication
distributed or made generally available to customers- or the public, including
brochures, circulars, research reports, market letters, form letters, seminar
texts, reprints or excerpts of any other advertisement, sales literature, or
published article), educational or training materials or other communications
distributed or made generally available to some or all agents or employees,
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, 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
14
<PAGE>
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 by 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 fife 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.
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
15
<PAGE>
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 fife 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 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
16
<PAGE>
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 (ie., variable annuity contractowners or variable fife
insurance 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 (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
17
<PAGE>
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 1.3 through 7.6 of this Agreement, a
majority of the 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 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
18
<PAGE>
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 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 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 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
19
<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
(iii) 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
(iv) 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.
20
<PAGE>
(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 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
21
<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.
22
<PAGE>
(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 sale of THE Contracts or the operation of the Account.
8.3. INDEMNIFICATION PROCEDURE
Any person obligated to provide indemnification under this Article VIE
("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 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
23
<PAGE>
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation, unless (i) the
indemnifying party and the indemnified party shall have mutually agreed to the
retention of such counsel or 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 VHI 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 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
24
<PAGE>
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 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
25
<PAGE>
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
(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 of (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
26
<PAGE>
successor or similar provision, or if the Company reasonably believes that the
Fund may fail 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
(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
(1) 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
27
<PAGE>
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.
(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 famished by the
party terminating this Agreement to the nonterminating 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 16. 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.
28
<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:
Mr. Bernard H. Garil
President
OpCap Advisors
200 Liberty Street
New York, NY 10281
If to the Company:
29
<PAGE>
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
other-wise affect their construction or effect.
12.4. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
30
<PAGE>
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.
31
<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 representative as
of the date and year first WRITTEN above.
COMPANY:
THE LINCOLN NATIONAL LIFE INSURANCE
COMPANY
SEAL By:
FUND:
OCC ACCUMULATION TRUST
SEAL By:
UNDERWRITER:
OCC DISTRIBUTORS
By:
32
<PAGE>
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
<PAGE>
SCHEDULE 2
Participation Agreement
Among
OCC Accumulation Trust, The Lincoln National Life Insurance Company
and
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
<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 Separate' Account M
Lincoln Life Premium Variable Life Separate Account R
Lincoln Life Variable Annuity Account N
October 7, 1998
OCC ACCUMULATION TRUST
By:
Name
Title:
OCC DISTRIBUTORS
By:
Name:
Title:
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY
By:
Name:
Title:
<PAGE>
FUND PARTICIPATION AGREEMENT
THIS AGREEMENT is entered into as of this 15th day of October, 1999 among
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY ("Lincoln National"), a life
insurance company organized under the laws of the State of Indiana, AMERICAN
VARIABLE INSURANCE SERIES ("Series"), an open-end management investment company
organized under the laws of the Commonwealth of Massachusetts, AMERICAN FUNDS
DISTRIBUTORS, INC. ("AFD"), a corporation organized under the laws of the State
of California, and having a business address of 333 South Hope Street, Los
Angeles, California 9007 1, and CAPITAL RESEARCH AND MANAGEMENT COMPANY
("CRMC"), a corporation organized under the laws of the State of Delaware, and
having a business address of 333 South Hope Street, Los Angeles, California
90071.
WITNESSETH:
WHEREAS, Lincoln National proposes to issue to the public, now and in the
future, certain multi-manager variable annuity contracts and variable life
insurance policies ("Contracts") as set forth in Appendix A;
WHEREAS, Lincoln National has established one or more separate accounts
("Accounts"), as set forth in Appendix B, for the purposes of issuing the
Contracts and has or will register the Account with the United States Securities
and Exchange Commission ("the SEC") as an unit investment trust under the
Investment Company Act of 1940 ("the 1940 Act") unless exempt therefrom;
WHEREAS, the Series has received a "Mixed and Shared Funding Order" from
the SEC granting relief from the certain provisions of the 1940 Act and the
rules thereunder to the extent necessary to permit shares of the Series to be
sold to variable annuity and life insurance separate accounts of unaffiliated
insurance companies;
WHEREAS, the Series is divided into various funds ("Funds"), some of
which are set forth in Appendix C, each Fund being subject to certain
fundamental investment policies some of which may not be changed without a
majority vote of the shareholders of such Fund;
WHEREAS, certain Funds will serve as the underlying investments for the
Contracts as set forth in Appendix C;
WHEREAS, AFD, a registered broker-dealer, will provide certain services
to Lincoln National with regard to the Contracts; and
WHEREAS, CRMC is the investment adviser for the Series.
NOW THEREFORE, in consideration of the foregoing and of mutual covenants
and conditions set forth herein and for other good and valuable consideration,
Lincoln National, the Accounts, the Series, AFD and CRMC hereby agree as
follows:
1
<PAGE>
1. The Series and CRMC each represents and warrants to Lincoln
National that: (i) a registration statement under the Securities Act of
1933 ("1933 Act") and under the 1940 Act with respect to the Series has
been filed with the SEC in the form previously delivered to Lincoln
National, and copies of any and all amendments thereto will be forwarded
to Lincoln National at the time that they are filed with the SEC; (ii)
the Series is, and shall be at all times while this Agreement is in
force, lawfully organized, validly existing, and properly qualified as an
open-end management investment company; and (iii) the Series registration
statement and any further amendments or supplements thereto will, when
they become effective, conform in all material respects to the
requirements of the 1933 Act and the 1940 Act, and the rules and
regulations of the SEC thereunder, and will not contain an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statement therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and
in conformity with information furnished in writing to the Series by
Lincoln National expressly for use therein.
2. The Series will furnish to Lincoln National such
information with respect to the Series in such form and signed by such of
its officers as Lincoln National may reasonably request, and will warrant
that the statements therein contained when so signed will be true and
correct. The Series will advise Lincoln National immediately of: (a) any
request by the SEC (i) for amendment of the registration statement
relating to the Series or (ii) for additional information; (b) the
issuance by the SEC of any stop order suspending the effectiveness of the
registration statement of the Series or the initiation of any proceeding
for that purpose; (c) the institution of any proceeding, investigation or
hearing involving the offer or sale of the Contracts or the Series of
which it becomes aware; or (d) the happening of any material event, if
known, which makes untrue any statement made in the registration
statement of the Series or which requires the making of a change therein
in order to make any statement made therein not misleading.
3. The Series will use best efforts to register for sale under
the 1933 Act and, if required, under state securities laws, such
additional shares of the Series as may reasonably be necessary for use as
the funding vehicle for the Contracts.
4. The Series agrees to make Class I and Class 2 shares of all
of its Funds available to the Contracts. To the extent Lincoln National
uses Class 2 shares, it will be entitled to a fee from the Series of .25%
per annum of Class 2 assets attributable to the Contracts to offset
Contract marketing expenses for as long as the Series' Rule 12b I plan
remains in effect. Fund shares to be made available to Accounts for the
Contracts shall be sold by the Series and purchased by Lincoln National
for a given Account at the net asset value (without the imposition of a
sales load) next computed after receipt of each order by the Series or
its designee, as established in accordance with the provisions of the
then current prospectus of the Series. For purposes of this Paragraph 4,
Lincoln National shall be a designee of the Series for receipt of such
orders from each Account, and receipt by such designee by 4:00 p.m.
Eastern time shall constitute receipt by the Series only if the net
purchase or redemption orders are transmitted to the Series by Lincoln
National by 10:00 a.m. Eastern time on the day following Lincoln
National's receipt of that information. "Business Day" shall mean any day
on which the New
2
<PAGE>
York Stock Exchange ("NYSE") is open for trading and on which the Series
calculates its net asset value pursuant to the rules of the SEC. The
Series will make its shares available indefinitely for purchase at the
applicable net asset value per share on those days on which the Series
calculates its net asset value pursuant to the rules of the SEC, and the
Series shall use its best efforts to calculate such net asset value on
each day on which the NYSE is open for trading. The Series shall make the
net asset value per share for each of the Funds available to Lincoln
National (using a mutually agreed upon format) on a daily basis as soon
as reasonably practical after the Series calculates its net asset value
per share, and the Series shall use its best efforts to make such net
asset value per share available by 6:00 p.m. Eastern time. The Series,
and its investment adviser, CRMC, are responsible for maintaining net
asset values for the Funds in accordance with the requirements of the
1940 Act and its current prospectus. Shares of particular Funds shall be
ordered in such quantities and at such times as determined by Lincoln
National to be necessary to meet the requirements of the Contracts.
Payment for shares purchased shall be made in federal funds transmitted
by wire by 2:00 p.m. Eastern time as long as the banking system is open
for business. If the banking, system is closed, payment will be
transmitted the next day that the banking system is open for business. If
payment is received by the Series after 2:00 p.m., Eastern time on such
Business Day, Lincoln National shall, upon the Series' request, promptly
reimburse the Series for any charges, costs, fees, interest or other
expenses incurred in connection with any advances, borrowing, or
overdrafts. The Series will confirm receipt of each trade (using a
mutually agreed upon format) by 1:00 p.m. Eastern time on the Business
Day the trade is placed with the Series.
The Series reserves the right to temporarily suspend sales if the
Board of Trustees of the Series deems it appropriate and in the best
interests of the Series or in response to the order of an appropriate
regulatory authority.
5. The Contracts funded through the Accounts will provide for
the allocation of net amounts among certain subaccounts for investment in
such shares of the Funds as may be offered from time to time in the
Contracts. The selection of the particular subaccount is to be made by
the Contract owner and such selection may be changed in accordance with
the terms of the Contracts.
6. Transfer of the Series' shares will be by book entry only.
No stock certificates will be issued to the Account. Shares ordered from
a particular Fund will be recorded by the Series as instructed by Lincoln
National in an appropriate title for the corresponding Account or
subaccount.
7. The Series shall furnish notice promptly to Lincoln
National (using a mutually agreed upon format) of any dividend or
distribution payable on any shares underlying subaccounts. Lincoln
National hereby elects to receive all such dividends and distributions as
are payable on shares of a Fund recorded in the title for the
corresponding subaccount in additional shares of that Fund. The Series
shall notify Lincoln National of the number of shares so issued. Lincoln
National reserves the right to revoke this election and to receive all
such income dividends and capital gain distributions in cash.
3
<PAGE>
8. The Series shall redeem its shares in accordance with the
terms of its then current prospectus. For purposes of this Paragraph 8,
Lincoln National shall be a designee of the Series for receipt of
requests for redemption from each Account, and receipt by such designee
by 4:00 p.m. Eastern time shall constitute receipt by the Series;
provided that the Series receives notice of such request for redemption
by 10:00 a.m. Eastern time on the following Business Day. Lincoln
National shall purchase and redeem the shares of Funds offered by the
then current prospectus of the Series in accordance with the provisions
of such prospectus. The Series agrees to redeem, upon Lincoln National's
request, any full or fractional shares of the designated portfolio held
by Lincoln National. Payment shall be made in federal funds transmitted
by wire by 2:00 p.m. Eastern time as long as the banking system is open
for business. If the banking system is closed, payment will be
transmitted the next day that the banking system is open for business. If
payment is received by Lincoln Life after 2:00 p.m., Eastern time on such
Business Day, the Series shall, upon Lincoln National's request, promptly
reimburse Lincoln National for any charges, costs, fees, interest or
other expenses incurred in connection with any advances, borrowing, or
overdrafts. The Series will confirm receipt of each trade (using a
mutually agreed upon format) by 1:00 p.m. Eastern time on the Business
Day the trade is placed with the Series.
9. The Series shall pay all expenses incidental to its
performance under this Agreement. The Series shall see to it that all of
its shares are registered and authorized for issue in accordance with
applicable federal and state laws prior to their purchase for the
Accounts. The Series shall bear the expenses for the cost of registration
of its shares, preparation of prospectuses to be sent to existing
Contract owners, proxy materials and reports, the printing and
distribution of such items to each Contract owner who has allocated net
amounts to any Subaccount, the preparation of all statements and notices
required from it by any federal or state law, and taxes on the issue or
transfer of the Series' shares subject to this Agreement. The Series will
provide Lincoln National, at least once a year, with enough copies of its
Statement of Additional Information to be able to distribute one to each
Contract owner or prospective Contract owner who requests such Statement
of Additional Information.
10. Lincoln National shall bear the expenses for the cost of
printing and distribution of Series prospectuses to be sent to
prospective Contract owners. The Series shall provide, at its expense,
such documentation (in camera ready or other mutually agreeable form) and
other assistance as is reasonably necessary in order for Lincoln National
once each year (or more frequently if the prospectus for the Series is
amended) to have the prospectus or prospectuses for the Contracts and the
Series prospectus printed together in one or more documents. With respect
to any Series prospectus that is printed in combination with any one or
more Contract prospectus (the "Prospectus Booklet"), the Series shall
bear the costs of printing and mailing the Prospectus Booklet to existing
Contract owners based on the ratio of the number of pages of the Series
prospectuses included in the Prospectus Booklet to the number of pages in
the Prospectus Booklet as a whole. With respect to any Series report that
is printed in combination with any one or more reports of investment
options for the Contracts (the "Report Booklet"), the Series shall bear
the costs of printing and mailing the Report Booklet to existing Contract
owners based on the ratio of the number of pages of the Series report
included in the Report Booklet to the number of pages in the Report
Booklet as a whole.
4
<PAGE>
11. Lincoln National represents and warrants to the Series that
any information furnished in writing by Lincoln National to the Series
for use in the registration statement of the Series will not result in
the registration statement's failing to conform in all material respects
to the requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder or containing any untrue statement of a material
fact or omission to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
12. Lincoln National and its affiliates shall make no
representations concerning the Series' shares except those contained in
the then current prospectus of the Series, in such printed information
subsequently issued on behalf of the Series or other funds managed by
CRMC as supplemental to the appropriate fund prospectus, or in materials
approved by AFD.
13. Shares of the Series may be offered to separate accounts of
various insurance companies in addition to Lincoln National. The Series
shall comply with the provisions of Section 817 of the Internal Revenue
Code of 1986 as amended and the regulations thereunder ("Section 817").
14. The parties to this Agreement recognize that due to
differences in tax treatment or other considerations, the interests of
various Contract owners participating in one or more Funds might, at some
time, be in conflict. Each party shall report to the other party any
potential or existing conflict of which it becomes aware. The Board of
Trustees of the Series shall promptly notify Lincoln National of the
existence of irreconcilable material conflict and its implications. If
such a conflict exists for which Lincoln National is responsible as
determined by the Board of Trustees, Lincoln National will, at its own
expense, take whatever action it deems necessary to remedy such conflict;
in any case, Contract owners will not be required to bear such expenses.
15. Lincoln National agrees to indemnify and hold the Series
harmless against, any and all losses, claims, damages, liabilities or
litigation (including reasonable legal and reasonable other expenses) to
which the Series may be 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 arise as a result
of Lincoln National: (a) making untrue statements of material facts or
omitting material fact in the registration statement, prospectus or sales
literature of the Contracts and/or Accounts; (b) making untrue statements
of material facts that the Series includes in its materials, provided the
Series relies on information supplied by Lincoln National, (c) engaging
in unlawful conduct with respect to the sale of the Contracts or Fund
shares; and (d) materially breaching this Agreement or a representation
or warranty.
16. The Series and CRMC each agrees to indemnify and hold
Lincoln National harmless against, any and all losses, claims, damages,
liabilities or litigation (Including reasonable legal and reasonable
other expenses) to which Lincoln National may be 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 arise as a result of the Series', AFD's or CRMC's (a) making
untrue statements of material facts or omitting material facts in the
registration statement, prospectus or sales literature of the Series; (b)
making untrue statements of material facts that the Series includes in
its materials, provided Lincoln National relies on information supplied
by or on behalf of the Series; (c) engaging in unlawful conduct
5
<PAGE>
with respect to the sale of the Contracts or Fund shares; (d) materially
breaching this Agreement or a representation or warranty; and (e) failing
to comply with the requirements of Section 817 and regulations
thereunder.
17. Lincoln National shall be responsible for assuring that the
Accounts provide passthrough voting privileges to Contract owners 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 the Contracts.
18. AFD will be responsible for conducting training activities
for Lincoln National's wholesalers regarding CRMC's approach to
investment management in connection with Lincoln National's wholesaler
support of the Series. Training will include initial sessions as to
CRMC's investment approach and strategies, background in CRMC's
investment results, information on CRMC's portfolio counselors managing
the Series and general information on CRMC. AFD will provide such
periodic additional training and refresher training as may be requested
by Lincoln National. AFD will provide speakers and panelists at national
sales meetings conducted by Lincoln National regarding the Series.
In consideration of the activities performed by AFD for Lincoln
National, Lincoln National will pay AFD .25% on each new Contract
purchase payment.
19. The parties understand that there is no intention to create
a joint venture in the subject matter of this Agreement. Accordingly, the
right to terminate this Agreement and to engage in any activity not
inconsistent with this Agreement is absolute. This Agreement will
terminate:
(i) By any party at any time upon six months' written
notice to the other parties; or
(ii) at the option of Lincoln National or the Series,
upon ten calendar days' prior written notice to the
other parties, if a final non-appealable
administrative or judicial decision is entered
against any other party which has a material impact
on the Contracts;
(iii) at the option of Lincoln National, upon ten calendar
days' prior written notice to the other parties, if
shares of the Series are not reasonably available;
(iv) at the option of Lincoln National, immediately upon
written notice to the other parties, if the Series
or CRMC falls to meet the requirements for either
diversification under Section 817 or registered
investment company status or if the Board of the
Series terminates the Class 2 Plan of Distribution
pursuant to Rule 12b-I under the 1940 Act; or
(v) immediately in the event the Series' shares are not
registered, issued or sold in accordance with
applicable state and/or federal law or such law
6
<PAGE>
precludes the use of such shares as an underlying
investment for the Contracts issued or to be issued
by Lincoln National; in such event prompt notice
shall be given by Lincoln National or the Series to
the other parties.
The effective date for termination pursuant to any notice required
under this Paragraph shall be calculated beginning with the date of
receipt of such notice to all other parties.
20. All notices, consents, waivers, and other communications
under this Agreement must be in writing, and will be deemed to have been
duly received (a) when delivered by hand (with written confirmation of
receipt), (b) when sent by facsimile (with written confirmation of
receipt), provided that a copy is mailed by registered mail, return
receipt requested, or (c) the day after it is sent by a nationally
recognized overnight delivery service, in each case to the appropriate
addresses and telecopier numbers set forth below (or to such other
addresses and telecopier numbers as a party may designate by notice to
the other parties):
IF TO LINCOLN NATIONAL:
The Lincoln National Insurance Company
1300 South Clinton Street
Fort Wayne, Indiana 46801
Attention: Steven M. Kluever, Second Vice President
Facsimile No.: 219-455-1773
IF TO SERIES:
American Variable Insurance Series
333 S. Hope Street, 55 th Floor
Los Angeles, California 90071
Attention: Michael J. Downer, Senior Vice President
Facsimile No.: 213-486-9041
IF TO CRMC:
Capital Research and Management Company
333 S. Hope Street, 55th Floor
Los Angeles, CA 90071
Attention: Michael J. Downer, Senior Vice President and Legal
Counsel
Facsimile No.: 213-486-9041
IF TO AFD:
American Funds Distributors, Inc.
333 S. Hope Street, 34th Floor
Los Angeles, California 90071
Attention: Michael J. Downer, Secretary and Legal Counsel
Facsimile No.: 213-486-9041
21. If this Agreement terminates, any provision of this
Agreement necessary to the orderly windup of business under it will
remain in effect as to that business, after termination.
7
<PAGE>
22. If this Agreement terminates, the Series, at Lincoln
National's option, will continue to make additional shares of the Series
available for all Contracts existing as of the effective date of
termination (under the same terms and conditions as were in effect prior
to termination of this Agreement with respect to existing Contract
owners), unless the Series liquidates or applicable laws prohibit further
sales. Lincoln National agrees not to redeem shares unless legitimately
required to do so according to a Contract owner's request or under an
order from the SEC.
23. The obligations of the Series under this Agreement are not
binding upon any of the Trustees, officers, employees, or shareholders
(except CRMC if it is a shareholder) of the Series individually, but bind
only the Series' assets. When seeking satisfaction for any liability of
the Series in respect of this Agreement, Lincoln National and the Account
agree not to seek recourse against said Trustees, officers, employees, or
shareholders, or any of them, or any of their personal assets for such
satisfaction. Notwithstanding the foregoing, if Lincoln National seeks
satisfaction for the Series for any losses, claims, damages, liabilities
or litigation in respect of this Agreement, Lincoln National and the
Accounts shall also have recourse against AFD and CRMC which shall be
jointly and severally liable for all amounts due Lincoln National and not
recovered from the Series.
24. This Agreement shall be construed in accordance with the
laws of the State of California.
25. This Agreement and the parties' rights, duties, and
obligations under this Agreement are not transferable or assignable by
any of them without the express, prior written consent of the other party
hereto. Any attempt by a party to transfer or assign this Agreement or
any of its rights, duties or obligations under this Agreement without
such consent is void.
26. The following Paragraphs shall survive any termination of
this Agreement: 4, 7, 8, 15, 16, 19, 20-25.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and attested as of the date first above written.
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY (ON BEHALF OF THE
ACCOUNTS AND ITSELF)
Attest: By:
Its:
8
<PAGE>
AMERICAN VARIABLE INSURANCE
SERIES
Attest:
By:
Its: Senior Vice President
AMERICAN FUNDS DISTRIBUTORS, INC.
Attest:
By:
Its: President
CAPITAL RESEARCH AND MANAGEMENT
COMPANY
Attest:
By:
Its: Executive Vice President
9
<PAGE>
Appendix A
Lincoln VUL
Lincoln VULdb
Lincoln CVUL D
L ChoicePlus variable annuity
MultiFund individual variable annuity
MultiFund group variable annuity Lincoln SVUL
Appendix B
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Flexible Premium Variable Life Account S
Lincoln Life Variable Annuity Account N
Lincoln National Variable Annuity Account C
Lincoln Life Variable Annuity Account Q
Lincoln Life Flexible Premium Variable Life Account R
Appendix C
American Variable Insurance Series
Global Growth Fund Class 2
Global Small Capitalization Fund Class 2
International Fund Class 2
Growth Fund Class 2
Growth Income Fund Class 2
High Yield Bond Fund Class 2
10
<PAGE>
AMENDMENT
Effective Date: May 1, 2000
APPENDIX A
Lincoln VULcv
Lincoln VULdb
Lincoln CVUL
Lincoln CVUL Series III
D-L ChoicePlus variable annuity
MultiFund individual variable annuity
MultiFund group variable annuity
Lincoln SVUL
Lincoln SVUL II
Group Variable Annuity (GVA) I, II, III
APPENDIX B
Lincoln Life Flexible Premium Variable Life Account M
Lincoln Life Flexible Premium Variable Life Account S
Lincoln Life Variable Annuity Account N
Lincoln National Variable Annuity Account C
Lincoln Life Variable Annuity Account Q
Lincoln Life Flexible Premium Variable Life Separate Account R
Lincoln National Variable Annuity Account L
APPENDIX C
American Variable Insurance Series
Global Growth Fund Class 2
Global Small Capitalization Fund Class 2
International Fund Class 2
Growth Fund Class 2
Growth-Income Fund Class 2
High-Yield Bond Fund Class 2
Bond Fund Class 2
U.S. Government/AAA-Rated Securities Fund Class 2
<PAGE>
THE LINCOLN NATIONAL LIFE
INSURANCE COMPANY (ON BEHALF OF THE
ACCOUNTS AND ITSELF)
Attest:
By:
--------------------------------
- --------------------------- Its: 2nd Vice President, Steven M. Kluever
AMERICAN VARIABLE INSURANCE
SERIES
Attest:
By:
--------------------------------
- --------------------------- Its: Senior Vice President, Michael J. Downer
AMERICAN FUNDS DISTRIBUTORS,
INC.
Attest:
By:
--------------------------------
- --------------------------- Its: President, Kevin G. Clifford
CAPITAL RESEARCH AND
MANAGEMENT COMPANY
Attest:
By:
--------------------------------
- --------------------------- Its: Executive Vice President,
Paul G. Haaga, Jr.
<PAGE>
PARTICIPATION AGREEMENT
AMONG
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY,
ALLIANCE CAPITAL MANAGEMENT L.P.
AND
ALLIANCE FUND DISTRIBUTORS, INC.
DATED AS OF
FEBRUARY 15, 2000
<PAGE>
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 15th day of February,
2000 ("Agreement"), by and among The Lincoln National Life Insurance Company, an
Indiana life insurance company ("Insurer") (on behalf of itself and its
"Separate Account," defined below). Insurer is also the principal underwriter
with respect to the Contracts referred to below; Alliance Capital Management
L.P., a Delaware limited partnership ("Adviser"), the investment adviser of the
Fund referred to below; and Alliance Fund Distributors, Inc., a Delaware
corporation ("Distributor"), the Fund's principal underwriter (collectively, the
"Parties"),
WITNESSETH THAT:
WHEREAS Insurer, the Distributor, and Alliance Variable Products Series
Fund, Inc. (the "Fund") desire that Class B shares of the Fund's Portfolios
listed in Schedule A, as may be amended from time to time (the "Portfolios";
reference herein to the "Fund" includes reference to each Portfolio to the
extent the context requires) be made available by Distributor to serve as
underlying investment media for variable annuity contracts and variable life
insurance policies issued by Insurer listed in Schedule B, as may be amended
from time to time; and
WHEREAS the Contracts provide for the allocation of net amounts
received by Insurer to separate series (the "Subaccounts"; reference herein to
the "Separate Account" includes reference to each Subaccount to the extent the
context requires) of the Separate Account for investment in Class B shares of
corresponding Portfolios of the Fund that are made available through the
Separate Account to act as underlying investment media,
1
<PAGE>
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Fund and Distributor will make Class B shares of the
Portfolios available to Insurer for this purpose at net asset value and with no
sales charges, all subject to the following provisions:
SECTION 1. ADDITIONAL PORTFOLIOS
The Fund has and may, from time to time, add additional Portfolios,
which will become subject to this Agreement, if, upon the written consent of
each of the Parties hereto, they are made available as investment media for the
Contracts.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
The Adviser or its designated agent will provide closing net asset
value, dividend and capital gain information for each Portfolio to Insurer at
the close of trading on each day (a "Business Day") on which the New York Stock
Exchange is open for regular trading. The Fund or its designated agent will use
its best efforts to provide this information by 6:00 p.m., New York time, using
a mutually agreed upon format. Insurer will use these data to calculate unit
values, which in turn will be used to process transactions that receive that
same Business Day's Separate Account Subaccount's unit values. Such Separate
Account processing will be done the same evening, and corresponding orders with
respect to Fund shares will be placed the morning of the following Business Day.
Insurer will use its best efforts to place such orders with the Fund by 10:30
a.m., New York time.
2
<PAGE>
2.2 TIMELY PAYMENTS.
Insurer will transmit orders for purchases and redemptions of Fund
shares to Distributor, and will wire payment for net purchases to a custodial
account designated by the Fund on the day the order for Fund shares is placed,
to the extent practicable. Payment for shares purchased shall be made in federal
funds transmitted by wire by 2:00 p.m. New York time as long as the banking
system is open for business. If the banking system is closed, payment will be
transmitted the next day that the banking system is open for business. If
payment is received by the Fund after 2:00 p.m. New York time on such Business
Day, Insurer shall, upon the Fund's request, promptly reimburse the Fund for any
charges, costs, fees, interest or other expenses incurred in connection with any
advances, borrowing, or overdrafts. The Fund will confirm receipt of each
purchase (using a mutually agreed upon format) by 1:00 p.m. New York time on the
Business Day the trade is placed. Payment for net redemptions will be wired by
the Fund to an account designated by Insurer on the same day as the order is
placed, to the extent practicable. The Fund agrees to redeem, upon Insurer's
request, any full or fractional shares of the designated Portfolio held by
Insurer. Payment for shares redeemed shall be made in federal funds transmitted
by wire by 2:00 p.m. New York time as long as the banking system is open for
business. If the banking system is closed, payment will be transmitted the next
day that the banking system is open for business. If payment is received by
Insurer after 2:00 p.m. New York time on such Business Day, the Fund shall, upon
the Insurer's request, promptly reimburse Insurer for any charges, costs, fees,
interest or other expenses incurred in connection with any advances, borrowing,
or overdrafts. The Fund will confirm receipt of each redemption (using a
mutually agreed upon format) by 1:00 p.m. New York time on the Business Day the
trade is placed. In any event payment will be made within six calendar days
after the date the order is placed in order
3
<PAGE>
to enable Insurer to pay redemption proceeds within the time specified in
Section 22(e) of the Investment Company Act of 1940, as amended (the "1940
Act").
2.3 APPLICABLE PRICE.
The Parties agree that Portfolio share purchase and redemption orders
resulting from Contract owner purchase payments, surrenders, partial
withdrawals, routine withdrawals of charges, or other transactions under
Contracts will be executed at the net asset values as determined as of the close
of regular trading on the New York Stock Exchange on the Business Day that
Insurer receives such orders and processes such transactions, which, Insurer
agrees shall occur not earlier than the Business Day prior to Distributor's
receipt of the corresponding orders for purchases and redemptions of Portfolio
shares. For the purposes of this section, Insurer shall be deemed to be the
agent of the Fund for receipt of such orders from holders or applicants of
contracts, and receipt by Insurer shall constitute receipt by the Fund. All
other purchases and redemptions of Portfolio shares by Insurer, will be effected
at the net asset values next computed after receipt by Distributor of the order
therefor, and such orders will be irrevocable. Insurer hereby elects to reinvest
all dividends and capital gains distributions in additional shares of the
corresponding Portfolio at the record-date net asset values until Insurer
otherwise notifies the Fund in writing, it being agreed by the Parties that the
record date and the payment date with respect to any dividend or distribution
will be the same Business Day.
4
<PAGE>
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided herein, each Party will bear
all expenses incident to its performance under this Agreement.
3.2 REGISTRATION.
The Fund will bear the cost of its registering as a management
investment company under the 1940 Act and registering its shares under the
Securities Act of 1933, as amended (the "1933 Act"), and keeping such
registrations current and effective; including, without limitation, the
preparation of and filing with the SEC of Forms N-SAR and Rule 24f-2 Notices
respecting the Fund and its shares and payment of all applicable registration or
filing fees with respect to any of the foregoing. Insurer will bear the cost of
registering the Separate Account as a unit investment trust under the 1940 Act
(unless exempt therefrom) and registering units of interest under the Contracts
under the 1933 Act (unless exempt therefrom) and keeping such registrations
current and effective; including, without limitation, the preparation and filing
with the SEC of Forms N-SAR and Rule 24f-2 Notices respecting the Separate
Account and its units of interest (unless exempt therefrom) and payment of all
applicable registration or filing fees with respect to any of the foregoing.
3.3 OTHER (NON-SALES-RELATED) EXPENSES.
The Fund will bear the costs of preparing, filing with the SEC and
setting for printing the Fund's prospectus, statement of additional information
and any amendments or supplements thereto (collectively, the "Fund Prospectus"),
periodic reports to shareholders, Fund proxy material and other shareholder
communications and any related requests for voting instructions from
Participants (as defined below). Insurer will bear the costs of preparing,
filing with the SEC and setting for printing,
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the Separate Account's prospectus, statement of additional information and any
amendments or supplements thereto (collectively, the "Separate Account
Prospectus"), any periodic reports to owners, annuitants or participants under
the Contracts (collectively, "Participants"), and other Participant
communications. The Fund and Insurer each will bear the costs of printing in
quantity and delivering to existing Participants the documents as to which it
bears the cost of preparation as set forth above in this Section 3.3, it being
understood that reasonable cost allocations will be made in cases where any such
Fund and Insurer documents are printed or mailed on a combined or coordinated
basis. If REQUESTED by Insurer, the Fund will provide annual Prospectus text to
Insurer on diskette (or by other means as may be mutually agreed upon) for
printing and binding with the Separate Account Prospectus.
3.4 OTHER SALES-RELATED EXPENSES.
Expenses of distributing the Portfolio's shares and the Contracts will
be paid by Insurer and other parties, as they shall determine by separate
agreement.
3.5 PARTIES TO COOPERATE.
The Adviser, Insurer and Distributor each agrees to cooperate with the
others, as applicable, in arranging to print, mail and/or deliver combined or
coordinated prospectuses or other materials of the Fund and Separate Account.
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) The Adviser will use its best efforts to qualify and to maintain
qualification of each Portfolio as a regulated investment company ("RIC") under
Subchapter M of the Internal
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Revenue Code of 1986, as amended (the "Code"), and the Adviser or Distributor
will notify Insurer immediately upon having a reasonable basis for believing
that a Portfolio has ceased to so qualify or that it might not so qualify in the
future.
(b) Insurer represents that it believes, in good faith, that the
Contracts will be treated as annuity contracts or life insurance policies under
applicable provisions of the Code and that it will make every effort to maintain
such treatment. Insurer will notify the Fund and Distributor 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.
(c) The Adviser and the Distributor represent and warrant that the Fund
currently qualifies as a Regulated Investment Company under Subchapter M of the
Code and will make every effort to continue to qualify and to maintain such
qualification (under Subchapter M or any successor or similar provision), and
that they will notify the company immediately upon having a reasonable basis for
believing that the Fund has ceased to so qualify or that it might not so qualify
in the future. The Adviser and the Distributor represent and warrant that the
Fund will comply with Section 817(h) of the Code, and all regulations issued
thereunder. In the event of a breach of this Section the Adviser and the
Distributor will: a) immediately notify the Insurer 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.
(d) Insurer represents that it believes, in good faith, that the
Separate Account is a "segregated asset account" and that interests in the
Separate Account are offered exclusively through the purchase of or transfer
into a "variable contract," within the meaning of such terms under Section
817(h) of the Code and the regulations thereunder. Insurer will make every
effort to continue to meet
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such definitional requirements, and it will notify the Fund and Distributor
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.
(e) The Adviser will manage the Fund as a RIC in compliance with
Subchapter M of the Code and will use its best efforts to manage to be in
compliance with Section 817(h) of the Code and regulations thereunder. The Fund
has adopted and will maintain procedures for ensuring that the Fund is managed
in compliance with Subchapter M and Section 817(h) and regulations thereunder.
(f) Should the Distributor or Adviser become aware of a failure of
Fund, or any of its Portfolios, to be in compliance with Subchapter M of the
Code or Section 817(h) of the Code and regulations thereunder, they represent
and agree that they will immediately notify Insurer of such in writing.
(g) The Distributor agrees 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.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) The Adviser will use its best efforts to cause the Fund to comply
with any applicable state insurance laws or regulations, to the extent
specifically requested in writing by Insurer. If it cannot comply, it will so
notify Insurer in writing.
(b) Insurer represents and warrants that (i) it is an insurance company
duly organized and 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
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Agreement, (ii) it has legally and validly established and maintains the
Separate Account as a segregated asset account under Indiana Law and (iii) the
Contracts comply in all material respects with all other applicable federal and
state laws and regulations.
(c) Distributor represents and warrants that it is a business
corporation duly organized, validly existing, and in good standing under the
laws of the State of Delaware and has full corporate power, authority and legal
right to execute, deliver, and perform its duties and comply with its
obligations under this Agreement.
(d) Distributor represents and warrants that the Fund 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.
(e) Adviser represents and warrants that it is a limited partnership,
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has full power, authority, and legal right to execute,
deliver, and perform its duties and comply with its obligations under this
Agreement.
4.3 SECURITIES LAWS.
(a) Insurer represents and warrants that (i) interests in the Separate
Account pursuant to the Contracts will be registered under the 1933 Act to the
extent required by the 1933 Act and the Contracts will be duly authorized for
issuance and sold in compliance with applicable state law, (ii) the Separate
Account is and will remain registered under the 1940 Act to the extent required
by the 1940 Act (unless exempt therefrom), (iii) the Separate Account does and
will comply in all material
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respects with the requirements of the 1940 Act and the rules thereunder (unless
exempt therefrom), (iv) the Separate Account's 1933 Act registration statement
relating to the Contracts, 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 (unless exempt therefrom), and (v) the Separate Account
Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder (unless exempt therefrom).
(b) The Adviser and Distributor represent and warrant that (i) Fund
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) the Fund is and will remain registered under
the 1940 Act to the extent required by the 1940 Act, (iii) the Fund 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) the Fund does and will comply in all material
respects with the requirements of the 1940 Act and the rules thereunder, (v) the
Fund's 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) the Fund Prospectus will at all times
comply in all material respects with the requirements of the 1933 Act and the
rules thereunder.
(c) The Fund will register and qualify its shares for sale in
accordance with the laws of any state or other jurisdiction only if and to the
extent reasonably deemed advisable by the Fund, Insurer or any other life
insurance company utilizing the Fund.
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(d) Distributor and Insurer each represents and warrants that it is
registered as a broker-dealer with the SEC under the Securities Exchange Act of
1934, as amended, and is a member in good standing of the National Association
of Securities Dealers Inc. (the "NASD").
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) Distributor or the Fund shall immediately notify Insurer 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 the Fund's registration statement
under the 1933 Act or the Fund Prospectus, (ii) any request by the SEC for any
amendment to such registration statement or Fund Prospectus, (iii) the
initiation of any proceedings for that purpose or for any other purpose relating
to the registration or offering of the Fund's shares, or (iv) any other action
or circumstances that may prevent the lawful offer or sale of Fund shares in any
state or jurisdiction, including, without limitation, any circumstances in which
(x) the Fund's shares are not registered and, in all material respects, issued
and sold in accordance with applicable state and federal law or (y) such law
precludes the use of such shares as an underlying investment medium of the
Contracts issued or to be issued by Insurer. Distributor and the Fund 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.
(b) Insurer shall immediately notify the Fund of (i) the issuance by
any court or regulatory body of any stop order, cease and desist order or
similar order with respect to the Separate Account's registration statement
under the 1933 Act relating to the Contracts or the Separate Account Prospectus,
(ii) any request by the SEC for any amendment to such registration statement or
Separate Account Prospectus, (iii) the initiation of any proceedings for that
purpose or for any other purpose relating to the registration or offering of the
Separate Account interests pursuant to the Contracts, or
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<PAGE>
(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. Insurer 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 INSURER TO PROVIDE DOCUMENTS.
Upon reasonable request, Insurer will provide the Fund and the
Distributor one complete copy of SEC registration statements, Separate Account
Prospectuses, reports, any preliminary and final voting instruction solicitation
material, applications for exemptions, requests for no-action letters, and
amendments to any of the above, that relate to the Separate Account or the
Contracts, and their investment in the Fund, within 20 days of the filing of
such document with the SEC or other regulatory authorities.
4.6 FUND TO PROVIDE DOCUMENTS.
Upon reasonable request, the Fund will provide to Insurer one complete
copy of SEC registration statements, Fund 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 the Fund or its
shares, within 20 days of the filing of such document with the SEC or other
regulatory authorities.
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SECTION 5. MIXED AND SHARED FUNDING
5.1 General.
The Fund has obtained an order exempting it from certain provisions of
the 1940 Act and rules thereunder so that the Fund is available for investment
by certain other entities, including, without limitation, separate accounts
funding variable life insurance policies and separate accounts of insurance
companies unaffiliated with Insurer ("Mixed and Shared Funding Order"). 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.
5.2 DISINTERESTED DIRECTORS.
The Fund 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 Adviser or Distributor within the meaning of Section
2(a)(19) of the 1940 Act.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
The Fund 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 the
Fund, including the Separate Account. Insurer agrees to inform the Board of
Directors of the Fund 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;
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<PAGE>
(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 participants or by participants of
different life insurance companies utilizing the Fund; or
(f) a decision by a life insurance company utilizing the Fund to
disregard the voting instructions of participants.
Insurer will assist the Board of Directors in carrying out its
responsibilities by providing the Board of Directors with all information
reasonably requested and necessary for the Board of Directors to consider any
issue raised, including information as to a decision by Insurer to disregard
voting instructions 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, Insurer and the other life insurance
companies utilizing the Fund will, at their own expense and to the extent
reasonably practicable (as determined by a majority of the Disinterested
Directors), take
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<PAGE>
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
separate accounts from the Fund or any Portfolio and
reinvesting such assets in a different investment medium,
including another Portfolio of the Fund, 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
contract owners or participants, life insurance contract
owners or all contract owners and participants of one or more
life insurance companies utilizing the Fund) that votes in
favor of such segregation, or offering to the affected
contract owners or 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 Insurer's
decision to disregard Participant voting instructions and that decision
represents a minority position or would preclude a majority vote, Insurer may be
required, at the Fund's election, to withdraw the Separate Account's investment
in the Fund. No charge or penalty will be imposed as a result of such
withdrawal. Any such withdrawal must take place within six months after the Fund
gives notice to Insurer that this provision is being implemented, and until such
withdrawal Distributor and the Fund shall continue to accept and implement
orders by Insurer for the purchase and redemption of shares of the Fund or upon
receipt of a substitution order granted by the SEC, whichever is later.
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<PAGE>
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to Insurer conflicts with the
majority of other state regulators, then Insurer will withdraw the Separate
Account's investment in the Fund within six months after the Fund's Board of
Directors informs Insurer that it has determined that such decision has created
a material irreconcilable conflict, and until such withdrawal Distributor and
Fund shall continue to accept and implement orders by Insurer for the purchase
and redemption of shares of the Fund or upon receipt of a substitution order
granted by the SEC, whichever is later.
(d) Insurer 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.
(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 the Insurer, Fund or
Distributor be required to establish a new funding medium for any Contracts.
Insurer 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 INSURER.
The Fund will promptly make known in writing to Insurer 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.
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5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
Insurer and the Fund will at least annually submit to the Board of
Directors of the Fund 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, 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 life insurance companies
utilizing the Fund 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 the Fund is serving 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, the Parties agree that they 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.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Portfolio:
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(a) at the option of Insurer or Distributor upon at least six months
advance written notice to the other Parties, or
(b) at the option of the Fund upon (i) at least sixty days advance
written notice to the other parties, and (ii) approval by a majority vote of the
shares of the affected Portfolio in the corresponding Subaccount of the Separate
Account (pursuant to the procedures set forth in Section 11 of this Agreement
for voting Trust shares in accordance with Participant instructions).
(c) at the option of the Fund upon institution of formal proceedings
against Insurer or Contracts Distributor by the NASD, the SEC, any state
insurance regulator or any other regulatory body regarding Insurer's obligations
under this Agreement or related to the sale of the Contracts, the operation of
the Separate Account, or the purchase of the Fund shares, if, in each case, the
Fund 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 Portfolio to be terminated; or
(d) at the option of Insurer upon institution of formal proceedings
against the Fund, Adviser, or Distributor by the NASD, the SEC, or any state
insurance regulator or any other regulatory body regarding the Fund's, Adviser's
or Distributor's obligations under this Agreement or related to the operation or
management of the Fund or the purchase of Fund shares, if, in each case, Insurer
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 Insurer, Contracts Distributor or the Subaccount
corresponding to the Portfolio to be terminated; or
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<PAGE>
(e) at the option of any Party in the event that (i) the Portfolio's
shares are not registered and, in all material respects, issued and sold in
accordance with any applicable state and federal law or (ii) such law precludes
the use of such shares as an underlying investment medium of the Contracts
issued or to be issued by Insurer; or
(f) upon termination of the corresponding Subaccount's investment in
the Portfolio pursuant to Section 5 hereof; or
(g) at the option of Insurer if the Portfolio ceases to qualify as a
RIC under Subchapter M of the Code or under successor or similar provisions; or
(h) at the option of Insurer if the Portfolio fails to comply with
Section 817(h) of the Code or with successor or similar provisions; or
(i) at the option of Insurer if Insurer reasonably believes that any
change in a Fund's investment adviser or investment practices will materially
increase the risks incurred by Insurer.
6.2 FUNDS TO REMAIN AVAILABLE.
Except (i) as necessary to implement Participant-initiated
transactions, (ii) as required by state insurance laws or regulations, (iii) as
required pursuant to Section 5 of this Agreement, (iv) with respect to any
Portfolio as to which this Agreement has terminated, or (v) pursuant to an SEC
approved Substitution Order, Insurer shall not (x) redeem Fund shares
attributable to the Contracts, or (y) prevent Participants from allocating
payments to or transferring amounts from a Portfolio that was otherwise
available under the Contracts, until, in either case, 90 calendar days after
Insurer shall have notified the Fund or Distributor of its intention to do so.
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6.3 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of
this Agreement.
6.4 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
Notwithstanding any termination of this Agreement, the Distributor
shall continue to make available shares of the Portfolios pursuant to the terms
and conditions of this Agreement, for all Contracts in effect on the effective
date of termination of this Agreement (the "Existing Contracts"), except as
otherwise provided under Section 5 of this Agreement. Specifically, and without
limitation, the Distributor shall facilitate the sale and purchase of shares of
the Portfolios as necessary in order to process premium payments, surrenders and
other withdrawals, and transfers or reallocations of values under Existing
Contracts.
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The other Parties hereto agree to cooperate with and give reasonable
assistance to Insurer in taking all necessary and appropriate steps for the
purpose of ensuring that the Separate Account owns no shares of a Portfolio
after the Final Termination Date with respect thereto except as specified under
Section 6.4 of this Agreement.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the
written consent of each other Party.
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SECTION 9. CLASS B DISTRIBUTION PAYMENTS
From time to time during the term of this Agreement the Distributor may
make payments to Insurer pursuant to a distribution plan adopted by the Fund
with respect to the Class B shares of the Portfolios pursuant to Rule 12b-1
under the 1940 Act (the "Rule 12b-1 Plan) in consideration of the Insurer's
furnishing distribution services relating to the Class B shares of the
Portfolios and providing administrative, accounting and other services,
including personal service and/or the maintenance of Participant accounts, with
respect to such shares. The Distributor has no obligation to make any such
payments, and the Insurer waives any such payment, until the Distributor
receives monies therefor from the Fund. Any such payments made pursuant to this
Section 9 shall be subject to the following terms and conditions:
(a) Any such payments shall be in such amounts as the Distributor may
from time to time advise the Insurer in writing but in any event not in excess
of the amounts permitted by the Rule 12b-1 Plan. Such payments may include a
service fee in the amount of .25 of 1% per annum of the average daily net assets
of the Fund attributable to the Class B shares of a Portfolio held by clients of
the Insurer. Any such service fee shall be paid solely for personal service
and/or the maintenance of Participant accounts.
(b) The provisions of this Section 9 relate to a plan adopted by the
Fund pursuant to Rule 12b-1. In accordance with Rule 12b-1, any person
authorized to direct the disposition of monies paid or payable by the Fund
pursuant to this Section 9 shall provide the Fund's Board of Directors, and the
Directors shall review, at least quarterly, a written report of the amounts so
expended and the purposes for which such expenditures were made.
(c) The provisions of this Section 9 shall remain in effect for not
more than a year and thereafter for successive annual periods only so long as
such continuance is specifically approved
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at least annually in conformity with Rule 12b-1 and the 1940 Act. The provisions
of this Section 9 shall automatically terminate in the event of the assignment
(as defined by the 1940 Act) of this Agreement, in the event the Rule 12b-1 Plan
terminates or is not continued or in the event this Agreement terminates or
ceases to remain in effect. In addition, the provisions of this Section 9 may be
terminated at any time, without penalty, by either the Distributor or the
Insurer with respect to any Portfolio on not more than 60 days' nor less than 30
days' written notice delivered or mailed by registered mail, postage prepaid, to
the other party.
SECTION 10. NOTICES
Notices and communications required or permitted by Section 2 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:
The Lincoln National
Life Insurance Company
1300 South Clinton
Fort Wayne, Indiana 46802
Attn.: Steven M. Kluever
Alliance Fund Distributors, Inc.
1345 Avenue of the Americas
New York NY 10105
Attn.: Edmund P. Bergan
FAX: (212) 969-2290
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<PAGE>
Alliance Capital Management L.P.
1345 Avenue of the Americas
New York NY 10105
Attn: Edmund P. Bergan
FAX: (212) 969-2290
SECTION 11. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3
hereof, Insurer will distribute all proxy material furnished by the Fund to
Participants (unless exempt therefrom) and will vote Fund shares in accordance
with instructions received from Participants. Unless exempt therefrom, and for
each Separate Account, Insurer will vote Fund shares that are (a) not
attributable to Participants or (b) attributable to Participants, but for which
no instructions have been received, in the same proportion as Fund shares for
which said instructions have been received from Participants. Insurer agrees
that it will disregard Participant voting instructions only to the extent it
would be permitted to do so pursuant to Rule 6e-3 (T)(b)(15)(iii) under the 1940
Act if the Contracts were variable life insurance policies subject to that rule.
Other participating life insurance companies utilizing the Fund will be
responsible for calculating voting privileges in a manner consistent with that
of Insurer, as prescribed by this Section 11.
SECTION 12. FOREIGN TAX CREDITS
The Adviser agrees to consult in advance with Insurer 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 the Fund's shareholders.
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<PAGE>
SECTION 13. INDEMNIFICATION
13.1 OF FUND, DISTRIBUTOR AND ADVISER BY INSURER.
(a) Except to the extent provided in Sections 13.1(b) and 13.1(c),
below, Insurer agrees to indemnify and hold harmless the Fund, Distributor and
Adviser, each of their directors and officers, and each person, if any, who
controls the Fund, Distributor or Adviser within the meaning of Section 15 of
the 1933 Act (collectively, the "Indemnified Parties" for purposes of this
Section 13. 1) against any and all losses, claims, damages, liabilities
(including amounts paid in settlement with the written consent of Insurer) 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, insofar as such losses, claims,
damages, liabilities or actions are related to the sale, acquisition, or holding
of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Separate Account's 1933 Act registration statement, the
Separate Account Prospectus, the Contracts or, to the extent
prepared by Insurer, 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 Insurer by or on behalf of the Fund, Distributor
or Adviser for use in the Separate Account's 1933 Act
registration
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<PAGE>
statement, the Separate Account Prospectus, the Contracts, or
sales literature or advertising (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 the Fund's 1933 Act registration statement, Fund
Prospectus, sales literature or advertising of the Fund, or
any amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of Insurer or the
negligent, illegal or fraudulent conduct of Insurer or persons
under their control (including, without limitation, their
employees and "Associated Persons," as that term is defined in
paragraph (m) of Article I of the NASD's By-Laws), in
connection with the sale or distribution of the Contracts or
Fund shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund's
1933 Act registration statement, Fund Prospectus, sales
literature or advertising of the Fund, 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
the Fund, Adviser or Distributor by or on behalf of Insurer
for use in the Fund's 1933 Act registration statement, Fund
Prospectus, sales literature or advertising of the Fund, or
any amendment or supplement to any of the foregoing; or
25
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(iv) arise as a result of any failure by Insurer to perform the
obligations, provide the services and furnish the materials
required of them 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 Insurer in the
Agreement.
(b) Insurer shall not be liable under this Section 13.1 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 under this Agreement or to Distributor or to the Fund.
(c) Insurer shall not be liable under this Section 13.1 with respect to
any action against an Indemnified Party unless the Fund, Distributor or Adviser
shall have notified Insurer 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 Insurer of any such action shall not relieve
Insurer from any liability which it may have to the Indemnified Party against
whom such action is brought otherwise than on account of this Section 13. 1. In
case any such action is brought against an Indemnified Party, Insurer shall be
entitled to participate, at its own expense, in the defense of such action.
Insurer 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 Insurer to such Indemnified Party of
Insurer's election to assume the defense thereof, the Indemnified Party will
cooperate fully with Insurer and shall bear the
26
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fees and expenses of any additional counsel retained by it, and Insurer 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.
13.2 INDEMNIFICATION OF INSURER BY ADVISER AND DISTRIBUTOR
(a) Except to the extent provided in Sections 13.2(d) and 13.2(e),
below, Adviser and Distributor agree to indemnify and hold harmless Insurer,
each of their directors and officers, and each person, if any, who controls
Insurer within the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" for purposes of this Section 13.2) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of Adviser) 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, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or actions are related to the sale,
acquisition, or holding of the Fund's shares and:
(i) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the Fund's
1933 Act registration statement, Fund Prospectus, sales
literature or advertising of the Fund or, to the extent not
prepared by Insurer, 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
27
<PAGE>
or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to
Distributor, Adviser or the Fund by or on behalf of Insurer
for use in the Fund's 1933 Act registration statement, Fund
Prospectus, or in sales literature or advertising (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 the Separate Account's 1933 Act registration
statement, Separate 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 Distributor, Adviser, or the Fund) or the negligent,
illegal or fraudulent conduct of the Fund, Distributor,
Adviser or persons under their control (including, without
limitation, their employees and Associated Persons), in
connection with the sale or distribution of the Contracts or
Fund shares; or
(iii) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the
Separate Account's 1933 Act registration statement, Separate
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 Insurer by or on
behalf of the Fund, Distributor or Adviser for use in the
Separate Account's 1933 Act
28
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registration statement, Separate 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 the Fund, Adviser or
Distributor to perform the obligations, provide the services
and furnish the materials required of them 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 Fund, Adviser, or
Distributor in the Agreement.
(b) Except to the extent provided in Sections 13.2(d) and 13.2(e)
hereof, Adviser and Distributor 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, except as set
forth in Section 13.2(c) below, the written consent of Adviser) 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 Portfolio to operate as a regulated investment company in
compliance with (i) Subchapter M of the Code and regulations thereunder and (ii)
Section 817(h) of the Code and regulations thereunder (except to the extent that
such failure is caused by Insurer), including, without limitation, any income
taxes and related penalties, rescission charges, liability under state law to
Contract owners or Participants asserting liability against Insurer pursuant to
the Contracts, the costs of any ruling and closing agreement or other settlement
with the Internal Revenue Service, and the cost of any substitution by Insurer
of shares of another investment company or portfolio for those of
29
<PAGE>
any adversely affected Portfolio as a funding medium for the Separate Account
that Insurer deems necessary or appropriate as a result of the noncompliance.
(c) The written consent of Adviser and Distributor referred to in
Section 13.2(b) above shall not be required with respect to amounts paid in
connection with any ruling and closing agreement or other settlement with the
Internal Revenue Service.
(d) Adviser and Distributor shall not be liable under this Section 13.2
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 under this Agreement or to Insurer or the Separate
Account.
(e) Adviser and Distributor shall not be liable under this Section 13.2
with respect to any action against an Indemnified Party unless Insurer shall
have notified Adviser and Distributor 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 Adviser or Distributor of any such action shall
not relieve Adviser or Distributor from any liability which it may have to the
Indemnified Party against whom such action is brought otherwise than on account
of this Section 13.2. In case any such action is brought against an Indemnified
Party, Adviser and Distributor will be entitled to participate, at its own
expense, in the defense of such action. Adviser and Distributor 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 Internal Revenue Service), with counsel approved by the
Indemnified
30
<PAGE>
Party named in the action, which approval shall not be unreasonably withheld.
After notice from Adviser or Distributor to such Indemnified Party of their
election to assume the defense thereof, the Indemnified Party will cooperate
fully with Adviser and Distributor and shall bear the fees and expenses of any
additional counsel retained by it, and Adviser and Distributor 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.
13.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Section 13.1(c) or 13.2(e) 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.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with New York 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.
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<PAGE>
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.
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. RESTRICTIONS ON SALES OF FUND SHARES
Insurer agrees that the Fund will be permitted (subject to the other
terms of this Agreement) to make its shares available to separate accounts of
other life insurance companies.
SECTION 18. 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.
32
<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.
THE LINCOLN NATIONAL
LIFE INSURANCE COMPANY
By:
Name: Steven M. Kluever
Title: Second Vice President
ALLIANCE CAPITAL MANAGEMENT L.P.
By: Alliance Capital Management Corporation,
its General Partner
By:
Name:
Title:
ALLIANCE FUND DISTRIBUTORS, INC.
By:
Name:
Title:
33
<PAGE>
SCHEDULE A
Portfolios of the Fund made available under this Agreement:
Premier Growth Portfolio
Growth and Income Portfolio
Growth Portfolio
Technology Portfolio
34
<PAGE>
SCHEDULE B
Insurer Contracts to which the Portfolios of the Fund are made available under
this Agreement:
Delaware-Lincoln ChoicePlus Variable Annuity
35
<PAGE>
PARTICIPATION AGREEMENT
AMONG TEMPLETON VARIABLE PRODUCTS SERIES FUND,
FRANKLIN TEMPLETON DISTRIBUTORS, INC. AND
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
THIS AGREEMENT made as of May 22, 1998, among Templeton Variable
Products Series Fund (the "Trust"), an open-end management investment company
organized as a business trust under Massachusetts law, Franklin Templeton
Distributors, Inc., a California corporation, the Trust's principal underwriter
("Underwriter"), and The Lincoln National Life Insurance Company, a life
insurance company organized as a corporation under Indiana law (the "Company"),
on its own behalf and on behalf of each segregated asset account of the Company
set forth in Schedule A, as may be amended from time to time (the "Accounts").
WITNESSETH:
WHEREAS, -the Trust is registered with the Securities and Exchange
Commission (the "SEC") as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), and has an
effective registration statement relating to the offer and sale of the various
series of its Shares under the Securities Act of 1933, as amended (the "1933
Act");
WHEREAS, the Trust and the Underwriter desire that Trust shares be
used as an investment vehicle for separate accounts established for variable
life insurance policies and variable annuity contracts to be offered by life
insurance companies which have entered into fund participation agreements with
the Trust (the "Participating Insurance Companies");
WHEREAS, the beneficial interest in the Trust is divided into several
series of shares, each series representing an interest in a particular managed
portfolio of securities and other assets, and certain of those series, named in
Schedule B, (the "Portfolios") are to be made available for purchase by the
Company for the Accounts; and
WHEREAS, the Trust has received an order from the SEC, dated November
16, 1993 (File No. 812-8546), granting Participating Insurance Companies and
their separate accounts exemptions from, the provisions of Sections 9(a),
13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2 (b) 0 5) and 6e-3 M (b)
(15) thereunder, to the extent necessary to permit shares of the Trust to be
sold to and held by variable annuity and variable life insurance separate
accounts of both affiliated and unaffiliated life insurance companies and
certain qualified pension and retirement plans (the "Shared Funding Exemptive
Order");
<PAGE>
WHEREAS, the Company has registered or will register each Account as a
unit investment trust under the 1940 Act unless an exemption from registration
under the 1940 Act is available and the Trust has been so advised; and has
registered or will register certain variable annuity contracts and variable life
insurance policies, listed on Schedule C attached hereto (the "Contracts"),
under which the portfolios are to be made available as investment vehicles under
the 1933 Act unless such interests under the Contracts in the Accounts are
exempt from registration under the 1933 Act and the Trust has been so advised;
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 one or more Contracts; and
WHEREAS, the Underwriter is registered as a broker dealer with the
Securities and Exchange Commission 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. (NASD"); and
WHEREAS, each investment adviser listed on Schedule B (each, an
"Adviser") is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended ("Advisers Act");
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 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 parties
agree as follows:
ARTICLE 1.
PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES
1.1. For purposes of this Article 1, the Company shall be the Trust's
agent for receipt of purchase orders and requests for redemption relating to
each Portfolio from each Account, provided that the Company notifies the Trust
of such purchase orders and requests for redemption by 9:00 a.m. Eastern time
on the next following Business Day, as defined in Section 1.3.
1.2. The Trust agrees to make shares of the Portfolios available to
the Accounts for purchase at the net asset value per share next computed after
receipt of a purchase order by the Trust (or its agent), as established in
accordance with the provisions of the then current prospectus of the Trust
describing Portfolio purchase
2
<PAGE>
procedures on those days on which the Trust calculates its net asset value
pursuant to rules of the SEC, and the Trust shall use its best efforts to
calculate Such net asset value on each day on which the New York Stock Exchange
("NYSE") is open for trading. The Company will transmit orders from time to time
to the Trust for the purchase of shares of the Portfolios. The Trustees of the
Trust (the "Trustees") may refuse to sell shares of any Portfolio to any person,
or suspend or terminate the offering of shares of any Portfolio if such action
is required by law or by regulatory authorities having jurisdiction or if, in
the sole discretion of the Trustees acting in good faith and in light of their
fiduciary duties under federal and any applicable state laws, such action is
deemed in the best interests of the shareholders of such Portfolio.
1.3 The Company shall submit payment for the purchase of shares of a
Portfolio on behalf of an Account no later than 2:00 P.M. Eastern time on the
next Business Day after the Trust receives the purchase order. Payment shall be
made in federal funds transmitted by wire to the Trust or its designated
custodian. Upon receipt by the Trust of the federal funds so wired, such funds
shall cease to be the responsibility of the Company and shall become the
responsibility of the Trust for this purpose. "Business Day" shall mean any day
on which the NYSE is open for trading and on which the Trust calculates its net
asset value pursuant to the rules of the SEC.
1.4 The Trust will redeem for cash any full or fractional shares of any
Portfolio, when requested by the Company on behalf of an Account, at the net
asset value next computed after receipt by the Trust (or its agent) of the
request for redemption, as established in accordance with the provisions of the
then current prospectus of the Trust describing Portfolio redemption
procedures. Redemption with respect to a Portfolio will normally be paid to the
Company for an Account in federal funds transmitted by wire to the Company
before 2:00 p.m. Eastern time on the next Business Day after the receipt of the
request for redemption. Such payment may be delayed if, for example, the
Portfolio's cash position so requires as when portfolio securities must be
sold, or if extraordinary market conditions exist, but in no event shall
Payment be delayed for a greater period than is permitted by the 1940 Act.
1.5 Payments for the purchase of shares of the Trust's Portfolios by
the Company under Section 1.3 and payments for the redemption of shares of the
Trust's Portfolios under Section 1.4 may be netted against one another on any
Business Day for the purpose of determining the amount of any wire transfer on
that Business Day.
1.6 issuance and transfer of the Trust's Portfolio shares will be by
book entry only. Stock certificates will not be issued to the Company or the
Account. Portfolio Shares purchased from the Trust will be recorded in the
appropriate title for each Account or the appropriate subaccount of each
Account.
1.7 The Trust Shall furnish, on or before the ex-dividend date, notice
to the
3
<PAGE>
Company of any income dividends or capital gain distributions payable on the
shares of any Portfolio of the Trust. The Company hereby elects to receive all
such income dividends and capital gain distributions as are payable on a
Portfolio's shares in additional shares of the Portfolio. The Trust shall notify
the Company of the number of shares so issued as payment of such dividends and
distributions.
1.8 The Trust shall calculate the net asset value of each Portfolio on
each Business Day, as defined in Section 1.3. The Trust shall make the net
asset value per share for each Portfolio available to the Company or its
designated agent on a daily basis as soon as reasonably practical after the net
asset value per share is calculated (normally by 6:30 p.m. Eastern time).
1.9 The Trust agrees that its Portfolio shares will be sold only to
Participating Insurance Companies and their separate accounts and to certain
qualified pension and retirement plans to the extent permitted by the Shared
Funding Exemptive Order. No shares of any Portfolio will be sold directly to
the general public. The Company agrees that it will use Trust shares only for
the purposes of funding the Contracts through the Accounts listed in Schedule
A, as amended from time to time.
1.10 The Company agrees that all net amounts available under the
Contracts shall be invested in (I) the Company's general account, (ii)
investment companies currently available as funding vehicles for the Contracts
and appearing on Schedules B and D to this Agreement, or (iii) other investment
companies, provided that the Company shall have given the Trust and the
Underwriter sixty (60) days' advance written notice of its intention to add
such other investment companies.
1.11 The Trust agrees that all Participating Insurance Companies shall
have the obligations and responsibilities regarding pass-through voting and
conflicts of interest corresponding to those contained in Section 2.10 and
Article IV of this Agreement.
1.12 Each party to this Agreement shall have the right to rely on
information or confirmations provided by any other party (or by any affiliate
of any other party), and shall not be liable in the event that an error results
from any incorrect information or confirmations supplied by any other party. If
an error is made in reliance upon incorrect information or confirmations, any
amount required to make a Contract owner's account whole shall be borne by the
party who provided the incorrect information or confirmation.
ARTICLE 11.
OBLIGATIONS OF THE PARTIES; FEES AND EXPENSE
2.1 The 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 the Trust.
The Trust shall bear the costs of
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<PAGE>
registration -and qualification of its shares of the Portfolios, preparation and
filing of the documents listed in this Section 2.1 and all taxes to which an
issuer is subject on the issuance and transfer of its shares.
2.2 At the option of the Company, the Trust or the Underwriter shall
either (a) provide the Company with as many copies of portions of the Trust's
current prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the
foregoing, pertaining specifically to the Portfolios as the Company shall
reasonably request; or (b) provide the Company with a camera ready copy of such
documents in a form suitable for printing and from which information relating
to series of the Trust other than the Portfolios has been deleted to the extent
practicable. The Trust or the Underwriter shall provide the Company with a copy
of its current statement of additional information, including any amendments or
supplements, in a form suitable for duplication by the Company. Expenses of
furnishing such documents for marketing purposes shall be borne by the Company
and expenses of furnishing such documents for current contract owners invested
in the Trust shall be borne by the Trust or the Underwriter. The Company
assumes sole responsibility for ensuring that such materials are delivered to
Contract owners in accordance with applicable federal and state securities
laws.
2.3 The Trust shall bear the costs of preparation, solicitation and
mailing Trust-sponsored proxy materials (or similar materials such as voting
solicitation instructions) to Contract owners, and the Company (at its expense)
shall. provide all necessary information for and otherwise fully cooperate with
the proxy distribution process. The Company shall bear the cost of distributing
all other proxy materials (or similar materials such as voting solicitation
instructions). The Company assumes sole responsibility for ensuring that such
materials are delivered to Contract owners in accordance with applicable
federal and state securities laws.
2.4 If and to the extent required by law, the Company shall: (i)
solicit voting instructions from Contract owners; (I!) vote the Trust shares in
accordance with the instructions received from Contract owners; and (iii) vote
Trust shares held in a separate account for which no instructions have been
received in the same proportion as Trust shares of such Portfolio in that
separate account for which instructions have been received, 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
reserves the right to vote Trust shares held in any segregated asset account in
its own right, to the extent permitted by law.
2.5 Except as provided in se section 2.7, the Company shall not use any
designation comprised in whole or part of the names or marks "Franklin" or
"Templeton" or any other Trademark relating to the Trust or Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
the Company shall cease all use of any such name or mark as soon as reasonably
practicable.
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<PAGE>
2.6 Except as provided in section 2.7, the Trust or Underwriter shall
not use any designation comprised in whole or in part of the names or marks
"Lincoln" or "Lincoln Life" or any other Trademark relating to the Company
without prior written consent, and upon termination of this Agreement for any
reason, the Trust or the Underwriter shall cease all use of any such name or
mark as soon as reasonably practicable.
2.7 The Company shall furnish, or cause to be furnished to the Trust or
its designee, at least one complete copy of each registration statement,
prospectus, statement of additional information, retirement plan disclosure
information or other disclosure documents or similar information, as applicable
(collectively "disclosure documents"), as well as any report, solicitation for
voting instructions, sales literature and other promotional materials, and all
amendments to any of the above that relate to the Contracts or the Accounts and
their investment in the Trust prior to its first use with investors. The
Company shall furnish, or shall cause to be furnished, to the Trust or its
designee each piece of sales literature or other promotional material in which
the Trust or an Adviser is named, at least 10 Business Days prior to its use.
No such material shall be used if the Trust or its designee reasonably objects
to such use within seven Business Days after receipt of such material. For
purposes of this paragraph, "sales literature or other promotional material"
includes, but is not limited to, portions of the following that use any
Trademark related to the Trust or Underwriter or refer to the Trust or
affiliates of the Trust: 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 electronic communication 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 or any other advertisement, sales literature or published article or
electronic communication), educational or training materials or other
communications distributed or made generally available to some or all agents or
employees, and disclosure documents, shareholder reports and proxy materials.
The Trust shall furnish or cause to be furnished, to the Company or its
designee each piece of sales literature or other promotional material (as
defined above) in which the Company's products are promoted is named, at least
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 Business
Days after receipt of such material. In addition, in marketing literature
regarding the Trust, the Trust and the Underwriter may include the Company's
name in a list of insurance companies whose separate accounts invest in the
Trust, provided the Company receives a copy of such literature three (3)
business days in advance of first use and does not affirmatively object.
2.8 The Company and its agents shall not give any information or make
any representations or statements on behalf of the Trust or concerning the
Trust, the Underwriter or an Adviser in connection with the sale of the
Contracts other than
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<PAGE>
information or representations contained in and accurately derived from the
registration statement or prospectus for the Trust shares (as such registration
statement and prospectus may be amended or supplemented from time to time),
annual and semi-annual reports of the Trust, Trust-sponsored proxy statements,
or in sales literature or other promotional material approved by the Trust or
its designee, except as required by legal process or regulatory authorities or
with the written permission of the Trust or its designee.
2.9 The Trust shall use its best efforts to provide the Company, on a
timely basis, with such information about the Trust, the Portfolios and each
Adviser, in such form as the Company may reasonably require, as the Company
shall reasonably request in connection with the preparation of disclosure
documents and annual and semi-annual reports pertaining to the Contracts.
2.10 The Trust shall not give any information or make any
representations or statements on behalf of the Company or concerning the
Company, the Accounts or the Contracts other than information or
representations contained in and accurately derived from disclosure documents
for the Contracts (as such disclosure documents may be amended or supplemented
from time to time), or in materials approved by the Company for distribution
including sales literature or other promotional materials, except as required
by legal process or regulatory authorities or with the written permission of
the Company.
2.11 The Trust Shall require all Participating Insurance Companies to
calculate voting privileges as set forth in section 2.4 and the Company shall
be responsible for assuring that the Accounts calculate voting privileges in
the manner established by the Trust. The Company will in no way recommend or
oppose or interfere with the solicitation of proxies for Portfolio shares held
to fund the Contracts without the prior written consent of the Trust, which
consent may be withheld in the Trust's sole discretion.
2.12 The Trust and Underwriter Shall pay no fee or other compensation
to the Company under this Agreement except as provided on Schedule E, if
attached. Nevertheless, the Trust or the Underwriter or an affiliate may make
payments (other than pursuant to a Rule 12b-1 Plan) to the Company or its
affiliates or to the Contracts' underwriter in amounts agreed to by the
Underwriter in writing and such payments may be made out of fees otherwise
payable to the Underwriter or its affiliates, profits of the Underwriter or its
affiliates, or other resources available to the Underwriter or its affiliates.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 The Company represents and warrants that it is an insurance company
duly organized and validly existing under the laws of its state of
incorporation and that it has
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legally and validly established each Account as a segregated asset account under
such law as of the date set forth in Schedule A.
3.2 The Company represents and warrants that, with respect to each
Account, (1) the Company has registered or, prior to any issuance or sale of
the Contracts, will register the Account as a unit investment trust in
accordance with the provisions of the 1940 Act to serve as a segregated asset
account for the Contracts, or (2) if the Account is exempt from registration as
an investment company under Section 3(c) of the 1940 Act, the. Company will
make every effort to maintain such exemption and will notify the Trust and the
Adviser immediately upon having a reasonable basis for believing that such
exemption no longer applies or might not apply in the future.
3.3 The Company represents and warrants that, with respect to each
Contract, (1) the Contract will be registered under the 1933 Act, or (2) if the
Contract is exempt from registration under Section 3(a)(2) of the 1933 Act or
under Section 4(2) and Regulation D of the 1933 Act, the Company will make
every effort to maintain such exemption and will notify the Trust and the
Adviser immediately upon having a reasonable basis for believing that such
exemption no longer applies or might not apply in the future. The Company
further represents and warrants that the Contracts will be sold by broker
dealers, or their registered representatives, who are registered with the
SEC under the 1934 Act and who are members in good standing of the NASD; the
Contracts will be issued and sold in compliance in all material respects with
all applicable federal and state laws; and the sale of the Contracts shall
comply in all material respects with applicable state insurance suitability
requirements.
For any unregistered Accounts which are exempt from registration under
the '40 Act in reliance upon Sections YOM or 3(c)(7) thereof, the Company
represents and warrants that:
(a) each Account and sub-account thereof has a principal underwriter
which is registered as a broker-dealer under the Securities
Exchange Act of 1934, as amended;
(b) Trust shares are and will continue to be the only investment
securities held by the corresponding Account sub-accounts; and
(c) with regard to each Portfolio, Company, on behalf of the
corresponding sub-account, will:
(1) seek instructions from all Contract owners with regard
to the voting of all proxies with respect to Trust
shares and vote such proxies only in accordance with
such instructions or vote such shares held by it in the
same proportion as the vote of all other holders of such
shares; and
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(2) refrain from substituting shares of another security for
such shares unless the SEC has approved such
substitution in the manner provided in Section 26 of the
'40 Act. 1
3.4 The Trust represents and warrants that it is duly organized and
validly existing under the laws of the State of Massachusetts and that it does
and will comply in all material respects with the 1940 Act and the rules and
regulations thereunder.
3.5 The Trust represents and warrants that the Portfolio shares offered
and sold pursuant to this Agreement will be registered under the 1933 Act and
the Trust shall be registered under the 1940 Act prior to and at the time of
any issuance or sale of such shares. The Trust shall amend its registration
statement under the 1933 Act and the 1940 Act from time to time as required in
order to effect the continuous offering of its shares. The Trust Shall register
and qualify its shares for sale in accordance with the
laws of the various states only if and to the extent deemed advisable by the
Trust or the Underwriter.
3.6 The Trust represents and warrants that (i) the investments of each
Portfolio will comply with the diversification requirements for variable
annuity, endowment or life insurance contracts set forth in Section 817(h) of
the Internal Revenue Code of 1986, as amended ("Code"), and the rules and
regulations thereunder, including without limitation Treasury Regulation
1.817-5, and that (ii) it has adopted such diversification policies, as
reflected in its registration statement, and has contractually obligated each
Portfolio's investment adviser to comply with Trust policies. The Trust will
notify the Company immediately upon having a reasonable basis for believing any
Portfolio has ceased to comply or might not so comply and will in that event
immediately take all reasonable steps to adequately diversify the Portfolio to
achieve compliance within the grace period afforded by Regulation 1.817-5.
3.7 The Trust represents and warrants that it is currently qualified
as a "regulated investment company" under Subchapter M of the Code, that it
will make every effort to maintain such qualification and will notify the
Company immediately upon having a reasonable basis for believing it has ceased
to so qualify or might not so qualify in the future.
3.8 The Trust and Underwriter each represents and warrants that should
it ever desire to make any payments to finance distribution expenses pursuant
to Rule 12b-1 under the 1940 Act, the Trustees, including a majority who are
not "interested persons" of the Trust under the 1940 Act ( "disinterested
Trustees" ), will formulate and approve any plan under Rule 12b-1 to finance
distribution expenses.
3.9 The Trust represents and warrants that it, its directors,
officers, employees and others dealing with the money or securities, or both,
of a Portfolio shall at all times be covered by a blanket fidelity bond or
similar coverage for the benefit of the Trust in
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an amount not less that the minimum coverage required by Rule 17g-I or other
regulations under the 1940 Act. Such bond shall include coverage for larceny and
embezzlement and be issued by a reputable bonding company.
3.10 The Company represents and warrants that all of its directors,
officers, employees, investment advisers, and other individuals or entities
dealing with the money and/or securities of the Trust are and shall be at all
times covered by a blanket fidelity bond or similar coverage for the benefit of
the Trust, in an amount not less than $5 million. The aforesaid bond shall
include coverage for larceny and embezzlement and shall be 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 Trust and the Underwriter in the event that
Such coverage no longer applies.
3.11 The Underwriter represents that each Adviser is duly organized
and validly existing under applicable corporate law and that it is registered
and will during the term of this Agreement remain registered as an investment
adviser under the Advisers Act.
3.12 The Trust currently intends for one or more Classes to make
payments to finance its distribution expenses, including service fees, pursuant
to a Plan adopted under Rule 12b-1 under the 1940 Act ("Rule 12b-1"), although
it may determine to discontinue such practice in the future. To the extent that
any Class of the Trust finances its distribution expenses pursuant to a Plan
adopted under Rule 12b-1, the Trust undertakes to comply with any then current
SEC and SEC staff interpretations concerning Rule 12b-1 or any successor
provisions.
ARTICLE IV.
POTENTIAL CONFLICTS
4.1 The parties acknowledge that a Portfolio's shares may be made
available for investment to other Participating Insurance Companies. In such
event, the Trustees will monitor the Trust for the existence of any material
irreconcilable conflict between the interests of the contract owners of all
Participating Insurance Companies. An irreconcilable material conflict may
arise for a variety of reasons, including: (a) an action by any state insurance
regulatory authority; (b) a Change in applicable federal or state insurance,
tax, or securities laws or regulations, or a public ruling, private letter
ruling, no-action or interpretative letter, or any similar action by insurance,
tax, or securities regulatory authorities; (c) an administrative or judicial
decision in any relevant proceeding; (d) the manner in which the investments of
any Portfolio are being managed; (e) a difference in voting instructions given
by variable annuity contract and variable life insurance contract owners; or
(f) a decision by an insurer to disregard the voting instructions of contract
owners. The Trust shall promptly inform the Company of any determination by the
Trustees that an irreconcilable material conflict exists and of the
implications thereof.
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4.2 The Company agrees to promptly report any potential or existing
conflicts of which it is aware to the Trustees. The Company will assist the
Trustees in carrying out their responsibilities under the Shared Funding
Exemptive Order by providing the Trustees with all information reasonably
necessary for the Trustees to consider any issues raised including, but not
limited to, information as to a decision by the Company to disregard Contract
owner voting instructions. All communications from the Company to the Trustees
may be made in care of the Trust.
4.3 If it is determined by a majority of the Trustees, or a majority of
the disinterested Trustees, that a material irreconcilable conflict exists that
affects the interests of Contract owners, the Company shall, in cooperation
with other Participating insurance Companies whose contract owners are also
affected, at its own expense and to the extent reasonably practicable (as
determined by the Trustees) take whatever steps are necessary to remedy or
eliminate the irreconcilable material conflict, which steps could include: (a)
withdrawing the assets allocable to some or all of the Accounts from the Trust
or any Portfolio and reinvesting Such assets in a different investment medium,
including (but not limited to) another Portfolio of the Trust, or submitting
the question of whether or not such withdrawal should be implemented to a vote
of all affected Contract owners and, as appropriate, withdrawal of the assets
of any appropriate group (i.e. , annuity contract owners, life insurance policy
owners, or variable contract owners of one or more Participating Insurance
Companies) that votes in favor of such withdrawal, or offering to the affected
Contract owners the option of making such a change; and (b) establishing a new
registered management investment company or managed separate account.
4.4 if a material irreconcilable conflict arises because of a
decision by the Company to disregard Contract owner voting instructions and
that decision represents a minority position or would preclude a majority vote,
the Company may be required, at the Trust's election, to withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account; provided, however, that such withdrawal and termination shall be
limited to the extent required by the foregoing material irreconcilable
conflict as determined by a majority of the disinterested Trustees. Any such
withdrawal and termination must take place within six (6) months after the
Trust gives written notice that this provision is being implemented. Until the
end of such six (6) month period, the Trust shall continue to accept and
implement orders by the Company for the purchase and redemption of shares of
the Trust.
4.5 if a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to the Company conflicts with a
majority of other state regulators, then the Company will withdraw the affected
Account's investment in the Trust and terminate this Agreement with respect to
such Account within six (6) months after the Trustees inform the Company in
writing that it has determined that such decision has created an irreconcilable
material conflict; provided, however, that such withdrawal and termination
shall be limited to the extent required by the foregoing material
irreconcilable conflict as determined by a majority of the disinterested
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Trustees. Until the end of such six (6) month period, the Trust shall continue
to accept and implement orders by the Company for the purchase and redemption
of shares of the Trust.
4.6 For purposes of Sections 4.3 through 4.6 of this Agreement, a
majority of the disinterested Trustees shall determine whether any proposed
action adequately remedies any irreconcilable material conflict, but in no event
will the Company or Trust be required to establish a new funding medium for the
Contracts. In the event that the Trustees determine that any proposed action
does not adequately remedy any irreconcilable material conflict, then the
Company will withdraw the Account's investment in the Trust and terminate this
Agreement within six (6) months after the Trustees inform the Company in writing
of the foregoing determination; provided, however, that such withdrawal and
termination shall be limited to the extent required by any such material
irreconcilable conflict as determined by a majority of the disinterested
Trustees.
4.7 The Company shall at least annually Submit to the Trustees such
reports, materials or data as the Trustees may reasonably request so that the
Trustees may fully carry out the duties imposed upon them by the Shared Funding
Exemptive order, and said reports, materials and data shall be submitted more
frequently if reasonably deemed appropriate by the Trustees.
4.8 If and to the extent that Rule 6e-2 and Rule 6e-3M 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 Shared Funding Exemptive Order) on terms and
conditions materially different from those contained in the Shared Funding
Exemptive Order, then the Trust and/or the Participating Insurance Companies,
as appropriate, shall take such steps as may be necessary to comply with Rules
6e-2 and 6e-3(T), as amended, and Rule 6e-3, as adopted, to the extent such
rules are applicable.
ARTICLE V.
INDEMNIFICATION
5.1 INDEMNIFICATION BY THE COMPANY
(a) The Company agrees to indemnify and hold harmless
the Trust and each of its Trustees, officers, employees and
agents and each person, if any, who controls the Trust within
the meaning of Section 15 of the 1933 Act (collectively, the
"Indemnified Parties" and individually the "Indemnified Party"
for purposes of this Article V) against any and all losses,
claims, damages, liabilities (including amounts paid in
settlement with the written consent. of the Company, which
consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending
any alleged loss, claim, damage, liability or
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<PAGE>
expense and reasonable legal counsel fees incurred in
connection therewith) (collectively, "Losses"), to which the
Indemnified Parties may become subject under any statute or
regulation, or at common law or otherwise, insofar as such
Losses are related to the sale or acquisition of Trust 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 a disclosure document for
the Contracts or in the Contracts themselves or in
sales literature generated or approved by the Company
on behalf of the Contracts or Accounts (or any
amendment or supplement to any of the foregoing)
(collectively, "Company Documents" for the purposes
of this Article V), or arise out of or are based upon
the omission or the alleged omission to state therein
a material fact required to be stated therein or
necessary to make the statements therein not
misleading, provided that this indemnity shall not
apply as to any Indemnified Party if such statement
or omission or Such alleged statement or omission was
made in reliance upon and was accurately derived from
written information furnished to the Company by or on
behalf of the Trust for use in Company Documents or
otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or result from statements
or representations (other than statements or
representations contained in and accurate1y derived
from Trust Documents as defined in Section 5.2 (a)(0)
or wrongful conduct of the Company or persons under
its control, with respect to the sale or acquisition
of the Contracts or Trust shares; or
(III) arise out of or result from any untrue
statement or alleged untrue statement of a material
fact contained in Trust Documents as defined in
Section 5.2(a)(i) or the omission or alleged
-omission to state therein a material fact required
to be stated therein or necessary to make the
statements therein not misleading if such statement
or omission was made in reliance upon and accurately
derived from written information furnished to the
Trust by or on behalf of the Company; or
(iv) arise out of or result from any failure
by the Company to provide the services or furnish the
materials required under the terms of this Agreement;
or
(v) arise out of or result from any material
breach of any
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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.
(b) The Company shall not be liable under this
indemnification provision with respect to any Losses 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 the Trust or Underwriter, whichever is
applicable. The Company shall also 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.
(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 sale of the Trust Shares or
the Contracts or the operation of the Trust.
5.2 INDEMNIFICATION BY THE UNDERWRITER
(a) The Underwriter agrees to indemnify and hold harmless the
Company,
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the underwriter of the Contracts 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" and
individually an "Indemnified Party" for purposes of this Section 5.2)
against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of the Underwriter,
which consent shall not be unreasonably withheld) or expenses (including
the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees
incurred in connection therewith) (collectively, "Losses") to which the
Indemnified Parties become subject under any statute, at common law or
otherwise, insofar as such Losses are related to the sale or acquisition
of the Trust'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, prospectus or sales literature of the Trust (or
any amendment or supplement to any of the foregoing) (collectively, the
"Trust Documents") 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 of such
alleged statement or omission was made in reliance upon and in
conformity with information furnished to the Underwriter or Trust by or
on behalf of the Company for use in the Registration Statement or
prospectus for the Trust or in sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of the
Contracts or Trust shares; or
(ii) arise out of or as a result of statements or
representations (other than statements or representations contained in
the disclosure documents or sales literature for the Contracts not
supplied by the Underwriter or persons under its control) or wrongful
conduct of the Trust, Adviser or Underwriter or persons under their
-control, with respect to the sale or distribution of the Contracts or
Trust shares; or
(iii) arise out of any untrue statement or alleged untrue
statement of a material fact contained in a disclosure document 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 Trust; or
(iv) arise as a result of any failure by the Trust 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
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qualification representation specified in Section 3.7 Of this Agreement
and the diversification requirements specified in Section 3.6 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 5.2(b) and 5.2(c) hereof.
(b) The Underwriter shall not be liable under this indemnification
provision with respect to any Losses 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.
(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
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.
(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.
5.3 INDEMNIFICATION BY THE TRUST
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(a) 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 (collectively, the
"Indemnified Parties" for purposes of this Section 5.3) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Trust, which consent shall not be unreasonably
withheld) 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 Trust, and arise -out of or result from any material
breach of any representation and/or warranty made by the Trust in this
Agreement or arise out of or result from any other material breach of this
Agreement by the Trust; as limited by and in accordance with the provisions of
Section 5.3(b) and 5.3(c) hereof. It is understood and expressly stipulated
that neither the holders of shares of the Trust nor any Trustee, officer, agent
or employee of the Trust shall be personally liable hereunder, nor shall any
resort to be had to other private property for the satisfaction of any claim or
obligation hereunder, but the Trust only shall be liable.
(b) The Trust shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation incurred
or assessed against any 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 Trust, the Underwriter or each Account, whichever is
applicable.
(c) The Trust 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 Trust in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claims 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 Trust of
any such claim shall not relieve the Trust 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 Trust will be entitled to
participate, at its own expense, in the defense thereof. The Trust also shall
be entitled to assume the defense thereof, with counsel satisfactory to the
party named in the action. After notice from the Trust to such party of the
Trust'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
Trust 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.
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(d) The Company and the Underwriter agree promptly to notify the
Trust of the commencement of any litigation or proceedings against it any of
its respective officers or directors in connection with the Agreement, the
issuance or sale of the Contracts, with respect to the operation of either the
Account, -or the sale or acquisition of share of the Trust.
ARTICLE V1.
TERMINATION
6.1 This Agreement may be terminated by any party in its entirety or
with respect to one, some or all Portfolios or any reason by ninety (90) days
advance written notice delivered to the other parties, and shall terminate
immediately in the event of its assignment, as that term is used in the 1940
Act.
6.2 This Agreement may be terminated immediately by either the Trust
or the Underwriter following consultation with the Trustees upon written notice
to the Company if :
(a) the Company notifies the Trust or the Underwriter that
the exemption from registration under Section 3(c) of the 1940 Act no
longer applies, or might not apply in the future, to the unregistered
Accounts, or that the exemption from registration under Section 4(2) or
Regulation D promulgated under the 1933 Act no longer applies or might
not apply in the future, to interests under the unregistered Contracts;
Or
(b) either one or both of the Trust or the Underwriter
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 is the subject of material adverse publicity.
6.3 This Agreement may be terminated immediately by the Company upon
written notice to the Trust and the Underwriter:
(a) if the Company Shall determine, in its sole judgment
exercised in good faith, that either the Trust or the Underwriter has
suffered a material adverse change in its business, operations,
financial conditions or prospects since the date of this Agreement or
is the subject of material adverse publicity; or
(b) if the Trust and Underwriter fail to promptly remedy a
breach of section 3.6 hereof.
6.4 If this Agreement is terminated for any reason, except under
Article IV (Potential Conflicts) above, the Trust shall, at the option of the
Company, continue to make available additional shares of any Portfolio
and redeem shares of any Portfolio
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pursuant to all of the terms and conditions of this Agreement for all Contracts
in effect on the effective date of termination of this Agreement. If this
Agreement is terminated pursuant to Article IV, the provisions of Article IV
shall govern.
6.5 The provisions of Articles 11 (Representations and Warranties) and
V (Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 6.4, except that the Trust and the Underwriter shall
have no further obligation to sell Trust shares with respect to Contracts
issued after termination.
6.6 The Company shall not redeem Trust shares attributable to the
Contracts (as opposed to Trust shares attributable to the Company's assets held
in the Account) except (i) as necessary to implement Contract owner initiated
or approved transactions, (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 Trust and the
Underwriter the opinion of counsel for the Company (which counsel shall be
reasonably satisfactory to the Trust 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 Trust or the Underwriter 90 days notice of its intention to do so.
ARTICLE VII.
NOTICES.
Any notice Shall be sufficiently. given when sent by registered or
certified mail to the other party at the address of such party set forth below
or at such other address as
such Party may from time to time specify in writing to the other party.
If to the Trust or the Underwriter:
Templeton Variable Products Series Fund or
Franklin Templeton Distributors, Inc.
500 E. Broward Boulevard
Fort Lauderdale, FL 33394-3091
Attention: Barbara J. Green, Trust Secretary
WITH A COPY TO
Franklin Resources, Inc.
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777 Mariners Island Boulevard
San Mateo, CA 94404
Attention: Karen L. Skidmore, Senior Corporate
Counsel
If to the Company:
The Lincoln National Life Insurance Company
1300 South Clinton Street, 2H-02
Fort Wayne, IN 46802
Attention: Kelly D. Clevenger, Vice President
ARTICLE VIIII.
MISCELLANEOUS
8.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof
or otherwise affect their construction or effect.
8.2 This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
8.3 If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
8.4 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of Florida. 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. Copies of any
such orders shall be promptly forwarded by the Trust to the Company.
8.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any Such
liabilities.
8.6 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.
8.7 Each party hereto shall treat as confidential the names and
addresses of the
20
<PAGE>
Contract owners and all information reasonably identified as confidential in
writing by any other party hereto, and, except as permitted by this Agreement or
as required by legal process or regulatory authorities, shall not disclose,
disseminate, or utilize such names and addresses and other confidential
information until such time as they may come into the public domain, without the
express written consent of the affected party. Without limiting the foregoing,
no party hereto shall disclose any information that such party has been advised
is proprietary, except such information that such party is required to disclose
by any appropriate governmental authority (including, without limitation, the
SEC, the NASD, and state securities and insurance regulators).
8.8 The rights, remedies and obligations contained in this Agreement
are cumulative and are in addition to any and all rights, remedies and
obligations, at law or in equity, which the parties hereto are entitled to
under state and federal laws.
8.9 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided in Section
1.10.
8.10 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the prior written approval of the other
party.
8.11 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.
IN WITNESS WHEREOF, the parties have caused their duly
authorized officers to execute this Participation Agreement as of the date and
year first above written.
The Company:
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
-------------------------------------------
By its authorized officer
By:
Name:
Title:
The Trust:
TEMPLETON VARIABLE PRODUCTS SERIES FUND
---------------------------------------
By its authorized officer
By:
Name:
Title:
21
<PAGE>
The Underwriter:
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
-------------------------------------
By its authorized officer
By:
Name:
Title:
SCHEDULE A
SEPARATE ACCOUNTS OF
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
1. Lincoln Life Flexible Premium Variable Life Account R
Date Established:
SEC Registration Number: 333-43107
2. Lincoln Life Variable Life Account M
Date Established:
SEC Registration Number: 333-42479
22
<PAGE>
SCHEDULE B
TRUST PORTFOLIOS AND CLASSES AVAILABLE
--------------------------------------
<TABLE>
<CAPTION>
<S><C>
TEMPLETON VARIABLE PRODUCTS SERIES ADVISER
---------------------------------- -------
Templeton Asset Allocation Fund Templeton Investment Counsel, Inc.
-Class 1
Templeton international Fund Templeton Investment Counsel, Inc.
-Class 1
Templeton Stock Fund Templeton Investment Counsel, Inc.
-Class 1
</TABLE>
23
<PAGE>
SCHEDULE C
VARIABLE ANNUITY CONTRACTS
ISSUED BY LINCOLN NATIONAL LIFE INSURANCE COMPANY
-------------------------------------------------
<TABLE>
<CAPTION>
<S><C>
REPRESENTATIVE
CONTRACT FORM NUMBER
-------- -----------
1. Lincoln Life Flexible Premium Variable Life Account R
Title: SVUL I Form: LN650LL
SEC Registration Number: 333-43107
2. Lincoln Life Variable Account M
Title: VUL I Form: LN605LL
SEC Registration Number: 333-42479
</TABLE>
24
<PAGE>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
----------------------------------------------
AIM Capital Appreciation Fund
AIM Diversified income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
BT Equity 500 Index Fund
Delaware Emerging Markets Series
Delaware Small Cap Value Series
Delaware Trend Series
Fidelity VIP Equity-Income Portfolio
Fidelity VIP 11 Asset Manager Portfolio
Fidelity VIP 11 Investment Grade Bond Portfolio
Lincoln National Money Market Fund
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
OpCap Global Equity Portfolio
OpCap Managed Portfolio
25
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
The Lincoln National Life Insurance Company, Templeton Variable
Products Series Fund and Franklin Templeton Distributors, Inc. hereby amend
their Fund Participation Agreement dated as of May 22, 1998, and as amended on
May 1, 1999 by:
1. Replacing Schedule A-C of the Agreement with Amended Schedule A-C,
attached;
2. Replacing Schedule D of the Agreement with Amended Schedule D, attached;
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Amendment to Fund Participation Agreement, to be
effective as of October 15, 1999.
LINCOLN NATIONAL LIFE INSURANCE TEMPLETON VARIABLE PRODUCTS SERIES
COMPANY FUND
- ---------------------------------- --------------------------------------
By its authorized officer By its authorized officer
By: By:
------------------------------- --------------------------------------
Name: Steven M. Kluever Name: Karen L. Skidmore
Title: Second Vice President Title: Assistant Vice President and
Assistant Secretary
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
--------------------------------------
By its authorized officer
By:
-----------------------------------
Name: Deborah Gatzek
Title: Senior Vice President and
Assistant Secretary
1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A-C
CONTRACTS ISSUED BY LINCOLN NATIONAL LIFE INSURANCE COMPANY
-----------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT SVUL I VUL I Lincoln VUL
NAME AND TYPE
- ----------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes Yes Yes
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-08579 811-08557 811-08557
NUMBER-1940
ACT
- ----------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE LN650LL LN605LL LN660
FORM NUMBERS LN615 LN615
LN660 LN605
- ----------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Lincoln Life Flexible Lincoln Life Flexible Lincoln Life Flexible
NAME/DATE Premium Variable Life Premium Variable Life Premium Separate
ESTABLISHED Account R Account M Account M
- ----------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-43107 333-42479 333-42479
NUMBER - 1933
ACT
- ----------------------------------------------------------------------------------------------------------------------------
TEMPLETON Templeton Asset Templeton Asset Templeton International
VARIABLE Allocation Fund - Class 1 Allocation Fund - Class 1 Fund - Class 2
PRODUCTS SERIES Templeton Investment Templeton Investment Templeton Investment
FUND ("TVP") - Counsel, Inc. Counsel, Inc. Counsel, Inc.
PORTFOLIOS AND
CLASSES - ADVISER Templeton International Templeton International Templeton Stock Fund -
Fund - Class 1 Fund - Class 1 Class 2
Templeton Investment Templeton Investment Templeton Investment
Counsel, Inc. Counsel, Inc. Counsel, Inc.
Templeton Stock Fund - Templeton Stock Fund -
Class 1 Class 1
Templeton Investment Templeton Investment
Counsel, Inc. Counsel, Inc.
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A-C
CONTRACTS ISSUED BY LINCOLN NATIONAL LIFE INSURANCE COMPANY
-----------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
CONTRACT 4 CONTRACT 5 CONTRACT 6
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT CVUL Lincoln SVUL VUL -DB-
NAME AND TYPE
- ------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes Yes Yes
- ------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-08579 811-08557
NUMBER -1940
ACT
- ------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE LN920 LN650 LN680
FORM NUMBERS LN921
- ------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Lincoln Life Flexible Lincoln Life Flexible Lincoln Life Flexible
NAME/DATE Premium Variable Life Premium Variable Life Premium Separate Account
ESTABLISHED Account S Account R Account M
- ------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-72875 333-43107 333-40745
NUMBER -1933
ACT
- ------------------------------------------------------------------------------------------------------------------
TEMPLETON Templeton Asset Templeton International TVP - Templeton
VARIABLE Allocation Fund - Class 2 Fund - Class 2 International Fund - Class
PRODUCTS SERIES Templeton Investment Templeton Investment 2 (Templeton Investment
FUND ("TVP") - Counsel, Inc. Counsel, Inc. Counsel, Inc.)
PORTFOLIOS AND
CLASSES - ADVISER Templeton International Templeton Stock Fund - TVP - Templeton Stock
Fund - Class 2 Class 2 Fund - Class 2 -
Templeton Investment Templeton Investment Templeton Investment
Counsel, Inc. Counsel, Inc. Counsel, Inc.
Templeton Stock Fund -
Class 2
Templeton Investment
Counsel, Inc.
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
----------------------------------------------
AIM Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
AIM International Fund
American Century International
American Century Income and Growth
American Variable Insurance Series
1) Global Small Capitalization Fund - Class 2
2) Growth Fund - Class 2
3) Growth-Income Fund - Class 2
Baron Capital Asset Fund
BT Equity 500 Index Fund
BT Small Cap Index Fund
BT EAFE Index Fund
Delaware Emerging Markets Series
Delaware Small Cap Value Series
Delaware Trend Series
Delaware Delchester Series
Delaware Devon Series
Delaware International Series
Delaware REIT Series
Fidelity VIP Equity-Income Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP II Investment Grade Bond Portfolio
Fidelity VIP Growth
Fidelity VIP II Contrafund
Fidelity VIP III Growth Opportunities
Janus Aspen Aggressive Growth
Janus Aspen Balanced
Janus Aspen Worldwide
4
<PAGE>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
----------------------------------------------
Lincoln National Money Market Fund
Lincoln National Bond Fund
Lincoln National Capital Appreciation Fund
Lincoln National Equity-Income Fund
Lincoln National Social Awareness Fund
Lincoln National Global Asset Allocation Fund
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
MFS Capital Opportunities Series
MFS Research
Neuberger Berman Partners Fund
Neuberger Berman Midcap Growth Fund
OpCap Global Equity Portfolio
OpCap Managed Portfolio
Oppenheimer Mainstreet Growth and Income Fund
5
<PAGE>
FranklinTempleton 777 Mariners Island Blvd.
P.O. Box 7777
San Mateo, CA 94403-7777
let 1-800/632-2301
May 18,1999
Steven M. Kluever
Assistant Vice President
Lincoln National Life Insurance Company
1300 South Clinton Street, 4C01
Fort Wayne, IN 46802
Re: Amendment to Fund Participation Agreement with the Templeton Variable
Products Series Fund
Dear Steve:
Enclosed for your records is an original copy of the Amendment to Fund
Participation Agreement by and among The Lincoln National Life Insurance
Company, Franklin Templeton Distributors, Inc. and the Templeton Variable
Products Series Fund.
If you have any questions, feel free to contact me at (650) 312-6244.
Sincerely,
Isaac Ruiz
Variable Insurance Products Paralegal
Enclosures
cc: Scott Campbell
Karen L. Skidmore
Mark Jensen
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
EFFECTIVE AS OF MAY 1, 1999
The Lincoln National Life Insurance Company, Templeton Variable
Products Series Fund and Franklin Templeton Distributors, Inc. hereby amend
their Fund Participation Agreement dated as of May 22, 1998 (the "Agreement"),
by:
Replacing Schedules A, B and C of the Agreement with Amended Schedule A-C,
attached;
2. Replacing Schedule D of the Agreement with Amended Schedule D, attached;
and
3. Adding Schedule E, attached.
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Amendment to Fund Participation Agreement, to be
effective as of the date first stated above.
THE LINCOLN NATIONAL LIFE INSURANCE TEMPLETON VARIABLE PRODUCTS SERIES FUND
COMPANY
- ----------------------------------- ---------------------------------------
By its authorized officer By its authorized officer
By: By:
Name: Name:
Title: Title:
FRANKLIN TEMPLETON DISTRIBUTORS, INC.
--------------------------------------
By its authorized officer
By:
Name:
Title:
1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A-C
(Cumulative Combined)
AMENDED PURSUANT TO FUND PARTICIPATION AGREEMENT AMENDMENT
EFFECTIVE AS OF MAY 1, 1999
VARIABLE UNIVERSAL LIFE POLICIES
VARIABLE ANNUITY CONTRACTS
ISSUED BY THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
-----------------------------------------------------
Contract 1 Contract 2 Contract 3
<S> <C> <C> <C>
Contract/Product SVUL I VUL I Lincoln VUL
Name
Registered (Y/N) Yes Yes Yes
SEC Registration 811-08579 811-08557 811-08557
Number
Representative Form LN650LL LN605LL LN660
Numbers LN615 LN615
LN660 LN605
Separate Account Lincoln Life Flexible Lincoln Life Flexible Lincoln Life Flexible
Name Premium Variable Life Premium Variable Life Premium Separate
Account
Account R Account M M
SEC Registration 333-43107 333-42479 333-42479
Number
Templeton Variable Templeton Asset Templeton Asset Templeton International
Products Series Allocation Fund - Class Allocation Fund - Class Fund - Class 2 (Templeton
Portfolios and Classes 1 (Templeton 1 (Templeton Investment Investment Counsel, Inc.)
Available Under the Investment Counsel, Counsel, Inc.)
Contract (Adviser) Inc.) Templeton Stock Fund -
Templeton International Class 2 (Templeton
Templeton International Fund - Class I Investment Counsel, Inc.)
Fund -Class 1 (Templeton Investment
(Templeton Investment Counsel, Inc.)
Counsel, Inc.)
Templeton Stock Fund -
Templeton Stock Fund Class I (Templeton
- Class 1 (Templeton Investment Counsel,
Investment Counsel, Inc.)
Inc.)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE A-C (CONTINUED)
AMENDED PURSUANT TO FUND PARTICIPATION AGREEMENT AMENDMENT
EFFECTIVE AS OF MAY 1, 1999
VARIABLE UNIVERSAL LIFE POLICIES
VARIABLE ANNUITY CONTRACTS
ISSUED BY THE LINCOLN NATIONAL LIFE INSURANCE COMPANY
-----------------------------------------------------
Contract 4 Contract 5 Contract 6
<S> <C> <C> <C>
Contract/Product CVUL Lincoln SVUL
Name
Registered (Y/N) Yes Yes
SEC Registration 811-08579
Number
Representative Form LN920 LN650
Numbers LN921
Separate Account Lincoln Life Flexible Lincoln Life Flexible
Name Premium Variable Life Premium Variable Life
Account S Account R
SEC Registration 333-72875 333-43107
Number
Templeton Variable Templeton Asset Templeton International
Products Series Allocation Fund - Class Fund - Class 2
Portfolios and Classes 2 (Templeton (Templeton Investment
Available Under the Investment Counsel, Counsel, Inc.)
Contract (Adviser) Inc.)
Templeton Stock Fund -
Templeton International Class 2 (Templeton
Fund - Class 2 Investment Counsel,
(Templeton Investment Inc.)
Counsel, Inc.)
Templeton Stock Fund
- Class 2 (Templeton
Investment Counsel,
Inc.)
</TABLE>
3
<PAGE>
SCHEDULE D
AMENDED PURSUANT TO FUND PARTICIPATION AGREEMENT AMENDMENT
EFFECTIVE AS OF MAY 1, 1999
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
----------------------------------------------
AIM Capital Appreciation Fund
AIM Diversified Income Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
AIM International Fund
American Century International
American Century Income and Growth
Baron Capital Asset Fund
BT Equity 500 Index Fund RT Small Cap Index Fund
BT EAFE Index Fund
Delaware Emerging Markets Series
Delaware Small Cap Value Series
Delaware Trend Series
Delaware Delchester Series
Delaware Devon Series
Delaware International Series
Delaware REIT Series
Fidelity VIP Equity-Income Portfolio
Fidelity VIP II Asset Manager Portfolio
Fidelity VIP H Investment Grade Bond Portfolio
Fidelity VIP Growth
Fidelity VIP II Contrafund
Fidelity VIP III Growth Opportunities
Janus Aspen Aggressive Growth
Janus Aspen Balanced
Janus Aspen Worldwide
4
<PAGE>
SCHEDULE D (CONTINUED)
AMENDED PURSUANT TO FUND PAR TICIPA TION A GREEMENT AMENDMENT
EFFECTIVE AS OF MAY 1, 1999
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
----------------------------------------------
Lincoln National Money Market Fund
Lincoln National Bond Fund
Lincoln National Capital Appreciation Fund
Lincoln National Equity-Income Fund
Lincoln National Social Awareness Fund
Lincoln National Global Asset Allocation Fund
MFS Emerging Growth Series
MFS Total Return Series
MFS Utilities Series
MFS Capital Opportunities Series
MFS Research
Neuberger Berman Partners Fund
Neuberger Berman Midcap Growth Fund
OpCap Global Equity Portfolio
OpCap Managed Portfolio
Oppenheimer Mainstreet Growth and Income Fund
5
<PAGE>
SCHEDULE E
AMENDED PURSUANT TO FUND PARTICIPA TION A GREEMENT AMENDMENT
EFFECTIVE AS OF MAY 1, 1999
RULE 12B-1 PLANS
COMPENSATION SCHEDULE
Each Portfolio named below shall pay the following amounts pursuant to the
terms and conditions referenced below under its Class 2 Rule 12b- I
Distribution Plan, stated as a percentage per year of Class 2's average daily
net assets represented by shares of Class 2.
<TABLE>
<CAPTION>
PORTFOLIO NAME MAXIMUM ANNUAL PAYMENT RATE
- -------------- ---------------------------
<S> <C>
TEMPLETON ASSET ALLOCATION FUND 0.25%
TEMPLETON INTERNATIONAL FUND 0.25%
TEMPLETON STOCK FUND 0.25%
</TABLE>
AGREEMENT PROVISIONS
--------------------
If the Company, on behalf of any Account, purchases Trust Portfolio
shares ("Eligible Shares") which are subject to a Rule 12b- 1 Plan adopted
under the 1940 Act (the "Plan"), the Company may participate in the Plan.
To the extent the Company or its affiliates, agents or designees
(collectively "you") you provide administrative and other services which assist
in the promotion and distribution of Eligible Shares or Variable Contracts
offering Eligible Shares, the Underwriter, the Trust or their affiliates
(collectively, "we") may pay you a Rule 12b- I fee. "Administrative and other
services" may include, but are not limited to, furnishing personal services to
owners of Contracts which may invest in Eligible Shares ("Contract Owners"),
answering routine inquiries regarding a Portfolio, coordinating responses to
Contract Owner inquiries regarding the Portfolios, maintaining such accounts or
providing such other enhanced services as a Trust Portfolio or Contract may
require, maintaining customer accounts and records, or providing other services
eligible for service fees as defined under NASD rules. Your acceptance of such
compensation is your acknowledgment that eligible services have been rendered.
All Rule 12b- I fees, shall be based on the value of Eligible Shares owned by
the Company on behalf of its Accounts, and shall be calculated on the basis and
at the rates set forth in the Compensation Schedule stated above. The aggregate
annual fees paid pursuant to each Plan shall not exceed the amounts stated as
the "annual maximums" in the Portfolio's prospectus, unless an increase is
approved by shareholders as provided in the Plan. These maximums shall be a
specified percent of the value of a Portfolio's net assets attributable to
Eligible Shares owned by the Company on behalf of its Accounts (determined in
the same manner as the Portfolio uses to compute its net assets as set forth in
its effective Prospectus).
6
<PAGE>
You shall furnish us with such information as shall reasonably be
requested by the Trust's Boards of Trustees ("Trustees") with respect to
the Rule 12b- I fees paid to you pursuant to the Plans. We shall furnish to
the Trustees, for their review on a quarterly basis, a written report of the
amounts expended under the Plans and the purposes for which such expenditures
were made.
The Plans and provisions of any agreement relating to such Plans must
be approved annually by a vote of the Trustees, including the Trustees who are
not interested persons of the Trust and who have no financial interest in the
Plans or any related agreement ("Disinterested Trustees"). Each Plan may be
terminated at any time by the vote of a majority of the Disinterested Trustees,
or by a vote of a majority of the outstanding shares as provided in the Plan,
on sixty (60) days' written notice, without payment of any penalty. The Plans
may also be terminated by any act that terminates the Underwriting Agreement
between the Underwriter and the Trust, and/or the management or administration
agreement between Franklin Advisers, Inc. or Templeton Investment Counsel, Inc.
or their affiliates and the Trust. Continuation of the Plans is also
conditioned on Disinterested Trustees being ultimately responsible for
selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the
Trustees have a duty to request and evaluate, and persons who are party to any
agreement related to a Plan have a duty to furnish, such information as may
reasonably be necessary to an informed determination of whether the Plan or any
agreement should be implemented or continued. Under Rule 12b-1, the Trust is
permitted to implement or continue Plans or the provisions of any agreement
relating to such Plans from year- to-year only if, based on certain legal
considerations, the Trustees are able to conclude that the Plans will benefit
each affected Trust Portfolio and class. Absent such yearly determination, the
Plans must be terminated as set forth above. In the event of the termination of
the Plans for any reason, the provisions of this Schedule E relating to the
Plans will also terminate.
Any obligation assumed by the Trust pursuant to this Agreement shall be limited
in all cases to the assets of the Trust and no person shall seek satisfaction
thereof from shareholders of the Trust. You agree to waive payment of any
amounts payable to you by Underwriter under a Plan until such time as the
Underwriter has received such fee from the Fund.
The provisions of the Plans shall control over the provisions of the
Participation Agreement, including this Schedule E, in the event of any
inconsistency.
You agree to provide complete disclosure as required by all applicable
statutes, rules and regulations of all rule 12b-1 fees received from us in the
prospectus of the contracts.
<PAGE>
AMENDMENT TO FUND PARTICIPATION AGREEMENT
The Lincoln National Life Insurance Company, Templeton Variable Products
Series Fund, Franklin Templeton Variable Insurance Products Trust and Franklin
Templeton Distributors, Inc. hereby amend their Fund Participation Agreement
dated as of May 22, 1998, and as amended on May 1, 1999, October 15, 1999 and
December 1, 1999 ("Agreement"), by:
1. Replacing Schedule A-C of the Agreement with amended Schedule A-C,
attached;
2. Replacing Schedule D of the Agreement with amended Schedule D,
attached.
IN WITNESS WHEREOF, the parties have caused their duly authorized officers
to execute this Amendment to Fund Participation Agreement, to be effective as of
April 30, 2000.
<TABLE>
<S><C>
Lincoln National Life Insurance Company Templeton Variable Products Series Fund
- --------------------------------------- ---------------------------------------
By its authorized officer By its authorized officer
By:_______________________________ By:_______________________________
Name: Steve M. Kluever Name: Karen L. Skidmore
Title: 2nd Vice President Title: Assistant Vice President and
Assistant Secretary
Franklin Templeton Variable Insurance Products Trust
----------------------------------------------------
By its authorized officer
By:_______________________________
Name: Karen L. Skidmore
Title: Assistant Vice President and
Assistant Secretary
Franklin Templeton Distributors, Inc.
-------------------------------------
By its authorized officer
By:_______________________________
Name: Phillip J. Kearns
Title: Vice President
</TABLE>
1
<PAGE>
SCHEDULE A-C
CONTRACTS ISSUED BY LINCOLN NATIONAL LIFE INSURANCE COMPANY
-----------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
CONTRACT 1 CONTRACT 2 CONTRACT 3
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT SVUL I VUL I Lincoln VUL
NAME AND TYPE
- --------------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-08579 811-08557 811-08557
NUMBER - 1940 ACT
- --------------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE LN650LL LN605LL LN660
FORM NUMBERS LN615
- --------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Lincoln Life Flexible Premium Lincoln Life Flexible Premium Lincoln Life Flexible Premium
NAME/DATE Variable Life Account R Variable Life Account M Variable Life Account M
ESTABLISHED
- --------------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-43107 333-42479 333-42479
NUMBER - 1933 ACT
- --------------------------------------------------------------------------------------------------------------------------------
TRUST: TEMPLETON TVP - Templeton Asset TVP - Templeton Asset TVP - Templeton
VARIABLE PRODUCTS Allocation Fund - Class 1 Allocation Fund - Class 1 International Fund - Class
SERIES FUND Templeton Investment Templeton Investment 2 - Templeton Investment
("TVP"), FRANKLIN Counsel, Inc. Counsel, Inc. Counsel, Inc.
TEMPLETON VARIABLE
INSURANCE PRODUCTS TVP - Templeton TVP - Templeton TVP - Templeton Stock
TRUST (VIP) - International Fund - Class International Fund - Class Fund - Class 2 - Templeton
PORTFOLIOS AND 1 - Templeton Investment 1- Templeton Investment Investment Counsel, Inc.
CLASSES - ADVISER Counsel, Inc. Counsel, Inc.
TVP - Templeton Stock TVP - Templeton Stock
Fund - Class 1 - Templeton Fund - Class 1
Investment Counsel, Inc. Templeton Investment
Counsel, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE>
SCHEDULE A-C
CONTRACTS ISSUED BY LINCOLN NATIONAL LIFE INSURANCE COMPANY
-----------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
CONTRACT 4 CONTRACT 5 CONTRACT 6
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT CVUL Lincoln SVUL Lincoln VUL(DB)
NAME AND TYPE CVUL Series III
- --------------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes Yes Yes
- --------------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-09241 811-08579 811-08557
NUMBER - 1940 ACT
- --------------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE LN920 LN650 LN680
FORM NUMBERS LN921
LN925/926
- --------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Lincoln Life Flexible Lincoln Life Flexible Lincoln Life Flexible Premium
NAME/DATE Premium Variable Life Premium Variable Life Variable Life
ESTABLISHED Account S Account R Account M
- --------------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-72875 333-43107 333-82663
NUMBER - 1933 ACT
- --------------------------------------------------------------------------------------------------------------------------------
TRUST: TEMPLETON TVP - Templeton Asset TVP - Templeton TVP - Templeton
VARIABLE PRODUCTS Allocation Fund - Class 2 - International Fund - Class International Fund - Class
SERIES FUND Templeton Investment 2 - Templeton Investment 2 - Templeton Investment
("TVP"), FRANKLIN Counsel, Inc. Counsel, Inc. Counsel, Inc.
TEMPLETON VARIABLE
INSURANCE PRODUCTS TVP - Templeton TVP - Templeton Stock TVP - Templeton Stock
TRUST (VIP) - International Fund - Class Fund - Class 2 - Fund - Class 2 - Templeton
PORTFOLIOS AND 2 - Templeton Investment Templeton Investment Investment Counsel, Inc.
CLASSES - ADVISER Counsel, Inc. Counsel, Inc.
TVP - Templeton Stock
Fund - Class 2 -
Templeton Investment
Counsel, Inc.
VIP - Franklin Small Cap
Fund - Class 2 - Franklin
Advisers, Inc.
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
3
<PAGE>
SCHEDULE A-C
CONTRACTS ISSUED BY LINCOLN NATIONAL LIFE INSURANCE COMPANY
-----------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
CONTRACT 7 CONTRACT 8 CONTRACT 9
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CONTRACT/PRODUCT Delaware Lincoln Choice Plus
NAME AND TYPE Variable Annuity
- ----------------------------------------------------------------------------------------------------------------------------------
REGISTERED (Y/N) Yes
- ----------------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 811-08517
NUMBER - 1940 ACT
- ----------------------------------------------------------------------------------------------------------------------------------
REPRESENTATIVE FORM AN425LL
NUMBERS
- ----------------------------------------------------------------------------------------------------------------------------------
SEPARATE ACCOUNT Lincoln Life Variable Annuity
NAME/DATE Account N
ESTABLISHED
- ----------------------------------------------------------------------------------------------------------------------------------
SEC REGISTRATION 333-40937
NUMBER - 1933 ACT
- ----------------------------------------------------------------------------------------------------------------------------------
TRUST: TEMPLETON TVP - Templeton
VARIABLE PRODUCTS International Fund - Class 2
SERIES FUND - Templeton Investment
("TVP"), FRANKLIN Counsel, Inc.
TEMPLETON VARIABLE
INSURANCE PRODUCTS VIP - Mutual Shares
TRUST (VIP) - Securities Fund - Class 2 -
PORTFOLIOS AND Franklin Mutual Advisers,
CLASSES - ADVISER LLC
VIP - Templeton Global
Growth Fund - Class 2 -
Templeton Investment
Counsel, Inc.
VIP - Franklin Small Cap
Fund - Class 2 - Franklin
Advisers, Inc.
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
SCHEDULE D
OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS
----------------------------------------------
<TABLE>
<S><C>
AIM V.I. Diversified Income Fund Fidelity VIP Equity-Income Portfolio (Initial Class)
AIM V.I. Capital Appreciation Fidelity VIP Growth (Intial & Service Class)
AIM V.I. Growth Fund Fidelity VIP High Income (Service Class)
AIM V.I. Value Fund Fidelity VIP Overseas (Intial & Service Class)
AIM V.I. International Fund Fidelity VIP II Asset Manager Portfolio (Initial & Service Class)
Fidelity VIP II Contrafund (Service Class)
Fidelity VIP II Investment Grade Bond Portfolio (Intial Class)
Fidelity VIP III Growth Opportunities (Initial & Service Class)
Alliance Capital Premier Growth Janus Aspen Series Aggressive Growth
Alliance Capital Growth & Income Janus Aspen Series Balanced
Alliance Capital Growth Janus Aspen Series Worldwide
Alliance Capital Technology Janus Aspen Flexible Income
Janus Aspen Global Technology
American Century V.P. International Liberty Variable Investment Trust
American Century V.P. Income and Growth Newport Tiger Fund
American Variable Insurance Series Lincoln National Money Market Fund
1) Global Small Capitalization Fund - Class 2 Lincoln National Bond Fund
2) Growth Fund - Class 2 Lincoln National Capital Appreciation Fund
3) Growth-Income Fund - Class 2 Lincoln National Equity-Income Fund
4) International - Class 2 Lincoln National Social Awareness Fund
5) Global Growth - Class 2 Lincoln National Global Asset Allocation Fund
6) U.S. Government Bond - Class 2
7) Bond - Class 2
8) High Yield Bond - Class 2
AMT Partners Portfolio
AMT Mid-cap Growth Portfolio MFS Emerging Growth Series
MFS Total Return Series
Baron Capital Asset Fund (Insurance Shares) MFS Utilities Series
MFS Capital Opportunities Series
MFS Research Series
BT EAFE Equity Index Fund
BT Equity 500 Index Fund OpCap Global Equity Portfolio
BT Small Cap Index Fund OpCap Managed Portfolio
Oppenheimer Main Street Growth and Income Fund
Delaware Emerging Markets Series
Delaware Devon Series
Delaware High Yield Series
Delaware Growth & Income
Delaware International Equity Series
Delaware REIT Series
Delaware Select Growth
Delaware Small Cap Value Series
Delaware Social Awareness Series
Delaware Trend Series
</TABLE>
5
<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. 5 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) January 31, 2000, with respect to the
statutory-basis financial statements of The Lincoln National Life Insurance
Company, and (b) March 24, 2000, with respect to the financial statements of
Lincoln Life Variable Annuity Account N.
Fort Wayne, Indiana
April 17, 2000
<PAGE>
PC Docs 12752 3/8/99
ORGANIZATIONAL CHART OF THE
LINCOLN NATIONAL INSURANCE HOLDING COMPANY SYSTEM
All the members of the holding company system are corporations, with
the exception of, Delaware Distributors, L.P and Founders CBO, L.P.
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National Management Corporation |
| | 100% - Pennsylvania - Management Company |
|
|--| City Financial Partners Ltd. |
| | 100% - England/Wales - Distribution of life|
| | assurance & pension products |
|
|--| LNC Administrative Services Corporation |
| | 100% - Indiana - Third Party Administrator |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| The Financial Alternative, Inc. |
| | | 100% - Utah- Insurance Agency |
| |
| |--| Financial Alternative Resources, Inc. |
| | | 100% - Kansas - Insurance Agency |
| |
| |--| Financial Choices, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| |
| | | Financial Investment Services, Inc. |
| |--| (fka Financial Services Department, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| |
| | | Financial Investments, Inc. |
| |--| (fka Insurance Alternatives, Inc.) |
| | | 100% - Indiana - Insurance Agency |
| |
| |--| The Financial Resources Department, Inc. |
| | | 100% - Michigan - Insurance Agency |
| |
| |--| Investment Alternatives, Inc. |
| | | 100% - Pennsylvania - Insurance Agency |
| |
| |--| The Investment Center, Inc. |
| | | 100% - Tennessee - Insurance Agency |
| |
| |--| The Investment Group, Inc. |
| | | 100% - New Jersey - Insurance Agency |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--|Lincoln National Financial Institutions Group, Inc.|
| |(fka The Richard Leahy Corporation) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Personal Financial Resources, Inc. |
| | | 100% - Arizona - Insurance Agency |
| |
| |--| Personal Investment Services, Inc. |
| | 100% - Pennsylvania - Insurance Agency |
|
|--| LincAm Properties, Inc. |
| | 50% - Delaware - Real Estate Investment |
|
| | Lincoln Life and Annuity Distributors, Inc. |
|--| (fka Lincoln Financial Group, Inc.) |
| | 100% - Indiana - Insurance Agency |
| |
| |--| Lincoln Financial Advisors Corporation |
| | | (fka LNC Equity Sales Corporation) |
| | | 100% - Indiana - Broker-Dealer |
| |
| | |Corporate agencies: Lincoln Life and Annuity Distributors, |
| | | Inc. ("LLAD")has subsidiaries of which LLAD owns from |
| | | 80%-100% of the common stock (see Attachment #1). These |
| | | subsidiaries serve as the corporate agency offices for the |
| | | marketing and servicing of products of The Lincoln National |
| | | Life Insurance Company. Each subsidiary's assets are less |
| | | than 1% of the total assets of the ultimate controlling |
| | | person. |
| |
| |--| Professional Financial Planning, Inc. |
| | 100% - Indiana - Financial Planning Services |
|
|--| Lincoln Life Improved Housing, Inc. |
| | 100% - Indiana |
|
|
|--| Lincoln National (China) Inc. |
| | 100% - Indiana - China Representative Office |
|
|
|--| Lincoln National Intermediaries, Inc. |
| | 100% - Indiana - Reinsurance Intermediary |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | |
| | |--|Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding Company|
| | | |
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | |
| | | |--| Delaware International Advisers Ltd.|
| | | | | 81.1% - England - Investment Advisor |
| | |
| | |--| Delaware Management Trust Company |
| | | | 100% - Pennsylvania - Trust Service|
| | | |
| | | |__| Delaware International Holdings, Ltd. |
| | | | | 100% - Bermuda - Mktg & Admin Services|
| | | | |
| | | | |--| Delaware International Advisers, Ltd.|
| | | | | 18.9% - England - Investment Advisor |
| | | |
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | |
| | | | |--| Delaware Management Company, Inc. |
| | | | | | 100% - Delaware - Holding Company |
| | | | | | ________________________________________
| | | | | |--|Delaware Management Business Trust |
| | | | | | |100% - Delaware - Investment Advisor |
| | | | | | |consists of: |
| | | | | | |Delaware Management Company Series |
| | | | | | | and Delaware Investment Advisers
Series |
| | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | |98%-Delaware-MutualFund Distrib. |
| | | | | | |& Broker/Dealer |
| | | | | | |1%Equity-Delaware Capital |
| | | | |Management, Inc. |
| | | | |1% Equity-Delaware Distributors, |
| | | | |Inc.(G.P) |
| | | | | |
| | | | | |--| Founders Holdings, Inc. |
| | | | | | | 100% - Delaware - General
| | | | | | | Partner |
| | | | | |
| | | | | |--| Founders CBO, L.P. |
| | | | | | |1%-Delaware-Investment |
| | | | | | | Partnership |
| | | | | | |99% held by outside |
| | | | | | |investors |
| | | | | |
| | | | | |--|Founders CBO Corporation|
| | | | |100%-Delaware-Co-Issuer |
| | | | |with Founders CBO |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| |--| Lincoln National Investment Companies, Inc.|
| | |(fka Lincoln National Investments, Inc.) |
| | | 100% - Indiana - Holding Company |
| | |
| | |--|Delaware Management Holdings, Inc.|
| | | | 100% - Delaware - Holding Company|
| | | |
| | | |--| DMH Corp. |
| | | | | 100% - Delaware - Holding Company |
| | | |
| | | |__| Delvoy, Inc. |
| | | | | 100% - Minnesota - Holding Company |
| | | | |
| | | | |--| Delaware Distributors, Inc.
| | | | | | | 100% - Delaware - General Partner |
| | | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | |98%-Delaware-Mutual Fund Distributor & |
| | | | | | |Broker/Dealer |
| | | | | |1% Equity-Delaware Capital |
| | | | | |Management, Inc. |
| | | | | |1% Equity-Delaware Distributors, Inc.|
| | | | | |(G.P) |
| | | | | |
| | | | |--| Delaware Capital Management, Inc. |
| | | | | |(fka Delaware Investment Counselors, Inc.)|
| | | | | | 100% - Delaware - Investment Advisor |
| | | | | | |
| | | | | |--| Delaware Distributors, L.P. |
| | | | | | | 98%-Delaware-Mutual Fund Distributor & |
Broker/Dealer |
| | | | | | |1% Equity-Delaware Capital
| | | | | | | Management, Inc. |
| | | | | | | 1% Equity-Delaware Distributors, |
| | | | | | | Inc. |
| | | | |--| Delaware Service Company, Inc. |
| | | | |100%-Delaware-Shareholder Services & |
| | | | |Transfer Agent |
| | | | | |
| | | | |__| Retirement Financial Services, Inc. |
| | | | | |(fka Delaware Investment & Retirement
| | | | | | Services,Inc.) |
| | | | | | 100% - Delaware - Registered Transfer
| | | | | | Agent & I/A |
| | |
| | |--| Lynch & Mayer, Inc. |
| | | | 100% - Indiana - Investment Adviser |
| | | |
| | | |--| Lynch & Mayer Securities Corp. |
| | | | 100% - Delaware - Securities Broker |
| | |
| | | | Vantage Global Advisors, Inc. |
| | |--| (fka Modern Portfolio Theory Associates, Inc.)|
| | | | 100% - Delaware - Investment Adviser |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|__| Lincoln National Investments, Inc. |
| | (fka Lincoln National Investment Companies, Inc.)|
| | 100% - Indiana - Holding Company |
| |
| | | Lincoln Investment Management, Inc. |
| |--| (fka Lincoln National Investment Management Company) |
| | | 100% - Illinois - Mutual Fund Manager and |
| | | Registered Investment Adviser |
|
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| |
| |--|AnnuityNet, Inc. |
| | | 100% - Indiana - Distribution of annuity products|
| | |
| | |--| AnnuityNet Insurance Agency, Inc. |
| | | | 100% - Indiana - Insurance Agency |
| |
| |--|Lincoln National Insurance Associates, Inc.|
| | | (fka Cigna Associates, Inc.) |
| | | 100% - Connecticut - Insurance Agency |
| | |
| | |--|Lincoln National Insurance Associates of Alabama, Inc. |
| | | | 100% - Alabama - Insurance Agency |
| | |
| | | | Lincoln National Insurance Associates of Massachusetts,|
| | | | Inc. (fka Cigna Associates of Massachusetts, Inc.) |
| | |--| 100% - Massachusetts - Insurance Agency |
| |
| |--|Sagemark Consulting, Inc. |
| | | (fka Cigna Financial Advisors, Inc.) |
| | | 100% - Connecticut - Broker Dealer |
| |
| |--| First Penn-Pacific Life Insurance Company |
| | | 100% - Indiana |
| |
| |--| Lincoln Life & Annuity Company of New York |
| | | 100% - New York |
| |
| |--| Lincoln National Aggressive Growth Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Bond Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Capital Appreciation Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Equity-Income Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| | | Lincoln National Global Asset Allocation Fund, Inc. |
| |--| (fka Lincoln National Putnam Master Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| The Lincoln National Life Insurance Company |
| | 100% - Indiana |
| |
| | | Lincoln National Growth and Income Fund, Inc. |
| |--| (fka Lincoln National Growth Fund, Inc.) |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Health & Casualty Insurance Company |
| | | 100% - Indiana |
| |
| |--| Lincoln Re, S.A. |
| | | 1% Argentina - General Business Corp |
| | | (Remaining 99% owned by Lincoln National |
| | | Reassurance Company) |
| |
| |--| Lincoln National International Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Managed Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Money Market Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Social Awareness Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Special Opportunities Fund, Inc. |
| | | 100% - Maryland - Mutual Fund |
| |
| |--| Lincoln National Reassurance Company |
| | 100% - Indiana - Life Insurance |
| |
| |--| Lincoln Re, S.A. |
| | | 99% Argentina - General Business Corp |
| | | (Remaining 1% owned by Lincoln National Health|
| | | & Casualty Insurance Company) |
| |
| |--| Special Pooled Risk Administrators, Inc. |
| | 100% - New Jersey - Catastrophe Reinsurance |
| | Pool Administrator |
|
|--| Lincoln National Management Services, Inc. |
| | 100% - Indiana - Underwriting and Management Services |
|
|--| Lincoln National Realty Corporation |
| | 100% - Indiana - Real Estate |
|
|--| Lincoln National Reinsurance Company (Barbados) Limited |
| | 100% - Barbados |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National Reinsurance Company Limited |
| | (fka Heritage Reinsurance, Ltd.) |
| | 100% ** - Bermuda |
| |
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 90% - England/Wales - Life/Accident/Health Underwriter |
| | | (Remaining 10% owned by Old Fort Ins. Co. Ltd.) |
| |
| | | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
| |--| 51% - Mexico - Reinsurance Underwriter |
| | (Remaining 49% owned by Lincoln National Corp.) |
|
|--| Lincoln National Risk Management, Inc. |
| | 100% - Indiana - Risk Management Services |
|
|--| Lincoln National Structured Settlement, Inc. |
| | 100% - New Jersey |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Allied Westminster & Company Limited |
| | | (fka One Olympic Way Financial Services Limited) |
| | | 100% - England/Wales - Sales Services |
| |
| |--| Culverin Property Services Limited |
| | | 100% - England/Wales - Property Development Services |
| |
| |--| HUTM Limited |
| | | 100% - England/Wales - Unit Trust Management (Inactive) |
| |
| |--| ILI Supplies Limited |
| | | 100% - England/Wales - Computer Leasing |
| |
| |--| Lincoln Financial Advisers Limited |
| | | (fka: Laurentian Financial Advisers Ltd.) |
| | | 100% - England/Wales - Sales Company |
| |
| |--| Lincoln Financial Group PLC |
| | | (fka: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | |
| | |--| Lincoln ISA Management Limited |
| | | | (fka Lincoln Unit Trust Management Limited; |
| | | | Laurentian Unit Trust Management Limited) |
| | | | 100% - England/Wales - Unit Trust Management |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln Financial Group PLC |
| | | (fka: Laurentian Financial Group PLC) |
| | | 100% - England/Wales - Holding Company |
| | |
| | |--| Lincoln Milldon Limited |
| | | |(fka: Laurentian Milldon Limited) |
| | | | 100% - England/Wales - Sales Company |
| | |
| | |--| Laurtrust Limited |
| | | 100% - England/Wales - Pension Scheme Trustee (Inactive) |
| | |
| | |--| Lincoln Management Services Limited |
| | | |(fka: Laurentian Management Services Limited) |
| | | | 100% - England/Wales - Management Services |
| | | |
| | | |--|Laurit Limited |
| | | | |100% - England/Wales - Data Processing Systems |
| |
| |--| Liberty Life Pension Trustee Company Limited |
| | | 100% - England/Wales - Corporate Pension Fund (Dormat) |
| |
| |--| LN Management Limited |
| | | 100% - England/Wales - Administrative Services (Dormat) |
| | |
| | |--| UK Mortgage Securities Limited |
| | | | 100% - England/Wales - Inactive |
| |
| |--| Liberty Press Limited |
| | | 100% - England/Wales - Printing Services |
<PAGE>
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| |
| |--| Lincoln General Insurance Co. Ltd. |
| | | 100% - Accident & Health Insurance |
| |
| |--|Lincoln Assurance Limited |
| | | 100% ** - England/Wales - Life Assurance |
| | | |
| | | |--|Barnwood Property Group Limited |
| | | | |100% - England/Wales - Property Management Co|
| | | | |
| | | | |--| Barnwood Developments Limited |
| | | | | | 100% England/Wales - Property Development|
| | | | |
| | | | |--| Barnwood Properties Limited |
| | | | | | 100% - England/Wales - Property Investment |
| | | |
| | | |--|IMPCO Properties G.B. Ltd. |
| | | | |100% - England/Wales - Property Investment
| | | | |(Inactive) |
| | | |
| | |--| Lincoln Insurance Services Limited |
| | | | 100% - Holding Company |
| | | |
| | | |--| British National Life Sales Ltd.|
| | | | | 100% - Inactive |
| | | |
| | | |--| BNL Trustees Limited |
| | | | | 100% - England/Wales - Corporate Pension |
| | | | | Fund (Inactive) |
| | | |
| | | |--| Chapel Ash Financial Services Ltd. |
| | | | | 100% - Direct Insurance Sales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
|
|--| Lincoln National (UK) PLC |
| | 100% - England/Wales - Holding Company |
| | |
| |--| Lincoln Unit Trust Managers Limited |
| | | 100% - England/Wales - Investment Management |
| | |
| |--| LIV Limited (fka Lincoln Investment Management Ltd.)|
| | | 100% - England/Wales - Investment Management Services |
| | |
| | |--| CL CR Management Ltd. |
| | | 50% - England/Wales - Administrative Services |
| |
| |--| Lincoln Independent Limited |
| | |(fka: Laurentian Independent Financial Planning Ltd.) |
| | | 100% - England/Wales - Independent Financial Adviser |
| | |
| |--| Lincoln Investment Management Limited |
| | |(fka: Laurentian Fund Management Ltd.) |
| | | 100% - England/Wales - Investment Management |
| |
| |--| LN Securities Limited |
| | | 100% - England/Wales - Nominee Company |
| |
| |--| Niloda Limited |
| | | 100% - England/Wales - Investment Company |
| |
| |--| Lincoln National Training Services Limited |
| | | 100% - England/Wales - Training Company |
| |
| |--| Lincoln Pension Trustees Limited |
| | | 100% - England/Wales - Corporate Pension Fund |
| |
| |--| Lincoln Independent (Jersey) Limited |
| | | (fka Lincoln National (Jersey) Limited) |
| | | 100% - England/Wales - Dormat |
| |
| |--| Lincoln National(Guernsey) Limited |
| | | 100% - England/Wales - Dormat |
| |
| |--| Lincoln SBP Trustee Limited |
| | | 100% - England/Wales |
<PAGE>
| |
| Lincoln National Corporation |
| Indiana - Holding Company |
|
| | Linsco Reinsurance Company |
|--| (fka Lincoln National Reinsurance Company) |
| | 100% - Indiana - Property/Casualty |
|
|
|--| Old Fort Insurance Company, Ltd. |
| | 100% ** - Bermuda |
| |
| | | Lincoln National Underwriting Services, Ltd. |
| |--| 10% - England/Wales - Life/Accident/Health Underwriter |
| | (Remaining 90% owned by Lincoln Natl. Reinsurance Co.) |
| |
| | | Solutions Holdings, Inc. |
| |--| 100% - Delaware - General Business Corporation |
| | |
| | |--|Solutions Reinsurance Limited |
| | | | 100% - Bermuda - Class III Insurance Co|
|
| | Seguros Serfin Lincoln, S.A. |
|--| 49% - Mexico - Insurance |
|
| | Servicios de Evaluacion de Riesgos, S. de R.L. de C.V. |
|--| 49% - Mexico - Reinsurance Underwriter |
| | (Remaining 51% owned by Lincoln Natl. Reinsurance Co.) |
|
|--| Underwriters & Management Services, Inc. |
| 100% - Indiana - Underwriting Services |
Footnotes:
* The funds contributed by the Underwriters were, and continue to be subject
to trust agreements between American States Insurance Company, the grantor,
and each Underwriter, as trustee.
** Except for director-qualifying shares
# Lincoln National Corporation has subscribed for and paid for 100 shares of
Common Stock (with a par value of $1.00 per share) at a price of $10 per
share, as part of the organizing of the fund. As such stock is further
sold, the ownership of voting securities by Lincoln National Corporation
will decline and fluctuate.
<PAGE>
ATTACHMENT #1
LINCOLN LIFE AND ANNUITY DISTRIBUTORS, INC.
CORPORATE AGENCY SUBSIDIARIES
1) Lincoln Financial Group, Inc. (AL)
2) Lincoln Financial and Insurance Services Corporation (Walnut Creek, CA)
3) California Fringe Benefit and Insurance Marketing Corporation
DBA/California Fringe Benefit Company (Walnut Creek, CA)
4) Colorado-Lincoln Financial Group, Inc. (Denver, CO)
5) Lincoln National Financial Services, Inc. (Lake Worth, FL)
6) CMP Financial Services, Inc. (Chicago, IL)
7) Lincoln Financial Group of Northern Indiana, Inc. (Fort Wayne, IN)
8) Financial Planning Partners, Ltd. (Mission, KS)
9) The Lincoln National Financial Group of Louisiana, Inc. (Shreveport,
LA)
10) Benefits Marketing Group, Inc. (D.C. & Chevy Chase, MD)
11) Lincoln Financial Services and Insurance Brokerage of New England, Inc.
(fka: Lincoln National of New England Insurance Agency, Inc.)
(Worcester, MA)
12) Financial Consultants of Michigan, Inc. (Troy, MI)
13) Lincoln Financial Group of Missouri, Inc. (fka: John J. Moore &
Associates, Inc.) (St. Louis, MO)
14) Beardslee & Associates, Inc. (Clifton, NJ)
15) Lincoln Financial Group, Inc. (fka: Resources/Financial, Inc.
(Albuquerque, NM)
16) Lincoln Cascades, Inc. (Portland, OR)
17) Lincoln Financial Group, Inc. (Salt Lake City, (UT)
<PAGE>
Summary of Changes to Organizational Chart:
JANUARY 1, 1995-DECEMBER 31, 1995
SEPTEMBER 1995
a. Lincoln National (Jersey) Limited was incorporated on September 18, 1995.
Company is dormat and was formed for tax reasons per Barbara Benoit,
Assistant Corporate Secretary at Lincoln UK.
JANUARY 1, 1996-DECEMBER 1, 1996
MARCH 1996
a. Delaware Investment Counselors, Inc. changed its name to Delaware Capital
Management, Inc. effective March 29, 1996.
AUGUST 1996
a. Lincoln National (Gernsey) Limited was incorporated on August 9, 1996;
company is dormat and was formed for tax reasons.
SEPTEMBER 1996
a. Morgan Financial Group, Inc. changed its name to Lincoln National Sales
Corporation of Maryland effective September 23, 1996.
OCTOBER 1996
a. Addition of Lincoln National (India) Inc., incorporated as an Indiana
corporation on October 17, 1996.
NOVEMBER 1996
a. Lincoln National SBP Trustee Limited was bought "off the shelf" and was
incorporated on November 26, 1996; it was formed to act ast Trustee for
Lincoln Staff Benefits Plan.
DECEMBER 1996
a. Addition of Lincoln National Investments, Inc., incorporated as an Indiana
corporation on December 12, 1996.
JANUARY 1, 1997-DECEMBER 31, 1997
JANUARY 1997
a. Delaware Management Holdings, Inc., Lynch & Mayer, Inc. and Vantage Global
Advisors, Inc. were transferred via capital contribution to Lincoln
National Investments, Inc. effective January 2, 1997.
b. Lincoln National Investments, Inc. changed its name to Lincoln National
Investment Companies, Inc. effective January 24, 1997.
c. Lincoln National Investment Companies, Inc. changed its named to Lincoln
National Investments, Inc. effective January 24, 1997.
JANUARY 1997 CON'T
<PAGE>
d. The following Lincoln National (UK) subsidiaries changed their name
effective January 1, 1997: Lincoln Financial Group PLC (fka Laurentian
Financial Group PLC); Lincoln Milldon Limited (fka Laurentian Milldon
Limited); Lincoln Management Services Limited (fka Laurentian Management
Services Limited).
FEBRUARY 1997
a. Removal of Lincoln National Financial Group of Philadelphia, Inc. which was
dissolved effective February 25, 1997.
MARCH 1997
a. Removal of Lincoln Financial Services, Inc. which was dissolved effective
March 4, 1997.
APRIL 1997
a. Acquisition of Dougherty Financial Group, Inc. on April 30, 1997. Company
then changed its name to Delvoy, Inc. The acquisition included the mutual
fund group of companies as part of the Voyager acquisition. The following
companies all then were moved under the newly formed holding company,
Delvoy, Inc. effective April 30, 1997: Delaware Management Company, Inc.,
Delaware Distributors, Inc., Delaware Capital Management, Inc., Delaware
Service Company, Inc. and Delaware Investment & Retirement Services, Inc.
b. Acquisition of Voyager Fund Managers, Inc. and Voyager Fund Distributors,
Inc. on April 30, 1997; merger is scheduled for May 31, 1997 for Voyager
Fund Managers, Inc. into Delaware Management Company, Inc. and Voyager Fund
Distributors, Inc. is to merge into Delaware Distributors, L.P.
c. Removal of Aseguradora InverLincoln, S.A. Compania de Seguros y Reaseguros,
Grupo Financiero InverMexico. Stock was sold to Grupo Financiero
InverMexico effective April 18, 1997.
MAY 1997
a. Name change of The Richard Leahy Corporation to Lincoln National Financial
Institutions Group, Inc. effective May 6, 1997.
b. Voyager Fund Managers, Inc. merged into Delaware Management Company, Inc.
effective May 30, 1997 at 10:00 p.m. with Delaware Management Company, Inc.
surviving.
c. On May 31, 1997 at 2:00 a.m., Voyager Fund Distributors, Inc. merged into a
newly formed company Voyager Fund Distributors (Delaware), Inc.,
incorporated as a Delaware corporation on May 23, 1997. Voyager Fund
Distributors (Delaware), Inc. then merged into Delaware Distributors, L.P.
effective May 31, 1997 at 2:01 a.m. Delaware Distributors, L.P. survived.
JUNE 1997
a. Removal of Lincoln National Sales Corporation of Maryland -- company
dissolved June 13, 1997.
b. Addition of Lincoln Funds Corporation, incorporated as a Delaware
corporation on June 10, 1997 at 2:00 p.m.
c. Addition of Lincoln Re, S.A., incorporated as an Argentina company on June
30, 1997.
<PAGE>
JULY 1997
a. LNC Equity Sales Corporation changed its name to Lincoln Financial Advisors
Corporation effective July 1, 1997.
b. Addition of Solutions Holdings, Inc., incorporated as a Delaware
corporation on July 27, 1997.
SEPTEMBER 1997
a. Addition of Solutions Reinsurance Limited, incorporated as a Bermuda
corporation on September 29, 1997.
OCTOBER 1997
a. Removal of the following companies: American States Financial Corporation,
American States Insurance Company, American Economy Insurance Company,
American States Insurance Company of Texas, American States Life Insurance
Company, American States Lloyds Insurance Company, American States
Preferred Insurance Company, City Insurance Agency, Inc. and Insurance
Company of Illinois -- all were sold 10-1-97 to SAFECO Corporation.
b. Liberty Life Assurance Limited was sold to Liberty International Holdings
PLC effective 10-6-97.
c. Addition of Seguros Serfin Lincoln, S.A., acquired by LNC on 10-15-97.
DECEMBER 1997
a. Addition of City Financial Partners Ltd. as a result of its acquisition by
Lincoln National Corporation on December 22, 1997. This company will
distribute life assurance and pension products of Lincoln Assurance
Limited.
b. Removal of Lynch & Mayer Asia, Inc. which was dissolved December 24, 1997.
JANUARY 1998
a. Addition of Cigna Associates, Inc., Cigna Financial Advisors, Inc. and
Cigna Associates of Massachusetts, Inc., acquired by The Lincoln National
Life Insurance Company on January 1, 1998. Cigna Associates of
Massachusetts is 100% owned by Cigna Associates, Inc.
b. Removal of Lincoln National Mezzanine Corporation and Lincoln National
Mezzanine Fund, L.P. Lincoln National Mezzanine Corporation was dissolved
on January 12, 1998 and Lincoln National Mezzanine Fund, L.P. was cancelled
January 12, 1998.
c. Corporate organizational changes took place in the UK group of companies on
January 21, 1998: Lincoln Insurance Services Limited and its subsidiaries
were moved from Lincoln National (UK) PLC to Lincoln Assurance Limited;
Lincoln General Insurance Co. Ltd. was moved from Lincoln Insurance
Services Limited to Lincoln National (UK) PLC.
d. Addition of AnnuityNet, Inc., incorporated as an Indiana corporation on
January 16, 1998 and a wholly-owned subsidiary of The Lincoln National Life
Insurance Company.
JUNE 1998
<PAGE>
a. Name Change of CIGNA Financial Advisors, Inc. to Sagemark Consulting, Inc.
effective June 1, 1998.
b. Name Change of CIGNA Associates, Inc. to Lincoln National Insurance
Associates, Inc. effective June 1, 1998.
c. Addition of Lincoln National Insurance Associates of Alabama, Inc.,
incorporated as a wholly-owned subsidiary of Lincoln National Insurance
Associates, Inc. as an Alabama domiciled corporation.
d. Dissolution of LUTM Nominees Limited effective June 10, 1998.
e. Dissolution of Cannon Fund Managers Limited June 16, 1998.
f. Dissolution of P.N. Kemp Gee & Co. Ltd. June 2, 1998.
JULY 1998
a. Name change of CIGNA Associates of Massachusetts, Inc. to Lincoln National
Insurance Associates of Massachusetts, Inc. effective July 22, 1998.
SEPTEMBER 1998
a. Removal of Lincoln Financial Group of Michigan, Inc., voluntarily dissolved
September 15, 1998.
b. Name change of Lincoln Financial Group, Inc. to Lincoln Life and Annuity
Distributors, Inc. on September 29, 1998.
c. Removal of Lincoln European Reinsurance S.A. -- company dissolved September
30, 1998.
d. Removal of Lincoln Funds Corporation -- company voluntarily dissolved
September 30, 1998.
OCTOBER 1998
a. Addition of AnnuityNet Insurance Agency, Inc., incorporated as an Indiana
corporation October 2, 1998., a wholly-owned subsidiary of AnnuityNet, Inc.
b. Removal of Lincoln National (India) Inc., voluntarily dissolved October 26,
1998.
DECEMBER 1998
a. Removal of The Insurers' Fund, Inc., voluntarily dissolved December 10,
1998.
b. Addition of Lincoln National Management Corporation, a Pennsylvania
corporation and a wholly-owned subsidiary of Lincoln National Corporation,
incorporated on December 17, 1998.
JANUARY 1999
Lincoln Unit Trust Management changed its name on January 5, 1999 to Lincoln ISA
Management Limited.
FEBRUARY 1999
Removal of Lincoln Southwest Financial Group, Inc. -- company's term of
existence expired July 18, 1998.
<PAGE>
BOOKS AND RECORDS
LINCOLN NATIONAL VARIABLE ANNUITY ACCOUNT 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.
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
series) accessible place
Securities in Transfer
- ----------------------
Not Applicable.
Securities in Physical Possession
- ---------------------------------
Not Applicable.
Securities Borrowed and Loaned
- ------------------------------
Not Applicable.
Monies Borrowed and Loaned
- --------------------------
Not Applicable.
Dividends and Interest Received
- -------------------------------
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily
series) accessible place
LN-Record Location Person to Contact Retention
- --------- -------- ----------------- ---------
Dividends Receivable and Interest Accrued
- -----------------------------------------
<PAGE>
LNL Trial Finance Eric Jones Permanently, the first two
Balance (5000 years in an easily
series) accessible place
(ii) Separate ledger accounts (or other records) for each portfolio security,
showing (as of trade dates), (a) the quantity and unit and aggregate price for
each purchase, sale, receipt, and delivery of securities and commodities for
such accounts, and (b) all other debits and credits for such accounts.
Securities positions and money balances in such ledger accounts (or other
records) shall be brought forward periodically but not less frequently than at
the end of fiscal quarters. Any portfolio security, the salability of which is
conditioned, shall be so noted. A memorandum record shall be available setting
forth, with respect to each portfolio security accounts, the amount and
declaration, ex-dividend, and payment dates of each dividend declared thereon.
Ledger Account for each portfolio Security
- ------------------------------------------
Daily Report Finance Eric Jones Permanently, the first two
Of Securities years in an easily
Transaction (Daily accessible 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
Trade File & Leg accessible 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
daily reports accessible 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
series) accessible place
(9) A record for each fiscal quarter, which shall be completed within 10 days
after the end of such quarter, showing specifically the basis or bases upon
which the allocation of orders for the purchase and sale of portfolio securities
to named brokers or dealers and the division of brokerage commissions or other
compensation on such purchase and sale orders among named persons were made
during such quarter. The record shall indicate the consideration given to (a)
sales of shares of the investment company by brokers or dealers, (b) the
supplying of services or benefits by brokers or dealers to the investment
company, its investment advisor or principal underwriter or any persons
affiliated therewith, and (c) any other considerations other than the technical
qualifications of the brokers and the dealers as such. The record shall show the
nature of their services or benefits made available, and shall describe in
detail the application of any general or specific formula or other determinant
used in arriving at such allocation of purchase and sales orders and such
division of brokerage commissions or other compensation. The record shall also
include the identifies of the person responsible for the determination of such
allocation and such division of brokerage commissions or other compensation.
Not Applicable.
(10) A record in the form of an appropriate memorandum identifying the person or
persons, committees, or groups authorizing the purchase or sale of portfolio
securities. Where an authorization is made by a committee or group, a record
shall be kept in the names of its members who participated in the authorization.
There shall be retained a part of the record required by this paragraph any
memorandum, recommendation, or instruction supporting or authorizing the
purchase or sale of portfolio securities. The requirements of this paragraph are
applicable to the extent they are not met by compliance with the requirements of
paragraph 4 of this Rule 31a1(b).
Advisory Legal Products and Six years, the first
Agreements Distribution, LNL two years in an easily
Law Division accessible place
(11) Files of all advisory material received from the investment advisor, any
advisory board or advisory committee, or any other persons from whom the
investment company accepts investment advice publications distributed generally.
Not Applicable.
(12) The term "other records" as used in the expressions "journals (or other
records of original entry)" and "ledger accounts (or other records)" shall be
construed to include, where appropriate, copies of voucher checks,
confirmations, or similar documents which reflect the information required by
the applicable rule or rules in appropriate sequence and in permanent form,
including similar records developed by the use of automatic data processing
systems.
Correspondence CSRM 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 years
ments in an easily accessible place
March 24, 2000
<PAGE>
POWER OF ATTORNEY
I undersigned officer of The Lincoln National Life Insurance Company, hereby
revoke all powers of attorney authorizing any person to act as attorney-in-fact
relative to Lincoln Life Variable Annuity Account N (Delaware-Lincoln
ChoicePlus), which were previously executed by me and do hereby severally
constitute and appoint Kelly D. Clevenger, Jeffrey K. Dellinger, and Steven M.
Kluever, my true and lawful attorneys-in-fact, with full power in each of them
to sign for me, in my name and in the capacities indicated below, any and all
amendments to Registration Statement No. 333-40937 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 my signature as it may be signed by any of my attorneys-in-fact
to any such amendment to that Registration Statement. The power of attorney was
signed on January 6, 2000.
SIGNATURE TITLE
- --------- -----
/s/ Jon A. Boscia President and Director
- ----------------- (Principal Executive Officer)
Jon A. Boscia
STATE OF PENNSYLVANIA )
)SS:
COUNTY OF PHILADELPHIA)
Subscribed and sworn to before me this
6th day of January, 2000.
Judith M. Callihan
--------------------------------------
Notary public
Commission Expires: Oct. 18, 2003
